WEBVTT 00:00:04.440 --> 00:00:08.039 --Commission of Texas will come to order to consider matters 00:00:08.039 --> 00:00:10.609 which have been duly posted with the Secretary of State 00:00:10.619 --> 00:00:15.769 for November 30, 2021. Under our public participation policy, 00:00:15.779 --> 00:00:19.120 anyone desiring to offer public testimony on any items 00:00:19.120 --> 00:00:23.079 that are not noticed on today's agenda was required 00:00:23.079 --> 00:00:26.420 to register in advance. We did not have anyone register 00:00:26.420 --> 00:00:29.000 in advance for this meeting. The Commission will consider 00:00:29.000 --> 00:00:33.659 the items on the agenda posted on the agenda. Before 00:00:33.659 --> 00:00:35.880 we bring up our first agenda item, I'd like to say 00:00:35.880 --> 00:00:39.090 a few words about the securitization order we adopted 00:00:39.090 --> 00:00:42.969 our last meeting. I'd like to take a moment to clear 00:00:42.969 --> 00:00:45.710 up some misconceptions about what we did in our last 00:00:45.710 --> 00:00:48.530 meeting regarding the natural gas Texans used during 00:00:48.530 --> 00:00:53.009 storm Yuri. During the storm, natural gas sold for as 00:00:53.009 --> 00:01:00.149 high as $900 per MCF. A 3000% increase overnight. The 00:01:00.149 --> 00:01:03.630 Railroad Commission has no jurisdiction over the price 00:01:03.630 --> 00:01:06.870 of natural gas, nor do we have jurisdiction over the 00:01:06.870 --> 00:01:11.280 use of natural gas to generate electricity. Our jurisdiction 00:01:11.280 --> 00:01:14.760 is over natural gas utilities. These are the companies 00:01:14.760 --> 00:01:17.329 that provide the gas Texans used to heat their homes 00:01:17.329 --> 00:01:21.439 and cook their food. While more than 4.5 million homes 00:01:21.439 --> 00:01:25.239 lost electricity during Storm Yuri, it is important 00:01:25.239 --> 00:01:30.319 to note that more than 99.5% of natural gas utilities 00:01:30.319 --> 00:01:34.439 provided continuous service to their customers. These 00:01:34.439 --> 00:01:37.750 utilities purchase natural gas on the open market and 00:01:37.750 --> 00:01:40.719 charge their consumers the same price that they pay 00:01:40.780 --> 00:01:45.920 without a markup. It is illegal for natural gas utilities 00:01:45.920 --> 00:01:49.859 to profit from the sale of natural gas. Let's be clear. 00:01:50.340 --> 00:01:52.870 The Railroad Commission does not have jurisdiction 00:01:52.870 --> 00:01:56.459 over the price of natural gas or electricity generation. 00:01:57.239 --> 00:02:00.319 We have jurisdiction over natural gas utilities that 00:02:00.319 --> 00:02:04.760 provide gas to homes. That's it. It is illegal for 00:02:04.760 --> 00:02:08.319 these utilities to profit from the gas they produce 00:02:08.330 --> 00:02:12.419 and purchase. These companies can get reimbursed from 00:02:12.419 --> 00:02:14.889 the customers for the gas they purchased during the 00:02:14.889 --> 00:02:18.740 storm. Our actions simply uses the credit worthiness 00:02:18.750 --> 00:02:22.099 of the state to ensure this reimbursement is done over 00:02:22.099 --> 00:02:25.930 a long period of time in small increments, rather than 00:02:25.930 --> 00:02:29.020 having customers receive an extremely high, unexpected 00:02:29.020 --> 00:02:33.580 bill in a single month. This process is not a jackpot 00:02:33.590 --> 00:02:37.319 for big natural gas utility companies. It simply creates 00:02:37.319 --> 00:02:41.090 a customer friendly way to pay them back. It is good 00:02:41.090 --> 00:02:43.949 for the consumers, utilities and the state of Texas 00:02:44.280 --> 00:02:46.930 which is why the Commission recently approved an order 00:02:46.930 --> 00:02:51.060 on this matter. If you want to learn more, I was published 00:02:51.060 --> 00:02:54.259 in the San Antonio Express News this weekend, that 00:02:54.259 --> 00:02:58.870 you can look the facts over. Okay, lets go into 00:02:58.870 --> 00:03:06.340 agenda Item number one. Matt Garner? 00:03:06.340 --> 00:03:09.159 Can you hear me? Okay. Can everybody back there hear? 00:03:09.719 --> 00:03:10.635 I can hear you. 00:03:10.659 --> 00:03:12.689 All right. Great. Good afternoon 00:03:12.699 --> 00:03:15.419 Chairman and Commissioners. My name is Matt Garner 00:03:15.419 --> 00:03:19.210 with the Office of General Counsel. Today's item is 00:03:19.219 --> 00:03:24.520 staff's recommendation to adopt new 16 Texas Administrative 00:03:24.520 --> 00:03:27.939 Code, Section 3.65, relating to critical designation 00:03:27.949 --> 00:03:31.460 of natural gas infrastructure and to amend section 00:03:31.469 --> 00:03:35.960 3.107, relating to penalty guidelines for oil and gas 00:03:35.960 --> 00:03:40.270 violations. The new section and amendments implement 00:03:40.270 --> 00:03:44.460 changes made by House Bill 3648, and Senate Bill 3 00:03:44.939 --> 00:03:49.250 from the 87th Texas Legislative Regular Session. Staff 00:03:49.259 --> 00:03:53.009 also recommends adoption of related forms CID and 00:03:53.009 --> 00:03:55.840 CIX. 00:03:55.840 --> 00:04:00.379 On September 14, 2021, the Commission approved the publication 00:04:00.389 --> 00:04:03.860 of the proposed rules and amendments in the Texas Register 00:04:03.860 --> 00:04:06.960 for a 30 day comment period which ended on November 00:04:06.960 --> 00:04:11.860 1, 2021. On September 28, the Commission also approved 00:04:11.870 --> 00:04:17.259 proposed forms CID and CIX for publication on the Commission's 00:04:17.259 --> 00:04:19.439 website. 00:04:19.439 --> 00:04:22.160 Staff recommends that the Commission adopt the rule, 00:04:22.269 --> 00:04:24.860 the amendments and the forms with changes that have 00:04:24.860 --> 00:04:28.310 been made after consideration of public comments that 00:04:28.310 --> 00:04:32.649 were submitted. Importantly, the changes address comments 00:04:32.649 --> 00:04:36.060 concerning the number of facilities designated as critical, 00:04:36.740 --> 00:04:40.449 the ability for facilities to apply for an exception, 00:04:41.740 --> 00:04:44.569 and public comments regarding the inclusion of tiers 00:04:44.579 --> 00:04:48.449 of criticality for load shed prioritization in section 3.65. 00:04:48.449 --> 00:04:51.639 00:04:51.639 --> 00:04:53.980 First, the Commission understands the concern that 00:04:53.980 --> 00:04:57.399 the proposed rule initially designated too many facilities 00:04:57.399 --> 00:05:01.720 as critical. Staff recommends a change to define critical 00:05:01.720 --> 00:05:07.189 gas supplier and critical gas customer separately so 00:05:07.189 --> 00:05:10.529 that critical customers are now a subset of critical 00:05:10.529 --> 00:05:13.240 gas supplier. 00:05:13.240 --> 00:05:16.839 The new subset of critical customer 00:05:16.839 --> 00:05:20.230 will ensure only those critical facilities that need 00:05:20.240 --> 00:05:23.839 electric power from a third party to operate will provide 00:05:23.850 --> 00:05:28.100 information to their electric utilities, which will 00:05:28.100 --> 00:05:30.759 help the utilities by limiting both the volume of information 00:05:31.139 --> 00:05:34.480 that will be required to process the number of critical 00:05:34.480 --> 00:05:40.139 facility, I'm sorry, stop there, 00:05:40.139 --> 00:05:42.319 which will help the utilities by limiting both the 00:05:42.319 --> 00:05:44.230 volume of information that they will be required to 00:05:44.230 --> 00:05:47.910 process and the number of critical facilities that 00:05:47.910 --> 00:05:53.139 they will have to prioritize as critical loads. 00:05:53.139 --> 00:05:56.579 The revised definition of critical gas supplier will 00:05:56.579 --> 00:06:00.420 also ensure even facilities that do not require electric 00:06:00.420 --> 00:06:03.319 service to operate will end up being designated as 00:06:03.319 --> 00:06:06.459 critical and subject to future weatherization rules 00:06:07.040 --> 00:06:09.790 provided that said facilities are also included on the 00:06:09.790 --> 00:06:14.939 electricity supply chain map. 00:06:14.939 --> 00:06:18.279 Staff also recommends a revised list of critical gas 00:06:18.290 --> 00:06:21.620 suppliers, which excludes leases producing below a 00:06:21.620 --> 00:06:25.720 certain volume threshold. When aggregated statewide 00:06:25.939 --> 00:06:29.750 these low volume producing leases and wells make up 00:06:29.759 --> 00:06:35.089 over 54, 000 leases but represent less than 1.5% of 00:06:35.089 --> 00:06:38.680 total production, which recognizes the marginal nature 00:06:38.680 --> 00:06:41.079 of the contribution of these leases to the overall 00:06:41.079 --> 00:06:45.120 supply of natural gas in the states. 00:06:45.120 --> 00:06:48.620 Second, staff recommends narrowing the exception provisions 00:06:48.629 --> 00:06:52.149 so certain critical facilities cannot 00:06:53.040 --> 00:06:57.389 obtain an exception. Recommended revisions to the rules 00:06:57.389 --> 00:07:00.720 specifically clarify that facilities on the Texas Electricity 00:07:00.720 --> 00:07:03.470 Supply Chain Security and Mapping Committee map and 00:07:03.480 --> 00:07:06.370 other highly critical facilities such as large volume 00:07:06.370 --> 00:07:10.379 producers, underground storage facilities and pipelines 00:07:10.379 --> 00:07:12.970 that directly serve a power generation plant or city 00:07:12.980 --> 00:07:18.240 gate are not eligible to apply for an exception. 00:07:18.240 --> 00:07:20.819 The revised rule also clarifies that the exception 00:07:20.829 --> 00:07:23.930 is not automatically granted upon filing the form and 00:07:23.939 --> 00:07:28.110 paying a fee. The option to make the bare assertion 00:07:28.120 --> 00:07:31.009 that a facility is not prepared to operate during a 00:07:31.009 --> 00:07:35.370 weather emergency is not available. An applicant must 00:07:35.370 --> 00:07:38.389 provide objective evidence demonstrating a reasonable 00:07:38.389 --> 00:07:41.750 basis and justification to support an application for 00:07:41.759 --> 00:07:44.040 an exception. 00:07:44.040 --> 00:07:48.129 The $150 amount for the exception fee is prescribed 00:07:48.139 --> 00:07:52.220 by the Texas Natural Resources Code. While comments 00:07:52.220 --> 00:07:55.540 received expressed concerns that the filing fee is 00:07:55.540 --> 00:07:58.720 too low, the Railroad Commission does not have the 00:07:58.730 --> 00:08:01.649 authority to increase that fee through a rulemaking. 00:08:03.540 --> 00:08:06.449 Finally, with regard to public comments that we received 00:08:06.459 --> 00:08:10.459 suggesting tiers of criticality be included in section 00:08:10.459 --> 00:08:13.720 3.65, the Commission does not have any jurisdiction 00:08:13.730 --> 00:08:16.850 over electric entities or load shed planning by electric 00:08:16.850 --> 00:08:20.189 utilities. Accordingly, the Commission does not find 00:08:20.189 --> 00:08:24.379 it appropriate to include tiers for load shed prioritization 00:08:24.389 --> 00:08:27.790 in its rule in the manner in which the commenters have 00:08:27.790 --> 00:08:31.740 suggested. However, concepts have been incorporated 00:08:31.750 --> 00:08:35.330 in the revised rule that served to categorize certain 00:08:35.330 --> 00:08:38.580 facilities that play such a significant role in the 00:08:38.580 --> 00:08:42.179 natural gas supply chain that they are not being allowed 00:08:42.190 --> 00:08:46.740 to apply for an exception. 00:08:46.740 --> 00:08:49.120 With such facilities effectively having the highest 00:08:49.120 --> 00:08:53.259 level of priority, other facilities that are critical 00:08:53.740 --> 00:08:56.740 but may apply for an exception and facilities that 00:08:56.750 --> 00:08:59.549 do not fall within the definition of critical because 00:08:59.549 --> 00:09:03.169 they do not reach the volumetric thresholds set out 00:09:03.169 --> 00:09:06.639 in subsection B of the rule. 00:09:06.639 --> 00:09:09.149 Other recommended revisions are described in your notebook 00:09:09.149 --> 00:09:13.620 materials. Staff also recommends the adoption of forms 00:09:13.629 --> 00:09:17.850 CID and CIX, which operators will use to acknowledge 00:09:17.850 --> 00:09:20.570 the critical designation or request an exception if 00:09:20.580 --> 00:09:24.389 eligible. The Commission does not adopt proposed table 00:09:24.389 --> 00:09:28.690 CCI, but has added the table CCI information to 00:09:28.690 --> 00:09:32.269 form CID. And I will do my best to answer any 00:09:32.279 --> 00:09:33.510 questions you may have? 00:09:33.534 --> 00:09:35.090 And members, we have available to 00:09:35.090 --> 00:09:38.519 answer questions, besides Matt here, Jason Modeling 00:09:38.519 --> 00:09:42.049 with the Texas Alliance of Energy Producers and Adrienne 00:09:42.049 --> 00:09:44.889 Shelly with Public Citizens. Are there any questions 00:09:44.889 --> 00:09:47.178 of those two witnesses? 00:09:47.202 --> 00:09:49.490 Hearing none, 00:09:49.500 --> 00:09:52.039 I believe we have some questions for our Railroad Commission staff. 00:09:52.039 --> 00:09:56.919 Matt. Thank you. I want to thank you for all 00:09:56.919 --> 00:10:00.309 the work that you and our general counsel and everybody 00:10:00.309 --> 00:10:04.990 else at our agencies worked on. This has been a fast 00:10:04.990 --> 00:10:08.149 rule with a lot of moving parts, and I appreciate that 00:10:08.149 --> 00:10:11.480 you have read the statute and also tried to adapt the 00:10:11.480 --> 00:10:14.080 rules of what the Legislature intended to 00:10:14.080 --> 00:10:16.210 do. So I know that's been a little bit of a challenge 00:10:16.210 --> 00:10:19.090 to, and I thank everybody for being 00:10:19.090 --> 00:10:21.710 involved in this process, all the comments we've gotten 00:10:21.710 --> 00:10:25.259 from all interested parties. This has been a, this 00:10:25.259 --> 00:10:29.929 is an important rule for us, and it's clear to me that 00:10:29.929 --> 00:10:33.000 your team and this agency as a whole have worked really 00:10:33.000 --> 00:10:37.149 hard to make this the best possible rule we can. That 00:10:37.149 --> 00:10:40.559 being said, it seems to me that a lot of this effort 00:10:40.559 --> 00:10:44.409 could go to waste if the electric generation facilities 00:10:44.419 --> 00:10:48.659 don't take the critical step of securing firm contracts 00:10:48.669 --> 00:10:52.409 over interruptible contracts. Are you aware of any 00:10:52.409 --> 00:10:55.649 changes that the generation facilities have made to 00:10:55.649 --> 00:10:58.168 secure more firm contracts? 00:10:58.192 --> 00:11:00.710 I'll answer your question 00:11:00.710 --> 00:11:05.049 by saying, as gas transmission and gas supply matters 00:11:05.539 --> 00:11:09.659 are private contracts between power generators 00:11:09.659 --> 00:11:14.179 and their suppliers. I don't have any particular 00:11:14.190 --> 00:11:18.639 insight into changes in practices that plant operators 00:11:18.639 --> 00:11:22.450 may have implemented regarding their gas purchasing. 00:11:23.440 --> 00:11:26.769 That's said, while there may be some additional cost 00:11:26.779 --> 00:11:31.820 to contractinf for firm gas, good emergency preparedness 00:11:31.820 --> 00:11:36.049 practices may indicate a need to go ahead and contract 00:11:36.440 --> 00:11:39.149 for firm gas where it's available. 00:11:39.173 --> 00:11:40.480 Thank you. And 00:11:40.490 --> 00:11:46.649 my second question, according to the rule published 00:11:46.649 --> 00:11:49.809 on the PUC's website, which I think that they've done 00:11:49.809 --> 00:11:53.019 the rule today and they've got a report due tomorrow 00:11:53.029 --> 00:11:56.929 that requires the TSP s to provide a winter readiness 00:11:56.929 --> 00:12:00.019 report that includes information on why they aren't 00:12:00.019 --> 00:12:02.840 winter ready if that's the case. So that's my understanding 00:12:02.840 --> 00:12:05.509 on their timing. I know it's not due till tomorrow 00:12:05.509 --> 00:12:08.500 but do you have anything? Have you seen anything? Do 00:12:08.500 --> 00:12:10.551 you have any information about that as well? 00:12:10.575 --> 00:12:14.149 I also understand that the reports are due tomorrow and I'm 00:12:14.149 --> 00:12:16.389 familiar with the requirements of the rule, including 00:12:16.389 --> 00:12:20.250 that they, responding parties, provide an 00:12:20.259 --> 00:12:23.409 explanation for any reason for which they are not winter 00:12:23.409 --> 00:12:27.085 ready. But at this point, I have not seen any of those reports. 00:12:27.109 --> 00:12:29.460 Okay, Thank you. Thank you very much for all 00:12:29.460 --> 00:12:31.229 your work. Thank you, Mr Chairman. 00:12:31.253 --> 00:12:32.159 Commissioner Wright? 00:12:32.539 --> 00:12:36.110 Thank you, Chairman. Matt, thank you. First, I 00:12:36.110 --> 00:12:37.879 want to thank the staff here at the Commission for 00:12:37.879 --> 00:12:40.379 their hard work on this rule throughout this process, 00:12:40.940 --> 00:12:43.600 from the initial draft to the review of public comments 00:12:43.600 --> 00:12:46.990 and finally to the proposal before us today, the staff 00:12:46.990 --> 00:12:49.570 here has been working diligently to find solutions 00:12:49.570 --> 00:12:52.309 and ensure that we are doing our part to ensure delivery 00:12:52.309 --> 00:12:55.210 of natural gas is not impacted during extreme weather 00:12:55.210 --> 00:12:59.740 events. It's worthwhile to remind folks what exactly 00:12:59.740 --> 00:13:03.279 this rule does and what its intended purpose is as construed 00:13:03.289 --> 00:13:06.899 under Senate Bill 3. This rulemaking is limited 00:13:06.899 --> 00:13:10.450 to addressing critical designation of natural gas infrastructure 00:13:10.940 --> 00:13:15.409 and or sources. Put simply in the event of a load shed 00:13:15.940 --> 00:13:18.970 like that we experienced in February which natural 00:13:18.970 --> 00:13:21.389 gas providers are substantially contributing to the 00:13:21.389 --> 00:13:23.529 production of electrical power and therefore need to 00:13:23.529 --> 00:13:27.500 stay on the grid to keep that gas available. The challenge 00:13:27.500 --> 00:13:30.700 is this: we must keep operators who are supplying large 00:13:30.700 --> 00:13:33.970 quantities of gas online. But if we list everyone as 00:13:33.970 --> 00:13:36.909 critical and maintain their access to electrical power 00:13:36.909 --> 00:13:40.080 during peak demand, it severely reduces the amount 00:13:40.080 --> 00:13:42.460 of electricity available to residents and families 00:13:42.460 --> 00:13:45.769 who need it. I believe the rule we are considering 00:13:45.769 --> 00:13:48.500 today identifies these fundamental issues and comes 00:13:48.500 --> 00:13:51.269 to a reasonable solution to narrow the universe based 00:13:51.269 --> 00:13:54.309 on an operator's contribution to the natural gas supply 00:13:54.309 --> 00:13:57.990 system and thereby to the overall electrical power 00:13:57.990 --> 00:14:01.429 system. To arrive at that solution, we first had to 00:14:01.429 --> 00:14:04.940 answer two important questions. You correct me if I'm 00:14:04.940 --> 00:14:07.830 wrong in this, Matt. The first question is simply 00:14:07.830 --> 00:14:10.830 how much gas is needed for people's homes and for power 00:14:10.830 --> 00:14:14.929 generation during extreme winter conditions? That figure 00:14:15.309 --> 00:14:19.789 as we understand and have verified is approximately 00:14:19.789 --> 00:14:24.970 22 billion cubic feet, BCF, of gas per day, according 00:14:24.970 --> 00:14:27.960 to market research firms and trade associations data. 00:14:28.909 --> 00:14:31.840 The next question is how much gas does Texas produce? 00:14:32.340 --> 00:14:36.269 Well, there are approximately 131, 000 leases in Texas 00:14:36.279 --> 00:14:40.500 which produce a total of approximately 28.7 BCF of 00:14:40.500 --> 00:14:45.149 gas per day. So we know that we have plenty of gas 00:14:45.149 --> 00:14:48.299 to be utilized for homes and electricity. The Commission 00:14:48.299 --> 00:14:50.840 was given a mandate from the Legislature to determine 00:14:50.840 --> 00:14:53.669 which operators are critical at least as far as the 00:14:53.669 --> 00:14:57.220 natural gas supply chain is concerned. After a lot 00:14:57.230 --> 00:15:00.169 of analysis, it turns out there are three large groups 00:15:00.179 --> 00:15:02.830 and I believe you said this earlier. The first group 00:15:02.830 --> 00:15:07.000 which I called supercritical, is comprised of over 00:15:07.000 --> 00:15:12.139 19, 000 leases and produces over 23 BCF per day, which 00:15:12.139 --> 00:15:14.669 represents more than the amount of gas that we need 00:15:14.669 --> 00:15:18.269 in Texas on a given day to send to people's homes and 00:15:18.269 --> 00:15:22.360 for power generation. In addition to producers of natural 00:15:22.360 --> 00:15:25.779 gas, this group includes pipeline operators, gas processing 00:15:25.779 --> 00:15:28.250 facilities and natural gas storage infrastructure. 00:15:28.840 --> 00:15:32.159 These leases and facilities are so important, so critical 00:15:32.940 --> 00:15:35.679 that we will not be allowed, they will not be allowed 00:15:35.679 --> 00:15:38.023 to opt out of the rule period. That's correct? 00:15:38.047 --> 00:15:39.610 That's correct. 00:15:39.634 --> 00:15:42.029 The second group is solely comprised of leases 00:15:42.029 --> 00:15:45.639 that produce low volume or no gas at all. This group 00:15:45.639 --> 00:15:48.570 only produces a little over 1% of the gas produced 00:15:48.570 --> 00:15:53.200 in Texas on a daily basis. The leases are not critical 00:15:53.200 --> 00:15:55.710 for production of gas. They are, however, excellent 00:15:55.710 --> 00:15:58.929 candidates for electrical load shed. There would be 00:15:58.929 --> 00:16:01.330 little benefit to keep electricity flowing to these 00:16:01.330 --> 00:16:04.450 leases in a weather event since they do not 00:16:04.450 --> 00:16:07.460 meaningfully contribute to the natural gas supply chain. 00:16:08.940 --> 00:16:11.429 The third and final group is comprised of leases that 00:16:11.440 --> 00:16:14.240 fall in between the first two groups. Like the first 00:16:14.240 --> 00:16:16.840 group, they are also defined as critical. However, 00:16:16.840 --> 00:16:20.870 the group is only comprised of marginal wells. In response 00:16:20.870 --> 00:16:23.460 to comments that there are too many critical facilities, 00:16:23.470 --> 00:16:26.070 a marginal well operator in this group is eligible 00:16:26.070 --> 00:16:30.190 to apply to opt out of the rule, but they will be 00:16:30.190 --> 00:16:33.250 required to present objective evidence of a reasonable 00:16:33.250 --> 00:16:37.190 cause and justification for such a request. And each 00:16:37.190 --> 00:16:40.009 of these requests will be scrutinized by the Commission. 00:16:41.440 --> 00:16:43.779 These production figures do not account for the vast 00:16:43.779 --> 00:16:46.330 amount of gas storage available, which plays an important 00:16:46.330 --> 00:16:48.970 role in our ability to provide gas and peak demand 00:16:48.970 --> 00:16:52.240 periods. As the Railroad Commission reported last month 00:16:52.240 --> 00:16:56.919 Texas has about 478 BCF of working gas in underground 00:16:56.919 --> 00:17:00.960 storage, with room for about another 75 BCF more of 00:17:00.960 --> 00:17:05.420 additional storage. That 75 BCF of additional storage 00:17:05.420 --> 00:17:08.890 alone could generate enough electricity for 8.6 million 00:17:08.890 --> 00:17:12.549 homes for a month. We strongly encourage operators 00:17:12.549 --> 00:17:15.039 to fully utilize the storage capacity for this coming 00:17:15.039 --> 00:17:20.039 winter. Here's why storage is so important. The Railroad 00:17:20.039 --> 00:17:22.490 Commission has no authority to require operators to 00:17:22.490 --> 00:17:25.700 produce gas at a specific time or, for that matter 00:17:25.700 --> 00:17:28.700 at all. The oil and gas industry is no different than 00:17:28.700 --> 00:17:32.019 any other business in this regard. Let me let me give 00:17:32.019 --> 00:17:34.589 you an example. Chick fil A is not required to be open 00:17:34.589 --> 00:17:37.880 on Sunday. That is a business decision made by the 00:17:37.880 --> 00:17:41.130 owner, correct? For gas producers, there could be any 00:17:41.130 --> 00:17:43.960 number of reasons to shut down production or for safety 00:17:43.960 --> 00:17:47.359 concerns, down power lines and frozen or inaccessible 00:17:47.359 --> 00:17:49.839 roads are just some of the various reasons individual 00:17:49.839 --> 00:17:52.670 operators may need to limit or shut down production 00:17:52.670 --> 00:17:57.599 at any given time. One thing I can say and tell 00:17:57.599 --> 00:17:59.759 you with certainty, if you want to eat a chick fil a 00:17:59.759 --> 00:18:01.769 sandwich on Sunday, you're going to need to buy in 00:18:01.769 --> 00:18:06.660 advance. The same is true for natural gas. Public perception 00:18:06.660 --> 00:18:09.240 of who is to blame for the failures last February seemed 00:18:09.240 --> 00:18:11.859 to be focused on supply shortage of available natural 00:18:11.859 --> 00:18:15.130 gas for power generation. I don't believe that to be 00:18:15.140 --> 00:18:18.250 fair or accurate, but I do believe it is important 00:18:18.250 --> 00:18:20.960 to ask the following questions of natural gas generators. 00:18:21.740 --> 00:18:25.160 Specifically, how much gas, how much gas do natural 00:18:25.160 --> 00:18:28.720 gas fired power plants currently have in storage and 00:18:28.720 --> 00:18:32.349 ready to deploy? What percentage of that storage represents 00:18:32.349 --> 00:18:35.259 our gas needs during a peak power generation event? 00:18:35.640 --> 00:18:38.849 And finally, how much of that gas is under firm supply 00:18:38.849 --> 00:18:42.380 and delivery contract? The answer is less than you 00:18:42.380 --> 00:18:45.359 would think. When it comes to human safety and protecting 00:18:45.359 --> 00:18:48.950 people's lives, firm gas contracts or indoor storage 00:18:48.960 --> 00:18:51.890 ought to be required for power generation, even if 00:18:51.890 --> 00:18:55.490 it's just for the winter months. So again, storage 00:18:55.490 --> 00:18:58.039 is a crucial component to address the underlying issues 00:18:58.039 --> 00:19:01.119 in our electrical grid. It's an issue I have raised 00:19:01.119 --> 00:19:03.569 with our counterparts at the Public Utility Commission 00:19:03.569 --> 00:19:05.690 and I look forward to continuing those discussions 00:19:05.690 --> 00:19:08.680 to address these concerns. I will say working with 00:19:08.680 --> 00:19:11.210 Chairman Lake at the PUC over the past few months has 00:19:11.210 --> 00:19:14.099 been a productive experience. I have found Chairman 00:19:14.099 --> 00:19:17.019 Lake to be an individual who, like myself and my fellow 00:19:17.019 --> 00:19:19.849 Commissioners, is devoted and committed to serving 00:19:19.849 --> 00:19:22.660 the people of Texas and always acts with their best 00:19:22.670 --> 00:19:25.859 interest in mind. I know the people of Texas will be 00:19:25.859 --> 00:19:29.759 pleased with our committed collaborative efforts. I 00:19:29.759 --> 00:19:31.970 am proud of the work the Railroad Commission has done 00:19:31.970 --> 00:19:34.420 thus far to implement the requirements under Senate 00:19:34.420 --> 00:19:37.769 Bill 3. I believe this proposed rule provides additional 00:19:37.769 --> 00:19:40.130 clarity and will help limit future disruption of our 00:19:40.130 --> 00:19:44.950 natural gas infrastructure. Thank you, Matt. 00:19:45.640 --> 00:19:49.039 Thank you, Commissioner. Now if my fellow members will 00:19:49.039 --> 00:19:51.500 indulge me for a second, I have a few 00:19:51.500 --> 00:19:54.579 comments and then some questions from that also, if that's 00:19:54.579 --> 00:19:58.430 okay. Over the weekend, a major Texas newspaper published 00:19:58.430 --> 00:20:02.480 an article demanding I resign because I refused to 00:20:02.480 --> 00:20:05.240 parrot their talking points and place blame for winter 00:20:05.240 --> 00:20:09.069 Storm Yuri on natural gas. By not doing this, they 00:20:09.069 --> 00:20:12.579 claim I've been misleading Texans. My response to their 00:20:12.579 --> 00:20:14.759 claims has been written, and I will send it to them 00:20:15.440 --> 00:20:18.559 after this open meeting, if they truly believe 00:20:18.559 --> 00:20:21.240 their claims, I challenge them to print my response 00:20:21.240 --> 00:20:25.009 in full and let Texans decide. While no form of energy 00:20:25.009 --> 00:20:27.799 performed perfectly during winter storm Yuri, the 00:20:27.799 --> 00:20:30.599 insistence that natural gas producers are the primary 00:20:30.599 --> 00:20:34.380 culprit with the February blackouts is pure hyperbole. 00:20:34.390 --> 00:20:39.930 But more than hyperbolic, it is hypocritical 00:20:39.930 --> 00:20:43.150 to blame natural gas for electricity shortage during 00:20:43.150 --> 00:20:46.700 a weather emergency while routinely applauding efforts 00:20:46.700 --> 00:20:50.269 by the Biden administrations to kill natural gas. 00:20:50.740 --> 00:20:53.650 You can't repeatedly write articles attacking natural 00:20:53.650 --> 00:20:56.750 gas and then be upset when there isn't enough natural 00:20:56.750 --> 00:21:00.140 gas to power our society. From the beginning, I've 00:21:00.140 --> 00:21:02.700 been clear that the issue isn't the existence of wind 00:21:02.700 --> 00:21:06.329 and solar energy, but in the world of finite resources, 00:21:06.329 --> 00:21:09.690 preferential treatment and subsidies for unreliable 00:21:09.690 --> 00:21:13.509 wind and solar power have stifled investment in reliable 00:21:13.509 --> 00:21:17.430 natural gas generation. Need proof? According to the 00:21:17.430 --> 00:21:21.299 US Energy Information Administration, Texas plans 00:21:21.299 --> 00:21:25.069 to build power plants that will generate 11.6 gigawatts 00:21:25.069 --> 00:21:29.460 of solar electricity, 8.4 gigawatts of wind electricity, 00:21:30.140 --> 00:21:33.460 but only five gigawatts of natural gas, electricity 00:21:33.460 --> 00:21:39.319 and zero nuclear or coal. Why build natural gas power 00:21:39.319 --> 00:21:42.509 plants when politicians in Austin guarantee your wind 00:21:42.509 --> 00:21:46.190 farm will be profitable no matter what? This is not 00:21:46.190 --> 00:21:49.160 being misleading. This is the truth, the bold truth. 00:21:49.640 --> 00:21:53.430 It's simple math. If you can't, if you add unreliable 00:21:53.430 --> 00:21:56.720 wind and solar generation and subtract reliable natural 00:21:56.720 --> 00:22:00.700 gas generation, that equals a less reliable electric 00:22:00.710 --> 00:22:05.390 grid. Until we fix this fuzzy math, we're simply putting 00:22:05.390 --> 00:22:09.309 a Band Aid on the problem. To be clear, I don't say 00:22:09.309 --> 00:22:11.849 that this minimizes the failures of the oil and gas 00:22:11.859 --> 00:22:15.619 industry during winter Storm Yuri. My agency is dedicated 00:22:15.619 --> 00:22:18.690 to ensuring Texas oil and gas producers are prepared 00:22:18.690 --> 00:22:22.390 to operate this winter. Matt, during winter Storm Yuri, 00:22:22.400 --> 00:22:26.720 how many megawatts of ERCOT managed electric grid shortage 00:22:26.730 --> 00:22:27.676 was Statewide? 00:22:27.700 --> 00:22:30.220 I understand about 50, 000 megawatts 00:22:30.230 --> 00:22:34.420 50, 000 megawatts, so we were short 50, 000 megawatts. 00:22:34.430 --> 00:22:37.730 How much of that shortage that ERCOT find was due to 00:22:37.730 --> 00:22:40.580 limited fuel supply issues of natural gas? 00:22:40.604 --> 00:22:44.201 I understand it was roughly 6000 MW. 00:22:44.225 --> 00:22:48.539 6000 MW. So 6000 of 50, 000 MW shortage 00:22:48.539 --> 00:22:52.799 was due to limited natural gas supplies. It was this 00:22:52.799 --> 00:22:56.960 6000 megawatts that a recent Federal Energy Regulatory 00:22:56.960 --> 00:23:00.789 Commission, FERC, reportedly discussed in regards to 00:23:00.799 --> 00:23:02.459 us. Is that correct? 00:23:02.483 --> 00:23:05.480 Yes. The report stated that roughly 00:23:05.490 --> 00:23:10.859 58% of those 60, 000 MW were due to failure to weatherize 00:23:11.940 --> 00:23:14.940 oil and gas production facilities such as natural gas 00:23:14.940 --> 00:23:15.885 wells. 00:23:15.909 --> 00:23:18.769 So, be clear, take 'em together, this means about 00:23:18.779 --> 00:23:24.269 7% or 3500 megawatts of the electrical shortage was 00:23:24.269 --> 00:23:28.130 caused by unprepared natural gas wells. 00:23:28.154 --> 00:23:29.569 I'll say yes 00:23:29.569 --> 00:23:32.869 that's partially correct. And I'll also amplify 00:23:32.869 --> 00:23:35.839 that by saying, from my personal experience of having 00:23:35.849 --> 00:23:38.549 worked for two different operators prior to joining 00:23:38.559 --> 00:23:42.220 the Commission, I can tell you that it's standard operating 00:23:42.230 --> 00:23:47.660 practice for operators to take wells offline in anticipation 00:23:47.660 --> 00:23:51.329 of severe weather. So while some of the wells that 00:23:51.339 --> 00:23:55.269 were unavailable due to true freeze offs, you did have 00:23:55.269 --> 00:23:57.650 a percentage of those wells that were also voluntarily 00:23:57.660 --> 00:24:00.039 taken offline. 00:24:00.039 --> 00:24:02.660 Our critical designation rule determines 00:24:02.660 --> 00:24:06.220 which natural gas facilities are critical to electricity 00:24:06.220 --> 00:24:10.130 generation. Any facility that is designated critical 00:24:10.140 --> 00:24:13.210 must weatherize, so they are prepared to operate during 00:24:13.220 --> 00:24:15.056 an energy emergency. Correct? 00:24:15.080 --> 00:24:15.671 Yes, sir. 00:24:15.695 --> 00:24:17.490 Okay. The media has written 00:24:17.490 --> 00:24:22.279 extensively that any company that pays us $150 is exempt 00:24:22.279 --> 00:24:25.105 from weatherization. Is this true? 00:24:25.129 --> 00:24:26.579 It is not true 00:24:27.539 --> 00:24:30.819 that facilities will be exempt from weatherization simply 00:24:30.819 --> 00:24:37.569 by paying the $150 fee. The exemption is a provision 00:24:37.569 --> 00:24:40.960 that was included in Senate Bill 3 by the Legislature. 00:24:42.069 --> 00:24:46.119 It has been addressed in our rule and it will be handled 00:24:46.119 --> 00:24:49.619 in a responsible fashion under the rule. And it is not 00:24:49.619 --> 00:24:51.876 simply a get out of jail free card. 00:24:51.900 --> 00:24:53.089 Okay, now is the 00:24:53.089 --> 00:24:57.640 $150 fee that's been repeated in many different media 00:24:57.650 --> 00:25:01.769 speeches, Legislative sessions, can you give me a little 00:25:01.769 --> 00:25:04.559 bit of story behind $150 fee and where it came from? 00:25:04.569 --> 00:25:07.150 Sure, it was originally created by the Legislature 00:25:07.150 --> 00:25:10.440 in 1985, and at the time that it was created, it was 00:25:10.440 --> 00:25:15.789 set at only $50. That statute was amended by the Legislature 00:25:15.789 --> 00:25:21.059 in 2001, and it was increased to $150 at that time. 00:25:21.640 --> 00:25:24.160 And while the statute has been amended subsequently, 00:25:24.640 --> 00:25:28.089 the $150 amount has not been amended since it was set 00:25:28.089 --> 00:25:31.140 at that level in 2001. 00:25:31.140 --> 00:25:34.619 So it was not the Railroad Commission, but instead 00:25:34.630 --> 00:25:39.299 the Texas legislature has set that $150 amount? 00:25:39.309 --> 00:25:43.329 correct? Thank you, Matt, for clearing all that up. 00:25:43.339 --> 00:25:47.230 And we've reached a sad time, folks, in politics where 00:25:47.230 --> 00:25:50.339 blame and centralization or more commonplace than 00:25:50.339 --> 00:25:53.940 nuanced reporting. I hope this question answers helped 00:25:53.940 --> 00:25:56.630 clear up some of the common misconceptions for the 00:25:56.630 --> 00:26:00.089 media and the public. People once set aside their political 00:26:00.089 --> 00:26:03.579 differences after a natural disaster struck, they would 00:26:03.589 --> 00:26:06.589 unite to help those suffering and sure everyone who 00:26:06.589 --> 00:26:09.170 needed it got help and worked together to make sure 00:26:09.170 --> 00:26:12.869 we're preparing for the next storm. Apparently, it's 00:26:12.869 --> 00:26:15.619 now commonplace for a major newspaper to call for the 00:26:15.619 --> 00:26:18.339 resignation of a democratic-elected government official 00:26:18.349 --> 00:26:21.710 over differences of opinion. Instead of being used 00:26:21.710 --> 00:26:24.180 as a learning opportunity about the importance of grid 00:26:24.180 --> 00:26:27.480 reliability, the winter storm has been used as a weapon 00:26:27.490 --> 00:26:30.859 by the media and the Far Left to attack fossil fuels 00:26:31.240 --> 00:26:34.319 and any elected official that places any blame on wind 00:26:34.319 --> 00:26:38.000 or solar unreliable energy. Instead of playing the 00:26:38.009 --> 00:26:41.779 blame game, we need to come together, find real solutions 00:26:41.779 --> 00:26:44.869 to fix the problems, and that's what I want people 00:26:44.869 --> 00:26:49.410 to know. Over 800 families are represented at this Railroad 00:26:49.410 --> 00:26:52.420 Commissioner Texas. It's been stated it is the most 00:26:52.420 --> 00:26:57.119 respected organization in regulating oil and gas on 00:26:57.119 --> 00:27:00.759 planet Earth. These are families that suffered during 00:27:00.759 --> 00:27:05.759 the storm with all the folks of Texas, there is nobody 00:27:05.759 --> 00:27:09.900 I think, in the Legislature, the administration at 00:27:09.910 --> 00:27:14.619 any Commission, ERCOT, PUC, the Railroad Commission 00:27:14.619 --> 00:27:20.099 of Texas that has anything but desiring to fix every 00:27:20.099 --> 00:27:23.769 problem possible and make sure this does not happen 00:27:23.769 --> 00:27:27.490 to the extent it did again. So we're here today, we're 00:27:27.490 --> 00:27:29.730 interested in continuing to do the Railroad Commission's 00:27:29.730 --> 00:27:32.559 work, and we thank you and the Railroad Commission 00:27:32.559 --> 00:27:35.980 staff for the excellent work you've done by trying 00:27:35.980 --> 00:27:38.279 to follow the legislative intent of the Legislature 00:27:38.289 --> 00:27:42.740 and Senate Bill 3. 00:27:42.740 --> 00:27:46.430 I believe we have done that. And are there any 00:27:46.430 --> 00:27:52.589 further questions or comments? I move the adoption 00:27:52.589 --> 00:27:58.200 of new 16 Texas Administrative Code, Section 3.65, related 00:27:58.200 --> 00:28:01.559 to the critical designations of the natural gas infrastructure, 00:28:02.039 --> 00:28:05.940 and amendments to section 3.107, relating to penalty 00:28:05.940 --> 00:28:09.670 guidelines for oil and gas violations, adoption of 00:28:09.670 --> 00:28:16.580 corresponding form CI-D CI-X. Is there a second? 00:28:16.604 --> 00:28:17.588 Second. 00:28:17.612 --> 00:28:20.589 Second by Commissioner, right. All in favor 00:28:20.589 --> 00:28:24.799 say aye. Any opposed? The motion passes. That 00:28:24.799 --> 00:28:28.410 item is approved. Let's move to agenda item 2. Agenda 00:28:28.410 --> 00:28:31.029 Item two is our Executive Session item, which we will 00:28:31.029 --> 00:28:33.980 not be going into today. Are there any other duly 00:28:33.980 --> 00:28:36.069 posted matters to be brought before the Commission 00:28:36.069 --> 00:28:39.859 at this time? Hearing none. This meeting of the Railroad 00:28:39.859 --> 00:28:43.640 Commission of Texas is adjourned.