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Texas energy regulators are one step closer to requiring natural gas providers to weatherize equipment

Following swift criticism for a rule allowing natural gas companies to opt-out of required upgrades to equipment, state regulators have adopted a new rule that allows them to choose who may and may not avoid weatherization.

AUSTIN, Texas (CN) — The Texas Railroad Commission Tuesday voted unanimously to adopt a rule that will allow some natural gas companies to opt-out of weatherization requirements passed by the legislature earlier this year in response to the deadly winter storm that left millions without power.

The commission is the top regulatory agency in the state that oversees the oil, natural gas, coal and renewable energy industries. 

In the aftermath of the storm, also referred to as Winter Storm Uri, the cause of the blackout was determined to be energy generators’ failure to operate in the freezing temperatures. A report released by the Federal Energy Regulatory Commission and the North American Electric Reliability Corporation showed that 75% of the issues energy producers experienced were caused by freezing and fuel issues. The primary source of fuel that powers the Texas grid is natural gas, which experienced widespread fuel supply issues and made up for 87% of the outages.  

Matt Garner, an attorney with the Office of General Counsel at the Texas Railroad Commission, laid out the new rules for natural gas producers in Texas. He said that the changes being proposed were spurred by two bills that were passed by the legislature earlier this year, House Bill 3648 and Senate Bill 3. 

Senate Bill 3 specifically charged the Railroad Commission, in collaboration with the Public Utility Commission, to formulate rules that designate gas providers as critical infrastructure and require them to adhere to weatherization standards. 

What the two regulators came up with was a rule that required facilities to weatherize their equipment, unless they apply for an exemption with the Railroad Commission and pay a $150 fee.  

The rule became the subject of harsh criticism from lawmakers in September. In a Senate Committee on Business and Commerce meeting, senators lambasted the Railroad Commission’s proposed rule calling it a “loophole” for gas providers. 

Republican State Senator Charles Schwertner said during the meeting, “for $150, [gas providers] get out from being designated critical facilities.” Lawmakers saw this as a workaround that allowed even the largest natural gas companies to resist making the upgrades needed to prevent future supply issues.  

The commission, responding to these criticisms, changed the requirements needed to obtain an exemption. Garner told commissioners that the Office of General Counsel recommends excluding certain low-level producers from being designated as critical.  

“[The counsel also] recommends narrowing the exception provision, so certain critical facilities cannot obtain an exemption,” said Garner. 

Essentially, facilities deemed critical by the Railroad Commission and Public Utility Commission will be required to meet the new weatherization standards, whereas smaller gas producers will be given the ability to apply to be opted out. However, Garner insisted that simply applying to be designated as not critical and paying a fee is not enough to be exempt from the new requirements. 

“An applicant must provide objective evidence demonstrating a reasonable basis and justification to support an application for an exemption,” said Garner. 

Doug Lewin, an Austin-based energy consultant, said in an interview that the rule adopted by the commission was better than the first proposed rule. He believes that the only reason it got better was people speaking out against it.

“This really speaks to how important public input is. The commission had 900 individual comments … and all of that public pressure was heard by the commission and they changed the rule,” said Lewin.

The rule allows the commission to begin designating providers as critical or not critical. On Jan. 1, regulators will release a map detailing the number of critical facilities in the state, then those facilities will be required to adhere to the new standards. 

Carey King, a research scientist with the Energy Institute at the University of Texas at Austin, said in an interview he has not seen the new rule but it sounded like a step in the right direction. 

“It is a step from zero percent being required of natural gas providers to greater than zero percent," said King.

King said state regulators are in a complicated position. There is a question as to whether smaller natural gas companies will be able to spend the thousands, if not millions, of dollars it would take to make their equipment resistant to freezing and failure. 

“A smaller company may not have the wherewithal to weatherize, versus if you are ConocoPhillips or ExxonMobil,” said King.

In order to stave off another blackout, Lewin believes there is no silver bullet. 

“There is a lot we have to do and this is doing to be a multi-year, decadal kind of effort, and hopefully every year we are decreasing the probability of something like we experienced in February or worse,” said Lewin.

An analysis from the Electric Reliability Council of Texas estimates electricity generation will meet demand from December to February. However, in the event of a cold snap that causes providers to shut down, some Texans could be left in the dark. Under new requirements, power plants are mandated to make weatherization upgrades, but if energy producers face issues, some Texans may experience outages. 

During the winter storm last February, over four million Texans lost power. Some were without electricity for up to four days. The state has confirmed 210 people died as a result of the storm, but a BuzzFeed News analysis estimates the death toll could be 700. Nearly a year later, Texans are nervously headed for another winter season.  

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Categories / Energy, Government, Regional

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