Texas Tribune energy and economy reporter Mitchell Ferman sat down with Texas Railroad Commissioner Christi Craddick for a live discussion about how the Texas energy sector has been affected by the coronavirus outbreak and what the Texas Railroad Commission, which regulates the industry, is doing to encourage recovery and growth.
Here's a look at some of Craddick’s responses to questions during the interview.
How has the oil and gas industry been impacted by the coronavirus outbreak, and how has the state responded?
- The oil and gas sector was experiencing disruptions months before the coronavirus outbreak. Craddick said that as early as the fourth quarter of last year, there were signs indicating that demand was on a downward slope. “Our permits were beginning to be off even before” the coronavirus outbreak began, Craddick said, so the commission had already begun accounting in its budget for a decrease in demand.
When asked if she would support an increase in the oil and gas severance taxes — state taxes placed on nonrenewable energy sources that other states will use — Craddick said, “I don't think any fee should be increased on an industry that's in a downturn right now,” adding that she had made a formal request to the state comptroller’s office to allow deferred payments on existing severance taxes.
The Texas Railroad Commission recently voted against imposing oil production cuts after much deliberation. When asked how she feels about that decision, Craddick said, “I think we’ve clearly made the right decision in my mind. … And it’s even more important to back up a few weeks before we took the vote of what was beginning to happen within the industry — they were cutting themselves. ... The markets had really [begun] to take care of it by the time we took a vote last week.”
Craddick said that many of the deliberations made by the commission in response to the downturn were done in consultation with stakeholders such as policymakers and industry leaders. “I think it's very important to hear from everybody,” Craddick said. “So it wasn't just people who were operators that were drilling the wells. ... We heard from mineral owners, we heard from pipeline companies, we heard from refiners, we heard from manufacturers ... and we frankly heard a lot from service companies as well.”
In terms of what she believes to be the commission’s top priorities in response to the downturn, “I think the jobs have been the priority for all of us to begin with … [because] no matter what part of the industry you're in, people are the industry,” Craddick said. “[So] what [our commission] can continue to do is have regulatory certainty so people know what the rules are as this industry continues to look forward, innovate and figure out how they're going to be here in a month, 10 months [or even] five years from now. ... I think that's really important for us.”
How has the state economy been affected by the downturn in the energy sector?
“Last year, [oil and gas] was about 35% of the state's economy ... and so [because this industry] is down ... it's gonna affect everything,” Craddick said.
Craddick went on to say that a downturn in oil and gas production could have an indirect effect on public health. “If you look at what we're manufacturing and need right now— we need ventilators," she said. "Well that's all plastic today, so that's oil and gas [production,] whether anybody recognizes that or not.”
Craddick said that given how interconnected the energy sector is with the state economy as a whole, the road to recovery will be a challenge the two must go through together. “As we came out of the Great Recession, the oil and gas industry was the industry that brought us out of [it],” Craddick said, “[and] right now this industry is down, and so how do we climb out of where we are today? ... I think that’s what people are going to have to figure out.”
What does the future of the energy industry look like?
In response to how current trends might impact the prominence of oil and gas in the energy sector versus alternative energy sources, Craddick said, “There is room in the market for everything,” adding that governmental bodies such as the Texas Railroad Commission should avoid “picking winners and losers for the energy market.”
Despite the downward trends and economic hardships, Craddick remains optimistic about the energy industry’s future. “This industry, especially in this state, has always survived [through] innovation ... and I think people looking at the world a little bit differently, while a challenge, is not necessarily the worst thing in the world.”
One challenge Craddick believes every sector should be focused on is finding a way to continue retaining and developing talent during the recovery. “The [question] we will have [to answer as an] industry is, ‘How do we maintain some talent, and where can we keep them?’” Craddick said. “And I think that's going to be the challenge, not just for this industry but frankly [for] every industry that's in a downturn today.”
Craddick was first elected to the Texas Railroad Commission in 2012. She is an attorney specializing in oil and gas, water, electric deregulation and environmental policy. Before serving on the Railroad Commission, Craddick was the chief political and legal adviser to the speaker of the Texas House.
The interview was streamed on the Tribune’s website, Facebook page and Twitter, as well as by our media partners at KPRC2 and KXAN, to a live audience of more than 4,100 viewers.
Disclosure: The Texas Comptroller of Public Accounts and Facebook have been financial supporters 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.
This event is presented by AT&T, TEXAS 2036, Ryan and Blue Cross and Blue Shield of Texas. Media support is provided by KPRC2 and KXAN. Foundation support is provided by the Catena Foundation, Energy Foundation and Cynthia & George Mitchell Foundation.
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