Sitton: Trans-Pecos Pipeline ‘vital’ to Texas and Mexico

Sitton: Trans-Pecos Pipeline ‘vital’ to Texas and Mexico
Midland Reporter-Telegram l June 26, 2016
By Trevor Hawes

If there’s one thing Texas has a lot of, it’s pipelines. The energy capital of the U.S. has about 400,000 miles of pipeline delivering energy products throughout the state and into Mexico, which is hungry for more of Texas’ natural gas as the nation’s energy demands grow.

Railroad Commissioner Ryan Sitton spoke with the Reporter-Telegram on Thursday to discuss the Trans-Pecos Pipeline and what it will mean for Texas and Mexico’s futures.

MRT: How important is the state’s pipeline infrastructure to the economy?

Sitton: As all of these markets grow — oil and natural gas — infrastructure, such as pipelines, are going to be crucial to being able to move that product and get a good market for that product.

One of the things that any producer has to be thoughtful about and mindful of is, ‘I can drill a well and produce that oil or natural gas out of that well, and maybe the spot price today says I can command a pretty nice margin unless I can’t get it to market. If I have to put it in a truck, that’s going to chew up a lot of that margin through shipping it.’ So, pipelines are really vital, and industry has done a fantastic job in this state in building that infrastructure.

Mexico has 120 million people, produces something like 2.5 million barrels of oil and has 6,000 miles of pipeline. The state of Texas has 27 million people, produces around 3 million barrels of oil, and we have 400,000 miles of pipeline. One of our big advantages is our infrastructure. What we need to be doing, from a regulatory perspective, is making sure our environment that we are maintaining really continues to promote that development.

We had a case just two days ago that was a somewhat landmark case at the Railroad Commission because it dealt with the rates that pipeline operators can charge. Are we going to use a market-based rate or are we going to use a cost-of-service rate? I was very public about the fact that I thought market-based rates were vital because that allows companies that will invest huge capital to get a return on that capital from those who use these pipelines.

MRT: What will the Trans-Pecos Pipeline mean for the Texas and Mexico economies?

Sitton: I think it’s vital to both. Having made a trip to Mexico two months ago, we heard them talking about how one of their top priorities is to expand their electricity production using natural gas. We are, by far, the largest provider of natural gas to Mexico.

So, it’s crucial to them. It will enable them to build a robust energy infrastructure, and it’s a huge economic opportunity for us to sell that natural gas and gain a trade advantage. In other words, we sell that raw product and bring in those revenues both from a business perspective and a tax perspective right back into the state of Texas. So, it’s absolutely huge.

The Trans-Pecos Pipeline has been met with some fairly public opposition in places like Alpine, and I think that speaks to the fact that the Railroad Commission really has an opportunity to assure residents in areas that haven’t seen this kind of development before, they need to know we’re on the job, that we are studying these things, that our rules and regulations are robust. I feel very confident about them, but we are working hard to communicate with those residents so that they feel confident, as well.

MRT: A recent Bloomberg article reported that previously undocumented abandoned wells in Pennsylvania have become revitalized by nearby hydraulic fracturing jobs, and thus are contaminating the environment, including water. Have you seen this in Texas?

Sitton: There’s a term we have called ‘communication.’ That’s when one well — and it doesn’t have to be because of hydraulic fracturing — seems to be affected by the service pressure of another well. We do see that — in other words, we do hear people talk about that and monitor that. I am not aware of an issue where an old, plugged well was (affected) when someone was putting in a new well and doing a hydraulic fracturing job caused an old well that we didn’t know about to have some sort of negative impact on the community.

We monitor that pretty closely. At the Railroad Commission, we know where the wells are. We’ve tracked them for almost 100 years. That’s not to say we’re perfect. I’m sure there are some out there from a long time ago (we don’t know about), but these things are monitored very closely.

We see cases all the time where someone wants to put in a disposal well or drill a new well, and our examiners will put specific requirements on them to keep them from potentially impacting or communicating with an old well.

We are on top of that and aware of the issue, and, as far as I know, we have never had a problem with contaminating groundwater.

MRT: What do you make of the recent federal judge’s decision to deny the president’s ban on fracturing on public lands?

Sitton: It’s a landmark case for a couple of reasons. First of all, the judge that struck it down was an Obama appointee. That’s pretty newsworthy because what we’ve seen in recent history, especially with Obama appointees, is that more often than not, politics tends to trump good constitutional law decisions.

In this case, I really applaud the judge. He seemed to steer very clear of politics in this decision and talked very clearly about what powers were enumerated to the executive branch, that Congress had not given this power to the executive branch. He talked about activities that were going on the states, and I think that this sends a very broad message that states have been regulating this and have a very good track record at regulation.

As one of the people running the most comprehensive agency in the country in terms of the breadth of our abilities and the breadth of our expertise, I think this speaks directly to the fact that we should be the ones doing this, not a group of bureaucrats that have no expertise in this. I think that this very much validates that message.

MRT: What other federal issues are you looking at or anticipating?

Sitton: We’re always monitoring (federal actions), such as the new methane rules and the clean power plan. We see some smaller issues that are less public like the issues around Joe Pool Dam and Joe Pool Lake in the Dallas area, where we are engaging in dealing with the Army Corps of Engineers, or (Traffic Incident Management Self-Assessment) rules with the Department of Transportation.

There are lots of things that we are monitoring to make sure that we are leading on that regulation, not just representing our state well, but representing best practices well.

MRT: Do you have any parting comments?

Sitton: There is so much going on right now in the energy industry in this state that we’re moving very aggressively at the Railroad Commission to stay engaged with the public.

One of our big jobs is to be out in the communities, whether it’s a coal mine, the Trans-Pecos Pipeline, oil wells and seismicity in the D-FW area, there’s so much going on that we’re working very hard to be out around the state and be engaged in those communities.

We always ask that people who have questions to reach out to us. We want them to talk to us.

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