Texas Railroad Commissioner Wayne Christian is peddling a new crypto token tied to the value of a barrel of West Texas Intermediate crude oil, raising concerns about potential conflicts of interest given his position as an elected official to the state agency that oversees the oil and gas industry in Texas — and whose regulatory decisions could impact the value of the token.

Christian, a Republican and one of three members of the Railroad Commission, is listed as a member of the board of directors and chair of the advisory board of Energy Substantiation, the company launching the West Texas Intermediate Coin, or $WTIC, according to materials obtained by The Texas Tribune that the company shared with prospective investors as recently as October.

Christian pitched prospective investors on $WTIC ahead of the coin’s public launch later this year, according to an email from Christian that also was obtained by the Tribune.

“We are now inviting a limited group of early participants to learn more and consider getting involved at the founding stage,” Christian, who also works as a financial advisor, wrote in the email. “After more than 40 years as a financial advisor, I’ve learned that the biggest opportunities are often those recognized early. I believe this one is worth serious consideration.”

Government watchdogs said Christian’s involvement in the company — especially if he trades in the coin or maintains a financial stake in Energy Substantiation — gives rise to potential conflicts of interest between his duties as a regulator and his personal business and financial interests.

“Regardless of how the commissioners’ financial interests might influence their decision-making, the potential for a conflict of interests remains,” said Virginia Palacios, executive director of Commission Shift, a nonpartisan organization focused on reforming the Railroad Commission. “Texans deserve elected officials free of potential biases, especially when financial interests are obvious.”

In a statement, Christian defended his involvement in the company, calling it “separate” from his work at the Railroad Commission and carried out in his personal time and without the use of state resources.

“The Commission does not regulate cryptocurrency or oil markets, so there is no overlap with my regulatory responsibilities,” Christian said. “Any suggestion otherwise stems solely from the fact that the concept is related to energy.”

Christian declined to answer a question from the Tribune about how he would ensure that his business interests remain separate from his government responsibilities. He also declined to answer questions about whether he owns or plans to trade $WTIC tokens, if he has a financial stake in Energy Substantiation and whether he’s paid to advise the company. His personal financial disclosure statement, which may answer some of those questions, is due to the Texas Ethics Commission on April 30.

An Energy Substantiation spokesperson said the company invited Christian’s involvement “because of his extensive knowledge of the energy sector,” adding that his role was “advisory in nature.” The spokesperson declined to share whether Energy Substantiation pays Christian in any way, calling compensation arrangements with advisors “private company matters.”

“As with any company operating in an emerging space, we have assembled advisors and board members with deep expertise in energy markets, public policy and commodity finance,” the spokesperson said. “We take regulatory compliance seriously and structure all of our relationships, including those with advisors and board members, to comply with applicable law.”

The Railroad Commission oversees oil and gas drilling, gas utilities, pipeline safety and coal and uranium surface mining in Texas. The agency’s stated mission is to “serve Texas by our stewardship of natural resources and the environment, our concern for personal and community safety and our support of enhanced development and economic vitality for the benefit of Texans.”

The agency has for years been the target of calls for reform, from changing the name of the body — it no longer regulates railroads — to tightening rules around campaign fundraising.

Commissioners routinely accept campaign contributions from companies, executives and groups in the industries they regulate and that have cases before the agency. Though commissioners are allowed to maintain personal financial interests in companies they regulate, commissioners must recuse themselves in cases in which they have a “personal or private interest.” Those rules do not apply to political donors.

“It does point to, will the regulator make the right decision for the people of Texas, or will they just make the right decisions for their pocketbook?” Palacios said. “There’s a lot of decisions that the railroad commissioners make that may constrict revenues for oil and gas companies, but the important thing is that they do their job to protect groundwater supplies, to protect air quality and to protect the future of the people of Texas.”

Tokenizing oil

$WTIC is a new crypto token whose value is tied, one-to-one, to the value of a barrel of West Texas Intermediate crude oil, one of three main global benchmarks for oil pricing. While investors typically trade on oil price changes, $WTIC allows investors to take direct ownership of oil itself, with each token serving as a digital representation of an actual barrel of oil in storage and traded on the blockchain, according to Energy Substantiation’s website and online documentation. The token has not publicly launched yet, according to the company spokesperson.

Christian, in his email to prospective investors, touted the venture as “an opportunity that brings together two of the most powerful forces shaping the global economy today: energy and blockchain finance.”

He wrote that as a member of the Interstate Oil and Gas Compact Commission — a multistate government agency to which he was appointed by Gov. Greg Abbott — he participated in discussions about “the growing threat to the U.S. dollar’s role as the world’s petro-currency” as “key players like Saudi Arabia have begun accepting alternative currencies from nations like China, Russia and Iran.”

“Texas has an opportunity to lead by unlocking a new dimension of America’s energy inventory through next-generation financial technology,” he wrote, arguing that the United States needed to “reinforce its leadership in energy markets tied to dollar-based systems.”

For investors, he wrote, an oil-backed token offered their portfolios direct exposure to the “value of a resource that has powered the global economy for more than a century.” For oil and gas producers, Christian wrote, the venture could “expand access to global capital.”

In pitch materials, Energy Substantiation said Texas “has led the energy revolution,” arguing that the “global petrocurrency should be from Texas.”

“Texas business is good business for the US; if not the US, who will step in?” the presentation reads.

Unanswered questions

Christian declined to answer a question about whether he earns a commission or other form of compensation from Energy Substantiation for investors he brings into the fold.

Ethics experts noted that if Christian has a financial stake in Energy Substantiation or personally trades in $WTIC, he would stand to earn more if oil prices were high.

Though oil prices are driven by a range of factors outside the Railroad Commission’s jurisdiction, such as geopolitics and financial markets, the agency has the power to curtail oil and gas production in Texas — giving commissioners the ability to shape supply and, thus, prices.

The Railroad Commission “has the power to regulate oil and gas production” in Texas, said Andrew Wheat, an editor at the Austin Free Press who previously served as research director of Texans for Public Justice, a nonpartisan watchdog group. “By exercising that power — or not — it wields great influence over oil prices. Are prices not the intersection of supply and demand?”

Commissioners, including Christian, have long supported near-unfettered oil production, largely viewing robust environmental regulations and tighter restrictions on practices like flaring as unwelcome limits on the industry and the market — meaning any moves to constrain oil production and supply would mark a significant departure from their typical postures.

“If it ever came down to it, I just don’t see Christian trying to limit supply to increase costs,” Wheat said. “But that would be a conflict if, in fact, he had a substantial monetary interest in this product.”

Andy Cates, a Texas ethics attorney, said any push by Christian to restrict drilling permits or otherwise constrain oil supply “could have follow along effects” on $WTIC and help prop up the token’s value.

“That, I would think, would be some sort of market manipulation, some sort of potentially, call it essentially insider trading,” Cates said.

Christian declined to say whether he would recuse himself from regulatory decisions by the Railroad Commission that could impact the token’s value and Energy Substantiation’s revenue. Recusals by commissioners from cases related to companies in which they have financial interests have been rare.

Government watchdogs also raised concerns that Christian’s official title was included in Energy Substantiation’s materials for prospective investors, which could lend credibility to the venture and suggest state backing for the product. Christian was the keynote speaker at Energy Substantiation’s launch in Houston in November, according to a LinkedIn post.

“It does seem like something that an elected official shouldn’t be getting involved with,” Palacios said. “It gives the impression of favoritism for a specific financial product.”

Christian was listed as a board member and advisor on Energy Substantiation’s website as recently as last week. After the Tribune reached out to Christian for an interview, the company’s website was overhauled, removing mention of its advisors, including Christian.

A presentation deck the company used to pitch investors described Christian as a “Texan politician heavily involved in energy, oil and gas policymaking,” a “member and former chair of the Railroad Commission of Texas since 2017,” and “Vice Chair, Interstate Oil & Gas Commission.”

“The inclusion of any advisor’s professional background in company materials reflects their individual qualifications and expertise,” Energy Substantiation’s spokesperson said. “It does not represent or imply endorsement by any government body, agency or office.”

The materials also described state Sen. Tan Parker, R-Flower Mound and a member of the Senate Natural Resources Committee, as a member of Energy Substantiation’s advisory board. Parker’s Capitol office did not respond to a request for comment. Frank Thorwald, chair of Arizona’s oil and gas regulator, also was named as the vice chair of the board of directors.

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