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Texas Railroad Commissioners have financial stakes in the oil and gas companies that they regulate, report says

Lax laws allow widespread conflict of interest between commissioners and industry

AUSTIN, Texas — The Texas Railroad Commission, which regulates the state’s oil and gas industry, faces a call for reform in wake of February’s power grid failure that knocked out power across the state, took hundreds of lives and left the state billions of dollars in the hole.

A new report released Tuesday claims the three-member RRC is “inadequate’ because lax laws allow state regulators to receive campaign donations and have financial ties to the very industry they are supposed to regulate.

The 48-page joint report by non-profit Commission Shift and Texans for Public Justice highlights potential conflicts of interest between RRC and the state’s oil and gas industry.

In fact, the report claims the panel of three commissioners "profit from the industry that they oversee” and make decisions that are in their "private interests."

"I think it gives the appearance of impropriety," said Virginia Palacios, executive director of Commission Shift, a non-profit, independent from the oil and gas industry, that is advocating for reforms at the Texas Railroad Commission.

Despite its name, the 130-year-old Texas Railroad Commission has no authority over railroads, instead regulating one of the state's most powerful industries - oil and gas. The three commissioners are elected in statewide elections to six-year staggered terms.

“All Texans should be paying attention to this agency and the way that it makes decisions,” said Palacios, whose report highlights various cases over the past decade where commissioners failed to recuse themselves and instead made regulatory decisions on companies they had financial stakes in.

“I think it's common sense to the public that you shouldn't have an interest in these companies if you're going to be making decisions about them,” Palacios said.

For example, according to the report, RRC Chairman Christi Craddick “cast a deciding vote not to fine a pipeline company for a leak despite owning between $17,520 and $35,874 in the company’s stock and receiving $22,500 in campaign contributions from the company. "

“Which is at least unethical and in most states is illegal,” said Dr. Michael Webber, the Josie Centennial professor of energy resources at the University of Texas at Austin.

Webber said that while Craddick’s conflict of interest was “questionable,” it’s not illegal in Texas.

“And as a consequence, we have railroad commissioners whose job is to protect the public from the oil and gas industry, but instead are trying to protect the oil and gas industry from the public,” Webber said.

"This is a huge problem, and it's not going to change until we in Texas say, 'Hey, we expect more from oil and gas,’” Webber said.

WFAA’s analysis of the three commissioners’ 2020 campaign donations show combined they received $946,354 dollars just last year, the majority of it coming from oil and gas - the very industry the commissioners regulate.

Palacios' team found commissioners have even received donations from a company while disputes involving that same company are being heard by the commissioners.

For example, while their case was before the commission, a Tulsa-based pipeline company donated $9,500 dollars to commissioners.

All three commissioners declined to be interviewed on-camera for our story.

In a statement, Commissioner Wayne Christian said:

"As an anti-oil and gas special interest group, Commission Shift is biased. In the last election cycle, a Democrat candidate received $2.6 million from out-of-state liberal Michael Bloomberg - the largest single contribution ever given to a Railroad Commission candidate. If we are going to reform campaign finance in Texas, let's start by limiting out-of-state billionaires from attempting to buy Texas elections."

In a statement, Chairman Christi Craddick said:

"Texas Ethics Commission laws ensure transparency of our public officials and maintain the public's trust in our ability to appropriately govern, and I take these laws seriously.”

In a statement, Commissioner Jim Wright said:

“As a candidate for office and now as the newest member of the Railroad Commission, I base my decisions on what I believe is best for the state and our citizens. Period. Upholding the public’s trust, not to mention my own personal integrity, is important to me, and I am committed to following all rules and regulations set forth under state law and administered by the Texas Ethics Commission.” 

Commission Shift said in order to regain public trust, changes at the RRC are needed. In its report, the group recommends various reforms.

Among them, requiring commissioners to demonstrate no financial interest in the companies they’re regulating by divesting from the industries they regulate. Such divestments are a requirement, for example, for commissioners overseeing Oklahoma’s oil and gas industry.

Recommendations also include:

  • Limiting campaign contributions to the 18-month period that precede the election and $5,000 per election cycle.
  • Strengthening recusal standards by requiring commissioners to recuse themselves from cases involving a company where the commissioners receive donations exceeding $1,000 during the last election cycle.
  • Reduce bias by requiring Texas Legislators, who are family members of commissioners or executive directors, to be required to recuse themselves from decisions involving the agency and not be allowed to sit on committees that oversee the agency
  • Improve financial disclosure by requiring RRC candidates and commissioners to match congressional disclosure requirements. In Texas, the current maximum disclosure option is “$44,630 or more.” Financial disclosure forms also should specify whether certain reported incomes come from interest, dividends, royalties or rents.

However, Tom “Smitty” Smith, former director of Public Citizen Texas points out, these calls for change aren't anything new. A sunset advisory committee made similar recommendations to lawmakers more than a decade ago, yet little has changed.

“Time after time, when we've tried to toughen those regulations at the state Legislature or in front of the various regulatory agencies, the industries mount a campaign and rebuff them quietly but effectively,” Smith said. “So as a result, Texas remains open for business and those that contribute the most typically win the day.”

Having just gone through one of the worst natural disasters in Texas history, Palacios said Texans can't afford to wait for reform any longer.

“We deserve to have better decision-making at our state agencies,” Palacios said. “And we know that if we have these conflicts of interest, we're more likely to get biased decision-making. So now is the time to change it.”

Email: investigates@wfaa.com

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