We have liveblogged each of the sessions from The 2013 Texas Tribune Festival's Energy track, which featured panel discussions on regulation, the shale boom, energy efficiency and the fight over electricity.
Featured speakers included state Reps. Stefani Carter, Myra Crownover, Harvey Hilderbran and Tracy King, state Sen. Carlos Uresti, Malachi Boyuls of St. Augustine Capital Partners, Sierra Club Conservation Director Cyrus Reed, Permian Basin Petroleum Association President Ben Shepperd and Public Utility Commission Chairwoman Donna Nelson.
Look below for highlights of the sessions, which were held on the University of Texas at Austin campus.
With: Malachi Boyuls, Stefani Carter, Christi Craddick, Cyrus Reed, Ben Shepperd and Kate Galbraith (mod.)
And we're off. The audience settled into their seats only to find large chocolate bars sitting on their armrests, provided by the nonprofit learning center Power Across Texas. We can only imagine this was a sugar-filled ploy to gain mention on this liveblog. It worked.
What's coming up next for the Railroad Commission right now? Craddick says the agency is working on a rule that deals with underground injection wells. The commission is also doing rule-making to raise its fees — something the Legislature recently allowed it to do. That will help it invest in upgrades to outmoded technology .
Carter, who is running for the open Railroad Commission seat, says the agency is doing plenty right. She mentions that the Legislature and agency are working together on chemical disclosure rules for hydraulic fracturing (with many chemicals being displayed on the website Fracfocus.org). Carter says it is good to keep the EPA out of the process — a refrain that will often come up in the race to replace outgoing Commissioner Barry Smitherman.
Shepperd mentions that the commission's update of the well casing rule — the first in 30 years — was a major step, and that the agency had struggled in the past to find the resources to make significant regulatory changes.
Boyuls, who is running for commissioner, worries — like Carter — that the federal government is "trying to get a foothold in Texas" when it comes to environmental regulations. The state should tell the EPA "We've got this covered. We can handle it better than you do."
"They're trying to stack regulation on top of regulation," he says. That's going to increase the cost of doing business, he adds.
Reed, of the Sierra Club, says the commission's updates were needed. He says the state should also update its regulation of natural gas flaring, a process that emits large amounts of pollution into the air. He also notes that the commission needs more resources to inspect its hundreds of thousands of wells and many miles of winding pipelines, because most go uninspected over the years. He also says disclosure could be better, and the agency's website needs updating.
Craddick admits that the agency is "way behind" on technology issues, but at least it's ahead of New Mexico (drawing a chuckle). The agency has a backlog of 12,000 well completion reports. But as of Aug. 1, the commission has signed a contract with an IT company, and should have significant updates to its website in the next two years, making it more efficient and transparent. That's thanks to a victory in the Legislature, which saw the agency gain permission to use more funds. The commission has also gotten more resources to hire more inspectors.
Since the 1980s, Craddick notes, the agency's staff has been cut from 1,500 to 700. The agency is also struggling to retain talent that may be otherwise drawn to high-paying private-sector jobs.
Boyuls says the technological advances within the agnency will help it retain talent. "And if they've got great leadership at the top," graduating students will be inspired to stay in Texas.
Galbraith asks whether the "let the states do it" rhetoric surrounding regulation of oil and gas is code word for using the lowest common denominator, and she mentions critics' argument that a patchwork of regulations in different states makes for confusion and inconsistency within the industry. Boyuls says no; each state has a unique set of characteristics — and geological formations — that locals will best understand.
Craddick says "Texas has some of the best rules in the country, and other states are following us." She says that several state-driven organizations frequently meet to share best practices about regulating the industry. That, she says, helps improve regulations without federal intrusion. She says it takes only a few days for states to dole out drilling permits, while it sometimes takes 200 days for the U.S. Bureau of Land Management to do the same of federal lands.
Reed says the issue with federal regulations is that oil and gas companies have long been expempt from federal regulations that other industries must follow. Now, the federal government, he says, it working to level that playing field through new rule-making.
Carter says "we have billions of dollars in our savings account because of this industry. If we make things harder, there's going to be fewer dollars," and as a result fewer resources for state programs. She is now leaving so she can catch a flight to St. Louis, where she will be addressing the Conservative Political Action Conference.
In response to an audience question about how the water-intensive industry can deal with drought and dwindling aquifers, Craddick says that drought in some ways has been a good thing for the industry, because it has prompted the industry to focus more on water-saving technology and recycling systems.
Shepperd says the industry wants to get as close to using 100 percent of recycled water as it can, but it's still trying to figure out the economics.
Reed agrees that the industry is making strides on water efficiency, but he says more needs to be done, such as clarifying the authority of groundwater districts over drilling activity.
An audience member asks whether the federal government should at least have baseline rules for the industry but give exemptions to states that have stricter regulations. Boyuls says he wouldn't prefer that, because that would give the EPA the chance to make the rules stricter in the future. Craddick says there currently are no such exemptions — that's not the way the rules work. Shepperd says that most existing federal rules require states to do things that they already do, and only add paperwork that slows down business.
An audience member asks about how the public can find out about what types of chemicals are found within fracking fluid. Could oil and gas companies, for instance, file notices in newspapers? Craddick, again, mentions the website fracfocus.org, which provides information about many (but not all) chemicals within the fluids. That's currently the best option for transparency, she says.
Craddick says "we do try to work with the EPA," and that Texas likes to have fact-based rules. But the EPA, she says, likes to "study it to death."
With: Myra Crownover, Blake Farenthold, Harvey Hilderbran, Tracy King, Carlos Uresti and Gregory Fenves (mod.)
The panelists have been asked: "What now?" Rep. Hilderbran says, "It's important to keep the policies that have made us one of the biggest oil and gas states in the country." The sales tax revenue from the industry has transformed communities, he says. Many companies are looking to extend the lives of shale plays, ensuring they will last for 30 or 40 years.
Crownover says it's been important that the government has stayed out of the way, and that "private industry has driven this boom." There is plenty to learn from the rapid transformation brought by shale. "Nobody could have known what George Mitchell ... could have done for Texas and the United States." Texas is leading the way, she says. "It's very important at this time, where we are blest...this is our opportunity to invest in infrastructure, because we don't know where this is going."
Uresti says "every other state looks to Texas and wishes they had the natural resources Texas has, and wishes they had the savings account." There are some challenges in Texas, he says -- like infrastructure that struggles to keep up." But they're challenges the state can manage, he says. We have to protect the golden goose that is the Eagle Ford, he says.
King says Texas should be aware of its past booms and busts, and says it's important to manage it, and invest the resources that it brings.
We're now talking about water, and how the water-intensive oil and gas industry can meet its needs while the state is gripped in drought. Hilderbran says the industry can — and is — working to conserve water, but its exemption from groundwater rules is essential to maintain.
Crownover says it's silly to criticize the industry's water use, echoing the industry's much-repeated refrain that that, statewide, it uses a fraction of the water that other industries, such as agriculture. She does not mention, however, that the industry's water use in some communities makes up very high portions of overall water use. King points out this out. While it the industry might use 1-2 percent across the state. In many rural communities where drilling takes place, water use might amount to 20-30 percent. "It's important to recognize the perception of the folks that live and work in those places" that the industry is draining their water supplies, he says.
On another note, we should mention that U.S. Rep. Blake Farenthold is not with us at the panel, as he is stuck in Washington. Apologies for mentioning this earlier.
Crownover says "we must be good shepherds of these resources," and that granting the Railroad Commission more money was a good step.
Hilderbran says we need to work on conserving water in other sectors, particularly in big cities that may need to upgrade their infrastructure to prevent waste though leaks.
We're now talking about transportation. Rep. Hilderbran says "it's a shame" that we're tearing up paved roads and turning them to gravel because transportation officials don't have the money to maintain as they struggle to support the influx of heavy traffic brought by the drilling boom.
Uresti mentions a bill he filed this session that would give counties millions of dollars to help them fund their roads. He agrees the pavement-to-gravel plan is "a step backward."
"I understand TxDOT's concerns, but I don't think this is the way to meet them."
Shifting the discussion to the broad impacts on communities, King mentions that cost of living has surged in many places impacted by the drilling boom, making it tough for some folks to pay their bills. That, he hopes, will eventually take care of itself.
Uresti says communities are benefiting as a whole, but "there are growing pains." For instance, some struggle to attract talent to essential jobs, like school bus drivers, when many workers are flocking to higher-paying oil and gas jobs.
Crownover says filling such jobs is "a very real problem" throughout the state.
Uresti says energy company's multimillion-dollar investments in Texas-based headquarters is proof that this boom will be around for a while.
An audience member asks: what's the future of liquified natural gas exports, a possibility that's been touted amid the boom. Rep. King says the market -- not the givernment -- should determine when the time is right.
In response to a question about how to address air quality emissions, Rep. King says that a lack of enforcement often comes from a lack of resources for state regulators, and the state should decicate funds for some of those purposes. Sen. Uresti agrees, saying that once the damage is done, you can't reverse it. Rep. Hilderbran says the state should continue to incentivize best practices in the industry.
Dewitt County Judge Daryl Fowler, an audience member, thanks the legislators on the panel for fighting to address the industry's "devestating" impact on county roads. He says he's a big supporter of the industry and the tax revenue it brings, but he says that overall the impacted counties need more of that revenue. Sen. Uresti says lawmakers need to address how the county-state funding formulas work.
An audience member from Pennsylvania asks the panelists what advice they would offer to a "newbie" shale state, considering Texas' long-held position as an energy producer. Sen. Uresti says "stakeholders are the key," and it's important to have an open dialogue between parties that the industry impacts in different ways. Rep. Crownover says Pennsylvania needs a Railroad Commission (it does't have one) to focus on the industry.
With: Kip Averitt, Doyle Beneby, Deborah Kimberly, Laura Spanjian and Jim Malewitz
Malewitz has asked the panel what the importance of energy efficiency is in a state like Texas.
Kip Averitt is responding saying our economy is big and growing, which requires power. The consumption of energy brings opportunity. The opportunity to use it better, Texas can do things better than we have historically. People get nervous about change, but there is opportunity in change.
Laura Spanjian is responding by saying that Texas isn't doing a great job on energy efficiency. We consume the most and conserve the least. Cities are where there is a lot going on, the three biggest cities are doing well at implementing conservation techniques. Says we need to figure out why some places in Texas are doing great and why some aren't
Doyle Beneby is mentioning the geography of Texas as it contributes to energy efficiency. He is saying that our peaks can provide a lot of aid in conserving energy. He is stressing the importance of timing.
Deborah Kimberly says the solution lies in improving customer satisfaction.
Malewitz has asked the panel how the state failed to implement efficiency. What has made Texas fall behind?
Averitt says we are very good at water efficiency but does not excel at energy efficiency. He says that Texas can't be compared with other states because it's a different animal than other places in America. It's like comparing apples and oranges. The Legislature has passed a bill that gives industrial commercial industries tools to finance energy and water efficiency programs.
Spanjian agrees with Averitt saying that the bill is beneficial. She thinks that we need to focus on doing those kinds of programs in residential areas but with the housing crisis, it prevented this from becoming more widespread.
Spanjian is mentioning that the federal government gives qualified energy bonds in which the government allocates money for conservation projects. Texas hasn't used these bills for energy efficiency work.
Malewitz is asking about EPA carbon standards, wants to know from Beneby about how CPS is making the transition away from coal.
Beneby is saying that they have started retiring coal plants, even though they were still profitable. CPS has also made a solar deal and invested heavily in renewable energy. He says this has been done not only to reduce carbon emissions but also demand response.
Beneby is also saying that very little is talked about health benefits. When you convert to more efficient energy, you make respiratory issues decrease. CPS is low carbon, not specifically anti-coal. Says the most economic options today aren't coal anymore.
Malewitz is asking what deregulation has done to the market.
Averitt is saying that deregulation is a disincentive. Electricty rates are very low, so there is no incentive to build capacity in Texas's growing market. Says we need to conserve. Averitt comments that "conservation is a nice thing for someone else to do", which he thinks the people of Texas agree with.
Spanjian is agreeing with Averitt. She thinks it's hard to get people concerned about conservation when the price of energy is so cheap. Everything has to be bought on the private market, why not buy renewable energy?
Malewitz is now asking if the energy industry should move to the capacity market and what it means.
Beneby is replying by saying a capacity market might cause new bills because if you have capacity sitting around, someone has to pay for it.
Malewitz is asking his last question. He wants to know about some of the effects of energy policy. Wants to know the panel's thoughts on how low income citizens can be more energy efficient.
Kimberly is saying that we need to incentivize conservation programs, especially in the state of Texas. Austin Energy is launching a tier alert for energy that will distribute warnings to give people an idea about their consumption. A lot are not aware of how much energy they are actually using.
Spanjian is saying Houston doesn't have that tier alert with energy consumption but they do have the same thing for water usage. Kimberly responds by saying that she should move to Austin. Kimberly would love to take Spanjian on... as a customer.
An audience member asked how are people going to use the tier app when they don't have smartphones.
Kimberly is saying that you don't need an iPhone but just a smartphone in general. Kimberly says that research has been done and has revealed that even lower-income people can afford smartphones.
Another audience member is asking about what incentives do apartment complexes have to become energy efficient.
Kimberly is saying that there is an ordinance in Austin that requires multi-family properties to pass energy benchmarks that they then track. If they are recognized as "energy hogs," they are monitored more closely and get monthly checks.
Last audience member is noting the disparity between the messages of conservation and the dependence on things that require electricity. What is the incentive for people to save?
Beneby is saying that you tie the two together by using low carbon sources so that way consumption doesn't have to be reduced because what we want to do is decrease pollutants in the atmosphere. He believes that the behavior training is the last frontier.
With: John Fainter, Peter Fox-Penner, Becky Klein, Suzi McClellan, Donna Nelson and Michael Webber (mod.)
Nelson says "it's a transformative time" for Texas electricity, and it's important to note that Texas has more control over its energy fate than other states, largely because of the unique makeup of its energy grid — one that covers most of the state. The state has fewer issues with coordinating cross-state grid issues and federal involvement than do other states.
McClellan says ERCOT's huge wind resource is a blessing, but it also prompts challenges, as the state tries to incorporate the intermittent resource into the grid. Demand response is an important tool the state has to try to reduce the strain on the grid, she says. "How are we going to get the benefits of that flexible resource," she asks. Energy efficiency — the topic of our last panel — is also important in this conversation to this conversation, she adds.
Klein says the electric power market is "exceptionally resilient to significant change," and that the relationship between the regulators and market stakeholders is very strong. In her years in the energy market, she says the private market tends to make better decisions than any one regulatory body.
Fox-Penner says the issue of grid resilience — how to harden the grid to protect against severe weather — is a looming issue for the industry. Meanwhile, new technology is giving more control of their electric power use, and helping them monitor it.
There are many parts of the state that are leaders in energy policy Fox-Penner says, but the state as a whole lags behind others in a number of issues, such as demand response. And the state's conversation about switching from an energy-only market to a capacity market is a unique one.
Fainter says Texas' energy issues are unlike those other states have faced, particularly because of Texas' rapid growth that has raised questions about reliability. The state's shrinking reserve margin needs to be addressed with major investments in energy infrastructure, he adds. When your utilities are thinking about investing in infrastructure that will last 30 or 40 years, it needs to know that it will pay off. Here, he seems to be hinting here at ongoing discussions about whether Texas should shift to a capacity market. "We have to ensure that Texas can grow, so we can grow," he says. He echoes Nelson's point that Texas' intrastate grid gives it more flexibility to address the state's unique problems.
The question now is, "What is the energy poor?" McClellan talks about those who are paying some 10 percent to 15 percent toward energy bills, largely because they live in inefficient homes. She says the industry is in talks about pooling money into an "impact fund" that can address some of those inefficiencies, helping people to redirect their income toward food or other important items.
Nelson says Texas has some interesting energy challenges because of the heat, but the state is working on it, trying to strike the appropriate balance between reliability and costs. "When we turn our air conditioner on, we want it to work," Nelson says.
Fainter, again, advocates for a shift to a capacity market — one in which companies are paid to build energy capacity rather than for the energy itself. It's one way, he says, that would incentivize the building of new infrastructure. It's an an ongoing discussion in Texas, and one that's somewhat controversial because ratepayers would likely bear the costs of that new construction.
McClellan says she hopes Texas will learn from other existing capacity markets. She says she can't imagine a mechanism that can guarantee 100 percent reliability, but the state needs to investigate ways to move toward that goal.
The panel is now talking about the role of water — of course, a scarce resource in parched Texas — in energy production. He says voters' upcoming decision on whether to fund the state's water plan will be essential in ensuring that Texas has enough water to meet its energy needs.
Is distributed generation a threat to the energy industry's business model, an audience member asks? Yes, says Fox-Penner, but Texas has the advantage of being "not a first mover" in that realm, because it doesn't currently have a capacity market.
Another audience member asks whether utilities could couple energy and water rates, since the two resources are so intricately linked. McClellan says it's a possibility, but it could take years of talks between stakeholders. Fox-Penner says it might take a while to completely fuse those systems, but the mechanisms might start looking similar.
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