The Texas Railroad Commission has nothing to do with railroads. It did, once, but that was long ago.
As the (misnamed) state agency charged with regulating many aspects of the Texas oil and gas industry – from drilling to pipelines to production allocations to spot pricing – the three-member commission has a great deal to do with the work of business lawyers and law firms here and across the country.
One seat on the commission is on the 2020 ballot. The Democratic candidate is Chrysta Castañeda of Dallas, the founding partner of The Castañeda Firm, an energy litigation firm. The Republican is Jim Wright, a fifth-generation son of South Texas ranchers and the owner of a group of oil field services companies.
There’s no incumbent in the race (Wright, a political novice, upset a sitting commissioner in the Republican primary), and Texas Democrats are more optimistic than they’ve been in decades about breaking the GOP’s iron grip on state government. The race has been unusually spirited – and costly – as two markedly different candidates have offered two markedly different views of what the commission’s priorities should be.
No Democrat has won a seat on the Railroad Commission since 1990. Sometimes, they haven’t even tried. In 2000 and 2012, no Democrat stepped forward to challenge Republican incumbents, who strolled to reelection.
No one’s strolling this time, a point emphatically made this week when Castañeda announced a $2.6 million donation from Michael Bloomberg, the former New York City mayor, former presidential candidate and profoundly wealthy patron of Democratic causes and candidates. Even by Texas standards, even by Bloomberg’s, that’s one large-bottom campaign contribution.
“Chrysta Castañeda will be a champion for Texans – her commitment to improving people’s lives is clear,” Bloomberg said in a written statement. “I’m glad to support Chrysta in her campaign to be the next Railroad Commissioner, because she has the vision and experience needed to build a safer, healthier, and more environmentally prosperous future for the state of Texas.”
The Bloomberg donation – $2.5 million in cash, $125,000 in in-kind considerations – is included in Castañeda’s latest campaign finance report to the Texas Ethics Commission, a report all candidates are required by law to submit. It covers the period from Sept. 25 through Oct. 26. ln all, hers lists $3.7 million in contributions.
Wright, who calls himself “a pro-life, Second Amendment conservative,” is running as a proud, steadfast friend of the oil and gas industry. He’s for creating jobs. And for a strong economy. And for rebuilding a strong economy. And for jobs.
If elected, he says in a YouTube campaign video, “I will continue to stand up to the liberals, the bureaucrats and keep Texas a world energy leader.”
Lest there be confusion about who “the liberals” are, the ad explains. They’re the people who “want to pass a so-called Green New Deal that will send [oil] prices spiraling even further downward” than they’ve already fallen in the pandemic, “cost Americans trillions of dollars and eliminate millions of jobs.”
Three black-and-white mug shots then appear in sequence in the video, over a silhouette of an oil derrick:
And Chrysta Castañeda.
Castañeda’s campaign has spent aggressively this month – six figures in Houston alone, according to one published source – on a blitz of TV ads.
One new spot highlights environmental violations by DeWitt Recyclable Products, an oil field waste-handling company Wright started and once owned. In November 2017, Wright agreed to pay $181,00 in fines to settle a Railroad Commission complaint that waste products had been illegally stored and were leaking from storage tanks at DeWitt’s facility outside Cuero. He also agreed to pay for a cleanup.
The ads reiterate what has been a central theme of her campaign: The failure of the commission to police “flaring,” the intentional burning of natural gas at the wellhead to save oil producers money.
When oil is extracted, natural gas comes with it. Even with prices stunted by the pandemic, West Texas producers can make a profit selling oil, so wells have been operating actively. But natural gas is worth less than it would cost to move it to market. So it’s often simply set on fire.
That’s grotesquely wasteful, Castañeda argues. She likes to say oil companies flare enough gas to power the city of Houston. “We might as well be burning cash.” Moreover, flaring releases air pollutants that are harmful to humans and greenhouse gases that contribute to climate change. The Railroad Commission, she says, has refused to use its legal authority to stop the practice.
In 2012, she was one of 11 candidates in the Democratic primary for the U.S. House seat in what was then a newly created congressional district, the 33rd. She finished seventh.
Wright prides himself on being a political outsider. He’s never run for office before, and he didn’t think he’d still be running for this one.
Going into the Republican primary, he had a famous Texas name, $12,600 and nothing to lose.
His primary opponent, Ryan Sitton, had been on the Railroad Commission since 2015; he’d won the seat the previous November by more than 1 million votes. He had $2 million in campaign cash and the public support of the four most powerful officeholders in Texas: Gov. Greg Abbott, Lt. Gov. Dan Patrick and the state’s two U.S. senators, John Cornyn and Ted Cruz. An Aggie with a degree in mechanical engineering, Sitton had founded his own company in 2006 to provide engineering, technology and data services to clients in the energy and petrochemical industries.
When Wright won the primary by a 55-45 margin, he may have been the only person in Texas more surprised than Ryan Sitton.
“It shocked me,” he said in an election night interview with the Austin American-Statesman.
He ran what he called a grassroots campaign, celebrating his rural heritage, his achievements as a self-made businessman and his commitment to “faith, family and hard work.”
An accomplished bull rider since his youth, he spent 20 years on the rodeo circuit. Riding bulls, he said, taught him two valuable lessons:
1. Eight seconds can seem like an eternity; and
2. When you fail, dust yourself off and get back up.
As for that famous name, he downplays the notion that he picked up votes because people associated him with the late Congress member and House speaker from Fort Worth.
“There’s an even mix of people who liked that guy, and didn’t like him,” he told the American-Statesman.
Despite what Wright’s video may suggest, Castañeda is more likely to be spotted at the Dallas Petroleum Club than at a day spa with AOC, more likely to be up at night drafting a pleading than texting with Nancy Pelosi.
Her law firm specializes in complex litigation for oil and gas industry clients, particularly in the upstream sector. Her practice touches on nearly every aspect of law of concern to the energy sector: leases, construction, royalties, conveyance, production accounting, government regulation, trade secrets, product liability, toxic torts and environmental law, among others.
She’s a graduate of the Dedman School of Law at Southern Methodist University and has a degree in industrial engineering from Kansas State University.
She is perhaps best known for winning a $146 million jury verdict in 2016 as the lead lawyer for T. Boone Pickens and his oil company, Mesa Petroleum Partners, in a lawsuit over the ownership of 160 West Texas oil wells. (The defendants, Baytech LLP and Delaware Basin Resources LLC of Midland, later settled with Pickens for an undisclosed amount.)
Pickens died in September of 2019 at the age of 91.
Castaneda cowrote a book about the case, The Last Trial of T. Boone Pickens. It was published in April of this year.
Wright, who calls himself “a strong pro-business Texan,” says his priority as a Railroad Commissioner would be to “help rebuild the oil and gas industry, which benefits all Texans.”
He’s also said he’d work to strengthen ethics rules for all commission employees. The reason he ran in the first place, his campaign website says, was “because we need to restore integrity and trust in the Texas Railroad Commission.”
Campaigning before the primary, Wright pledged that if elected he would recuse himself from ruling on any matters involving his campaign contributors. On the stump, it was an effective line. Sitton, his opponent, had accepted millions of dollars in contributions from oil and gas interests regulated by the commission.
That hardly made Sitton a singular rogue. In the modern history of the Railroad Commission, taking campaign money from the oil and gas industry is closer to a best practice than a misdeed. Statistically, it would have been more remarkable had Wright discovered he was running against an incumbent who had refused such contributions.
A November 2016 study by the Sierra Club Lone Star Chapter, Texans for Public Justice and Public Citizen’s Texas Office analyzed contributions to the three commissioners then in office, including Sitton. The groups concluded that 60% of the commissioners’ campaign cash had come from energy concerns.
The study was titled, “RIGGED: How the Texas Oil and Gas Industry Bankrolls Its Own Regulators.”
Four months after his upset victory, Wright “clarified” his recusal pledge. The scrappy outsider running a petty-cash campaign had undergone a transformation of sorts. Call it a change of fortune.
Put simply, the big oil money was rolling in. From late February through the end of June, his campaign had collected more than $384,000 in contributions, according to campaign finance reports filed with the Texas Ethics Commission. And most of it came from energy-related companies, executives and political action committees.
In July, he told the American-Statesman that he’d still recuse himself from ruling on matters involving contributors – but only if their donations were made right before a vote. That, he said, would look bad.
Asked by the newspaper about the preponderance of industry money in the contributions he’d received since he’d become the Republican candidate, Wright had a simple explanation: “Industry is of course going to support someone who is pro-business, and I am very pro-business.”
According to Ballotpedia, an independent online encyclopedia of U.S. politics, Wright’s campaign raised $644,957 and spent $555,248 between Jan. 1, 2019, and Sept. 24 of this year.
Wright’s campaign finance reports list contributions of:
- $25,000 from Mackie McCrea, president of Energy Transfer LP; and $10,000 from the Energy Transfer Texas PAC;
- $25,000 from NGL Waters Solution Permian LLC, an oil and gas producer;
- $20,000 from Timothy and Terri Dunn – Timothy is the co-founder and CEO of CrownQuest Operating LLC, a Midland-based oil and gas exploration company;
- $12,500 each from the Marathon Oil Co. Employees PAC and the Texas Oil and Gas Association Good Government Committee; and
- $10,000 each from more than a dozen individuals and entities.
Castañeda’s fundraising efforts, even before the Bloomberg gift, were impressive as well. She raised $411,917 – $81,000 of it from the Texas House Democratic Campaign Committee – in the 20 months covered by the Ballotpedia analysis. Her campaign had spent $272,632 as of Sept. 24.
Her campaign finance reports showed that she got:
- $25,000 from Spike Buckley, a Denver real estate developer and entrepreneur;
- $15,000 from Jeffrey M. Tillotson, a Dallas trial lawyer and longtime supporter of Democratic causes;
- $15,000 from Bryan Sheffield, executive chairman of Parsley Energy, an independent oil and gas company, and $5,000 from Scott Sheffield, Bryan Sheffield’s father and the president and CEO of Pioneer Natural Resources;
- $10,000 from Ariel Nessel, founder of Nessel Energy, “a values-based organization committed to sustainability through … solar energy and energy efficiency”;
- $5,000 from the Vinson & Elkins Texas Political Action Committee;
- $5,000 from former Houston Mayor Bill White, chairman of Lazard Houston, a primary hub of Lazard’s global energy investments, including oil and gas exploration, production, refining, midstream, pipelines and alternative energy;
- Ann Marie Painter, who is Castañeda’s campaign treasurer, a Dallas partner with Perkins Coie and an eminent employment and labor law practitioner;
- $5,000 from Chris Kayem, president of Tex-Isle Inc., a Houston-based manufacturer and distributor of oil field “tubulars,” such as drill pipe, line pipe and casing; and
- $5,000 from Tom Fagadau of Dallas, chairman of Primexx Energy Partner , an independent oil and gas exploration company.
Wright did not respond to repeated requests from The Texas Lawbook to answer a written questionnaire. The following are Castañeda’s responses.
Q: Tell us a little bit about yourself and why you entered this race.
A: I’m a commercial litigation attorney with over 30 years of experience in the oil and gas industry, both as an attorney and an engineer. I focus on upstream litigation. My most notable oil and gas case was as the lead lawyer for T. Boone Pickens. Our winning $146 million verdict was named one of the largest verdicts in the nation in 2016.
Because of my extensive background in the industry, I was asked to consider a run for Railroad Commissioner. The Railroad Commission has nothing to do with railroads; it regulates the oil and gas industry in Texas. I decided to run when I saw how much flaring was occurring and how wasteful it is. Flaring is the intentional combustion of produced natural gas and has been illegal for over 100 years with limited exceptions. In 2019, companies lit on fire enough natural gas to power the City of Houston continuously. When the current commission fails to enforce our laws, it comes with significant environmental and health consequences. Flaring has economic consequences as well, because we are wasting the very energy that we are spending billions of dollars to get.
The Railroad Commission is also failing to protect industry jobs and companies from going bankrupt. It had the power to avoid some of the worst losses caused by the pandemic but failed to act in the spring of 2020 when it was asked to prorate production. We are all worse off because of the current Railroad Commission’s lack of oversight.
Q: Tell us about your career and why your previous career experiences would serve you well if elected to the Texas Railroad Commission.
A: In engineering school, I interned for Conoco (now Phillips66) designing and overseeing pipeline capital improvement projects. After graduating, I became a software engineer designing computer systems for gas companies, including production and revenue accounting systems. After law school, I have focused heavily on commercial litigation in the upstream sector of the oil and gas industry. After over 20 years in major law firms, I founded my own firm in 2014 focused on oil and gas litigation.
I have represented landowners, royalty owners, investors and oil companies big and small. I have served as the general counsel of an E&P company. I have tried cases and been in courtrooms in all of the places we keep the oil and gas: the Permian, the Eagle Ford, the Barnett Shale and South Texas. I have spent many months (if not years of my life) in these areas of Texas.
My oil and gas litigation involves the most complex and recurrent issues the industry faces, including evidence and disputes about geology, reserves, accounting, legal agreements, title issues and more. I know both the complex technical and legal issues that the industry faces.
My 30-plus years of experience inform my understanding that oil and gas play a key role in the economic well-being of literally every corner of Texas, but that our economic needs must be balanced with the protection of our precious natural resources and environment.
Q: What are the biggest challenges the Railroad Commission is currently facing? How would you do your part in addressing those issues?
A: The oil and gas industry faces an existential crisis if it does not get flaring and venting under control, but the current commissioners refuse to enforce existing laws against these practices. The commission is punishing those who follow the law and rewarding those who violate it. I would enforce the existing laws and encourage turning that “waste” gas into electricity at the source.
Q: How do you think the Railroad Commission is doing in addressing issues that have resulted from the pandemic? What would you do differently?
A: We need the commission to guide the industry through enormous challenges, like the recent market crash caused by the pandemic which caused oversupplied markets and resulted in massive job losses and bankruptcies. Commissioners could have helped soften the market bottom but didn’t. Instead, they said they no longer know how to use the tool of proration to stabilize the market, which they abandoned in the last decade. We must maintain a plan on when and how to utilize proration for exceptional times such as these.
In addition to ignoring is statutory duty to prevent waste, the commission suspended several longstanding rules in violation of due process without any prior notice to the public. These include rules that would give notice to surface owners regarding where hydrocarbons will be stored, allowing for waste storage pits to remain undrained, allowing permits for underground oil storage in formations other than salt caverns, and relieving operators of their requirements to plug abandoned wells. These are key environmental protections.
Q: What kind of change would you like to see with the Railroad Commission and what specific steps would you take to promote change?
A: My top three priorities for the commission are: 1) Enforce the existing laws against flaring and venting, which waste our natural gas resources, pollute our environment, cause human health problems and contribute to global warming; 2) Support industry jobs and company stability by using the tools the Commission has at its disposal; and 3) Use federal stimulus money to put unemployed workers back to work plugging abandoned wells, which are many times more likely to leak and pollute our environment than producing wells.
Q: What was good and what was bad about how the previous commissioner in the seat you’re seeking handled his role? Why would you be a breath of fresh air?
A: While the methodology in his report was suspect, one can appreciate that Commissioner Ryan Sitton attempted to examine the flaring problem and created a report in response to my campaign on flaring. But it shouldn’t have come after granting tens of thousands of flaring exception permits.
Make no mistake: The industry knows it faces an existential crisis if the twin problems of flaring and venting are not reined in. The industry needs change at the Railroad Commission, as do we all, to literally bring fresh air back to Texas.
Q: During your time advocating for oil and gas producers in energy disputes, what have you learned about their needs, and how would you balance their needs with what you see the RRC office needs the most right now?
A: Over 30 years, I’ve learned that the industry is very complex. There are no easy answers to the challenges that the industry faces right now. I’ve also learned that there are a lot of responsible companies that do the right thing and follow the law, but are penalized by the Railroad Commission due to lack of enforcement against the bad actors. The responsible companies know that the industry record on environmental issues – particularly venting and flaring – is a black eye and an existential threat. Institutional investors and private equity are leaving the sector based on this poor industry record. Solutions exist to allow companies to reduce flared and vented gas and greenhouse emissions, and as Railroad Commissioner, I intend to incentivize the rapid deployment of those solutions.
Q: Much of your campaign has focused on flaring. What should producers do instead to get rid of excess gas produced with oil?
A: I propose to turn that “waste gas” into electricity right there in the Permian through microgeneration grids. The technology is already in use. The producers can use the electricity for their own power needs and put the excess into the grid. New electricity-dependent industries could develop in the Permian because of the abundance of this power source, including computer farms. We need more computing capacity every day.
Some operators are reinjecting the gas to enhance recovery of oil. This is the proposal suggested by the National Petroleum Council.
Q: What is your vision for the Railroad Commission? What are some areas you think the office needs to focus its efforts in that it is currently not?
A: In addition to getting a handle on emissions and flared and vented gas, we need investment in the agency. The commission struggles to compete for qualified, adequately trained and compensated talent to fully staff the mission of the agency. We need increased investment in air and water quality monitoring tools. We need to modernize agency information technology infrastructure and make more information readily available to the public.
Q: What is good and what is bad about how the RRC currently conducts its business?
A: The greatest strength of our Texas oil and gas regulatory system is the hundred years of expertise we have gained as a result of being one of the first, and most prolific, oil producing states. We have laws already on the book’s at the RRC that can get Texas out of the mess it’s in. We just need the political will to enforce the principles that Texans have held important for over 100 years.
Q: Identify one important decision the RRC recently made that you didn’t agree with, and tell us how you would have reached a decision differently.
A: In the spring of 2020, a combination of reduced demand for oil caused by the pandemic and a gross oversupply caused by Saudi Arabia and Russia flooding the market caused the price of oil to crash at epic proportions – hitting negative $41/barrel. The market crash put companies out of business and resulted in massive job losses this year, with more still to come. Commissioners could have helped soften the market bottom but didn’t through their powers of proration, which cuts oil production to help eliminate oversupply. When asked by many operators to use that tool, they said they no longer knew how it works, which is incompetence. Like any agency charged with protecting Texans from epic events – whether they are floods, hurricanes, COVID19 or famine – they were required to plan for foreseeable challenges. This isn’t the first oil market crash and it won’t be the last, and they should have been prepared. If I am elected I will focus on rebuilding that planning capability so the next time a catastrophe arises, the commission can determine how and when to deploy it.
Q: What sets you apart from your opponent?
A: In addition to my extensive experience, what sets me apart is that my opponent, Jim Wright, is disqualified from holding this office. If Wright cannot follow Railroad Commission laws, he shouldn’t be a railroad commissioner. His company, which runs an oil field sludge recycling facility in Cuero, was cited for 258 environmental and safety violations by the Railroad Commission, the Texas Commission on Environmental Quality and the EPA, and was ordered to cease and desist operations. The Railroad Commission fined him over $181,000 as a penalty. The enforcement action is still pending. He has been sued for fraud by his business partners in the venture. He has been sued more than 25 times for failing to pay debts, for harming workers and other legal issues.
Q: Why would it be bad for Texas if your opponent prevails in this election?
A: I think the Houston Chronicle summarized it best in its endorsement for me. It said the Railroad Commission lacks a member “who takes to heart both the mandate that the commission promote the oil and gas industry and its charge to safeguard the water and air Texans drink or breathe.” We lack balance at the commission, and the industry and the Texas economy are suffering as a result, along with our environment and our climate. We need change, and I’m the only candidate who will bring it.
Editor’s Note: Candidate responses may be edited to comply with Texas Lawbook style guidelines.