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    State considers more oversight of natural gas

    March 11, 2022 - Bob Sechler


      Winter is almost over this year, but the state's natural gas industry remains in the crosshairs of those who say it's a potential weak link in efforts to bolster the Texas electricity grid and prevent a calamity on the scale of 2021's deadly blackouts from ever repeating.

      A number of state senators called for stepped-up oversight of the natural gas sector during a hearing Wednesday at the Capitol, suggesting additional legislation might be needed if the Texas Railroad Commission, which regulates the oil and gas industry, asserts it doesn't have the necessary authority.

      "We need to make sure that the (natural) gas market is operating well," because it provides the fuel used by many Texas power plants, said state Sen. Nathan Johnson, D-Dallas.

      "I think for the most part it has, but we certainly have had some incidents where we've had, I guess at a minimum, suspicious activity" in terms of natural gas prices, Johnson said.

      Railroad Commission Chairman Wayne Christian, whose agency has come under fire from critics who say it's too cozy with the industries it regulates, said at several points during the hearing that the commission lacks the power to take certain actions or to intervene in private contractual disputes between natural gas companies and the electricity generators that use the commodity as fuel.

      He also questioned whether more regulatory authority for his agency would be a good idea.

      "Of course, it's up to the Senate, not me, of what you do up there passing laws, but I've always been one that hesitates of adding additional layers of anything if there has been no problem prevented," said Christian, who is in a primary runoff with Republican challenger Sarah Stogner in his bid reelection bid.

      Christian said Wednesday that the Railroad Commission and the natural gas industry have taken significant actions since the February 2021 grid disaster to shore up natural gas infrastructure across the state.

      But he has long disputed the notion that the natural gas sector bears an outsize portion of responsibility for the calamity, in which extensive blackouts amid a severe freeze contributed to hundreds of deaths and billions of dollars in property damage.

      A report by the Federal Energy Regulatory Commission in the aftermath of the disaster found otherwise, however, concluding that a lack of consistent natural gas supply for gas-fueled power plants was among the top causes of the widespread and lengthy power outages.

      In addition, the federal agency has said it's investigating instances of possible price manipulation related to huge increases in wholesale costs for natural gas and electricity during the disaster.

      State Sen. Charles Schwertner, R-Georgetown, said the possibility that such manipulation took place is a serious issue for many state lawmakers. Schwertner is chairman of the Senate's Business and Commerce Committee that held Wednesday's hearing.

      "There was great concern by members (of the Legislature) regarding the potential actions of natural gas companies during the winter storm – of profiteering, throttling back is the term I used, of gas flow," he said during Wednesday's hearing.

      State Sen. Donna Campbell, R-New Braunfels, raised the prospect of creating an independent monitor to watch daily pipeline flows and to bring transparency to the state's natural gas market. Others suggested that more needs to be done to prevent the owners of natural gas pipelines from wielding monopoly power over the electricity generators that rely on them.

      "We do have instances where there is local monopoly control of the gas pipeline," Johnson said. "I do think it's the job of the Railroad Commission" to intervene in such cases.

      Less than two months ago, Vistra Energy subsidiary Luminant reported to the Railroad Commission that pipeline operator Energy Transfer LP was threatening to cut off the supply of natural gas to some of its power plants because of disputed bills stemming from the February 2021 freeze. Energy Transfer subsequently said it wouldn't cut off Luminant's natural gas flows, but Johnson and other lawmakers voiced concern Wednesday about the apparent negotiating tactic.

      But Christian said the issue was resolved appropriately once the Railroad Commission was made aware of it.

      "I as chairman issued a letter saying we don't want the people cut off, and the system honored that," he said. "So I'm saying, as long as we see the resolution occur that does not harm the public, then I hesitate to add another layer of government regulation to the free market natural gas system."

      Later in the hearing, however, Christian said he's not sure what he would have done if Energy Transfer had cut off Luminant's natural gas supply, because the issue stemmed from a private-sector contractual dispute.

      As for the overall status of the effort to make the Texas electricity grid more reliable, lawmakers said Wednesday that they're pleased with the initiatives that have been taken so far and with the grid's performance this winter.

      For the first time, Texas power plants had to comply with winterization mandates and faced inspections from the Electric Reliability Council of Texas, or ERCOT, which operates the grid. Other measures have included steps to increase communication between electricity generators and natural gas companies, and to lower the maximum price that can be charged for wholesale electricity during times of extremely high demand.

      "The grid is strong, (and) it's more reliability than it has ever been," said Peter Lake, chairman of the Texas Public Utility Commission, which oversees ERCOT. "We are ready for whatever the weather holds in the future – spring (or) summer, we'll be ready."

      While the utility commission enacted winterization mandates for electricity generators in time for this winter, the Railroad Commission didn't do the same for natural gas producers and pipelines. Under legislation approved by the Legislature in the wake of the 2021 grid disaster, the Railroad Commission must establish such mandates in time for next winter, but it didn't have to do so by this winter.


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