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While the rest of us are fretting about the pandemic, a couple of state agencies are busy with big, unrelated stuff. Government never stops.
The Texas Department of Transportation decided to use the agency’s $3.4 billion discretionary fund on an Interstate 35 expansion through Austin, a long-term project starting during what the state comptroller predicts will be a loss of billions of dollars of state revenue due to the coronavirus-spurred recession in Texas.
Meanwhile, the Texas Railroad Commission is set to vote Tuesday on a proposal to order a cut in the amount of oil produced in the state, a serious bit of regulatory intervention designed to cut supply to match drops in demand. The plan has found unexpected welcomes from some struggling oil companies that ordinarily bridle at any hint of intervention from Austin or Washington. Those voices are hardly unanimous, but they’re out there.
The pandemic scattered most state government workers to their homes, like the rest of us. That doesn’t mean they’re all working on responses to the spread of coronavirus. In fact, both agencies are in the business now they’ve always been in, regulating oil and gas and building roads.
The energy business is in a tailspin that’s only partly attributable to the pandemic. Producers are putting out more product than the world wants, pushing prices down. Mixed with a dreaded virus that stalled the economy and, with it, a large amount of that already insufficient demand, oil prices fell below zero, into negative dollars.
That prompts a classic economic debate in the conservative oil patch: Do you prefer free markets or government control of production?
The latter was the Texas model for decades. The Texas Railroad Commission, which regulates energy in the state (it’s a long story), was the original oil cartel, turning the spigots off and on to balance supply with demand and keep prices up.
That’s no longer how it works; the agency stopped “proration” more than 40 years ago. But the machinery is still in place, and lame-duck Commissioner Ryan Sitton, who lost his reelection primary this year, wants the agency to order a 20% cut in production. The chairman, Wayne Christian, wrote a lengthy “no” in an op-ed in the Houston Chronicle this week, setting the stage for a tiebreaker at the next RRC meeting. The third commissioner, Christi Craddick, hasn’t said publicly whether she’s with Sitton or Christian, but she’s widely believed to be against proration.
It’s a big fight, though, and it’s not about social distancing or testing or the other things dominating the state’s attention right now.
TxDOT isn’t looking at changing course — not because of the pandemic or the economy. Commissioners there voted 3-1 Thursday to use all of the agency’s discretionary funds on the I-35 project, which adds lanes to the highway in Central Texas and which, according to agency officials, will eliminate 11 of the 12 worst “choke points” on state highways.
They drove past objections from state Sen. Robert Nichols, R-Jacksonville, (a former TXDOT commissioner) and state Rep. Terry Canales, D-Edinburg, the respective transportation committee chairs in the Senate and House, who wrote the commissioners in mid-March seeking a delay.
The lawmakers cited “immense volatility in global financial markets, a near collapse in the oil market, and a threat of potential recession” as reasons to “postpone adoption until more financial certainty is available.”
The state’s economic problems have escalated sharply since they wrote that letter. Comptroller Glenn Hegar, watching rapid declines in sales taxes from a flagging economy and oil prices that signal drops in severance taxes, has warned state officials that they’ll have billions of dollars less to spend in the current budget than he forecasted a year ago.
One commissioner, Alvin New of San Angelo, also wanted to tap the brakes. He was the lone vote against the proposal.
“Now, I want to be really clear here,” he said before the vote. “I am not against this project. I am not speaking from a metro versus rural perspective. I am not speaking to protect or debate any one region of the state. That's what I am not doing. I am not against this project. However, the pandemic and its effect on our economy and revenue sources have me wanting to slow down and be more cautious with expenditures.”
Commission Chairman J. Bruce Bugg Jr. pushed to stay the course, saying the vote to proceed isn’t a promise the project will be built, but it commits those funds to the agency’s plans. The discretionary funds would cover a little less than half of the total $7.5 billion price tag, most of which the commission previously approved.
“The COVID-19 environment we are living through today has had historic impacts on the world economy and our economy in Texas,” he said. “But we know the sun will once again shine on Texas. In the meantime, it is the responsibility of this commission to look ahead to the future needs of Texas.”
Disclosure: The Texas Comptroller of Public Accounts has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.