The De-Railers

RR Commission Challengers Say the Office Is Off-Track

Is it time to derail the Texas Railroad Commission? Three of the four candidates running for a seat on the three-person regulatory board think so.

While they don't meet eye-to-eye on exactly how the ax should fall, they all agree the Railroad Commission has been polluted by oil and gas interests, which spend millions each election year to ensure that their candidates maintain control of the board. The three challengers seeking to unseat the incumbent Republican, Carole Keeton Rylander, say changes are needed at the Railroad Commission to protect the future of the very industry that the agency is supposed to regulate. Through the years, the Railroad Commission has lost nearly all of its regulatory powers over transportation, and the importance of the oil and gas industry to Texas' economy has been on the decline. In 1982, oil and gas production taxes represented 27.5% of all state tax revenue. Last year, that figure dropped to 4.5%. Over the same period, the agency's budget has doubled and now stands at $47 million.

Democratic challenger Hector Uribe, a former state senator from Brownsville, wants to replace the Railroad Commission with a new entity he plans to call the Texas Oil and Gas Agency. By dropping the three elected commissioners (who each are paid $79,000 a year and maintain personal staffs) in favor of a governor-appointed executive director and streamlining the agency, Uribe claims he can cut $14 million out of the budget over the next two years. "The commissioners are overpaid, under-worked and over-perked," Uribe says. "We can run this agency without three politicians and their political staffs."

Uribe says his proposed agency would be insulated from the influence the oil and gas industry applies through its campaign contributions, and the oil industry could put the money it saves back into production. The three main duties of the Texas Oil and Gas Agency, he says, will be to refocus the industry, protect the environment, and conserve Texas' natural resources.

Paul W. Pigue, a Houston oilman running on the Natural Law Party ticket, agrees with Uribe that the three elected commissioners should be ousted in favor of a governor-appointed director. But he thinks the office's focus should shift to developing a partnership among industry, government and academia to research alternatives to replace oil that is rapidly being depleted. "I feel like we will no longer have a fossil fuels industry in the 21st century... and that's going to be devastating to Texas," Pigue says. "That's based on a logical conclusion... I think the industry is well past middle age and we're advancing so rapidly from a technical standpoint that it's certain that there will be new fuels developed and new energy sources developed to fuel our vehicles and heat our houses and do all those things we need energy for sometime in the 21st century -- probably early in the 21st century. When that happens, it's going to be devastating to the industry and the Texas economy unless we do something about it."

Richard N. Draheim Jr., a press operator for a T-shirt shop in the Dallas-area suburb of Rockwall, is making his fourth bid for the Commission on the Libertarian ticket. He says abolishing the agency would benefit the oil industry and Texas' economy by lowering prices, providing more competition, and increasing production. "The Railroad Commission [is] a typical government regulatory body, and all government regulatory bodies are captured by the very industry they're supposed to regulate," Draheim says. "It's really utopian and naïve to believe that the Railroad Commission will ever be used to serve the public interest if you just change the name and not the government."

Yet Rylander, apparently, is taking the position that it's not time to throw the baby out with the bath water. (The Chronicle received no response to repeated requests for an interview.) Since she was elected two years ago to serve out an unexpired term, Rylander has worked to put the Railroad Commission on a different track. When a 1994 federal law pre-empted states' authority to regulate in-state trucking rates, routes and services, Rylander pushed to have the Railroad Commission's remaining authority over trucking transferred to the Texas Department of Public Safety. Then she set about reorganizing the Commission, cutting $11 million out of its budget, and reducing staff by 12%. Rylander also cut her personal budget by an impressive 32%.

In campaign literature, Rylander outlines the oil and gas industry's continued importance to Texas -- pumping more than $52 billion into the state's economy and providing more than 293,000 jobs. She has gone on record promising to make the Commission run smoother and partially deregulate the oil industry to help boost production. Over the past two years, Rylander has gained the support of the oil and gas industry and has amassed a war chest of more than $1 million. According to her contribution and expenditure reports filed with the Texas Ethics Commission, most of that money comes from the oil and gas industry -- including a total of almost $17,000 from executives and a political action committee associated with Enron Oil and Gas, $10,000 from the Black Hawk Oil-Torch Energy Advisors PAC, almost $18,000 from J. Virgil Waggoner of Houston's Sterling Chemicals Inc., and at least $10,000 from Jim Bob Moffett, president of Freeport-McMoRan. Rylander has come under fire from her challengers and the Austin American-Statesman for accepting money from companies shortly before or after their cases were heard by the Railroad Commission. (Rylander has responded that she has not taken contributions from any group once that group's name appears on the Commission docket.)

In comparison, Uribe has raised some $30,000 for his campaign and, except for $5,000 from Lucien Flournoy -- a personal friend of Uribe's who works in the oil and gas industry -- little of that has come from the industry. Other donations have come from attorneys, friends, fellow Democrats and the AFL-CIO.

Pigue's filings showed no contributions as of October 7, but says he brought in about $6,000 -- mostly from friends -- at an October 10 fund-raiser. Draheim has refused to submit contribution and expenditure reports, prompting the Texas Ethics Commission to file a suit against him requesting $11,600 in civil penalties plus attorney's fees and court costs.

Historical Perspective

The name itself -- Texas Railroad Commission -- is somewhat of an anachronism, since the agency has precious little to do with railroads these days other than maintaining railroad crossing safety. Its duties in this area, as with trucking, have been shifted to the federal government. Formed in 1891 under Gov. James Stephen Hogg, the Railroad Commission was designed to keep the railroad barons from gouging farmers on freight rates. By the end of the century, due to the waste and environmental mess that had been made at the Corsicana field, the first laws regulating oil production in Texas were passed. When the Spindletop gusher kicked off the Texas oil boom in 1901, regulation of the oil industry began to fall to the Railroad Commission, since the body had the most experience in such matters.

According to George N. Green's chapter on "The Oil and Gas Industry in Texas" in The Texas Heritage history textbook, the Texas Legislature attempted to empower the Railroad Commission with a series of laws designed to favor Texas oil companies over the large, out-of-state national firms, but those laws were struck down by federal courts at the request of the majors. When wildcatters got the jump on the large oil companies on newly discovered oil fields in East Texas during the 1930s and began flooding the market with barrels of crude that severely depressed oil prices, the Railroad Commission enacted prorationing laws to limit production. Gov. Ross Sterling, a former Humble Oil president, declared martial law over the East Texas oil fields and sent National Guard troops into the area to enforce the Railroad Commission's limits.

Eventually the federal government got involved, and laws were passed to allow the Railroad Commission to "`stabilize' the industry," Green writes. "The Commission's prorationing allowed the majors to drive the independents out of the processing end of the business, but it also protected Texas independents from the price-cutting practices of the majors, not a single one of which was based in Texas. The Commission set the allowable at whatever level the majors and leading independents requested and... the Commission became the creature of the industry it purported to regulate.... The original goal of serving the citizenry and regulating the oil industry seemed lost in the shuffle."

Over the years, the Railroad Commission has served as a launching pad for those seeking higher office. Democrat Beauford Justice was elected governor in 1948 following a stint on the Commission. More recently, Comptroller John Sharp and former U.S. Sen. Bob Krueger used the Commission as a step up. Others, like Buddy Temple and Kent Hance, weren't so lucky when they attempted to parlay their office into gubernatorial runs in 1982 and 1990, respectively.


Carole Keeton Rylander (Republican)
The Incumbent

Carole Keeton Rylander, 56, has been a figure in local politics since 1972, when she was elected to Austin Independent School District's Board of Trustees. She served as both vice president and president of the AISD board, and was a founding board member and president of Austin Community College. In 1977, Rylander became the first woman mayor of Austin and served three terms until 1983. From 1983-1986, she was appointed to the State Board of Insurance and later worked to further Republican causes, serving as regional co-chair of Texas Women for Bush in 1988 and as state co-chair for Odessa oilman Clayton Williams' failed bid for governor in 1990. (Williams recently contributed $2,000 to Rylander's campaign.)

In 1994, Rylander defeated incumbent Mary Scott Nabers, who had been appointed to the Commission by Gov. Ann Richards after Bob Krueger left to take the U.S. Senate seat vacated by Lloyd Bentsen. With Rylander's election, the Republican Party occupied all three seats on the Commission for the first time in its 100-year history. And last year, Rylander's fellow commissioners, Barry Williamson and Charles Matthews, appointed her chairman of the board.

In campaign literature, Rylander states "I believe the oil and gas industry needs what all Texans need from government and that's less, not more -- less mandates, less regulation, less taxation. We're doing more with less at the Texas Railroad Commission." She promises: an effort to increase oil and gas exploration and production; to promote the use of natural gas; de-hassling the regulatory process; and to use the Commission as a "bully pulpit" for disseminating information about the Texas energy industry. Rylander also promises "promoting sensible environmental protection." Last July, she told the Statesman that the United States has fallen behind in the global energy market and relies too much on foreign oil because of "regulatory overkill and environmental extremism."

If her past two years in office are any indication, Rylander will attempt to keep those promises. She has cut the Railroad Commission's budget and staff. She has pushed for more incentives to drill more gas wells, and created the Gas Services Division to promote the use of natural gas. She has reduced the amount of paperwork required to do business with the agency. And, since her time in office, the Railroad Commission has been recognized twice for its programs by the Environmental Protection Agency.


Hector Uribe (Democrat)
The Democratic Challenger

Attorney Hector Uribe, 50, was elected to the Texas House of Representatives in 1978, and served until elected to the state Senate in a 1981 special election. While in the Senate, Uribe was vice chairman of the Joint Committee on Oil Spills and Water Pollution Abatement, and served on the Natural Resources committee, among other things. He lost his seat to Eddie Lucio in the 1990 Democratic primary, and returned to his law practice in Brownsville. Last year, Uribe announced his candidacy for chairman of the Democratic Party, but later withdrew in favor of Bill White, who got the nod last December.

In the last state election, Democrat Martha Whitehead ran for State Treasurer promising to do away with the office -- and she succeeded. (Whitehead announced she was considering running to eliminate the Railroad Commission, but that bid never materialized.) Uribe, taking up the mantle, says the political environment is right for making government smaller and more efficient. "We need to force these three politicians at the Railroad Commission to get real jobs and I propose to send them back to the private sector," Uribe says. "I hope to shame the other two commissioners into doing the right thing at the next session of the Legislature. Because when I'm elected to the Railroad Commission, I'm going to ask the governor and the State Legislature to fire me and the other two commissioners." The State Treasurer's position was created by the Texas Constitution and thus required voters to approve a constitutional amendment to ax the job. Since the Railroad Commission was created by the Legislature, a majority vote in the Texas House and Senate, then a nod from the governor, is all that's needed to end it. But that probably won't sit well with Commissioners Williamson and Matthews.

The average Texas voter generally has little knowledge or concern about the race for Railroad Commission, so the election historically goes to the candidate who can drum up the most backing from the oil and gas industry. Uribe hopes to tap into that support and get their votes, if not their money. "There are many members of the oil and gas industry who are tired of being shaken down for campaign contributions by the Railroad commissioners, by the individuals who are supposed to be regulating the industry," Uribe says. "The industry has been shaken down to the tune of about $6 million in the past four and a half years. That's money that could have been used for exploration, secondary recovery, or marketing. Instead of going back into the industry for some production purposes, it went into the campaign coffers of these three individuals."

However, Uribe admits that complaint is "not in a very loud voice." Traditionally, the oil and gas industry has gotten a good return on its investment when it backs candidates for the Railroad Commission. Taxes on wellhead production have been kept lower than any other state, and environmental restrictions have not been that strict.

Uribe says the agency has not been as vigilant as it should in collecting fines from the industry for the messes it has made. Currently, he says, there are 45 oil and gas operators with a total of more than $800,000 in unpaid fines still doing business in Texas. Making producers more responsible and creating a superfund for cleanup are the answers, he says. "No responsible oil and gas person wants to go back to the waste and pollution of the Thirties and Forties," Uribe says. "That's an unfortunate legacy."

Uribe, too, promises to help boost production, but claims he is more realistic than Rylander about how much of a boost is possible. "One of the reasons production has fallen in Texas is because Texas producers have been productive," Uribe says. "How are we going to put the oil back in the ground? Secondly, oil prices are now determined in the global economy. To suggest anything other than that is simply not to recognize the historical changes that have taken place since OPEC came into existence."

As for alternative fuels, Uribe says: "Government ought to do less and the private sector ought to do more." He proposes privatizing the Railroad Commission's Alternative Fuels Division.

Third-Party Candidates


Richard Draheim, Jr. (Libertarian)
Libertarian candidate Draheim, 38, says he got first-hand experience with the burden the Railroad Commission puts on Texas when he ran a moving company in Austin during the 1980s. The Commission then had power over trucking, and keeping up with its fees and regulations prevented many small businesses from competing in the marketplace, he says.

Government, Draheim says, acts on the whims of big business to eliminate the competition. He is running "to abolish the office," but doesn't agree with Uribe's method of doing so. "What [Uribe] wants to do is change its name and keep its regulatory powers," Draheim says. "And worse than that, for a person who claims to be a Democrat, he wants to make the Commission -- or what remains of it -- appointed rather than elected, thus removing any kind of democratic control we the voters would have over the office."

Total deregulation -- not the "partial deregulation" proposed by Rylander -- would allow increased production by lifting restrictions placed on production. It would also mean more competition in the industry and lower prices, he says. Protecting the environment, Draheim says, should fall to the legal system, not a regulatory agency. "The courts recognize the property rights of the people," he says. "If an oil driller pollutes your ground water, you should be able to sue the oil company, get an injunction and stop them. And you should receive some compensation for the damages." However, Draheim does not address how an individual property owner can afford to go up against a large oil conglomerate in court.

Draheim has never held political office, but ran on the Libertarian ticket for Railroad Commission in 1988, 1992 (picking up about 400,000 votes) and in 1994. And during the 1993 special election, he ran for the U.S. Senate.


Paul Pigue (Natural Law Party)
Pigue, 66, is a rare candidate for the Texas Railroad Commission -- he actually has practical experience in the oil business. With a degree in petroleum engineering from the University of Texas, Pigue has been in the oil business for 43 years, working for Humble Oil, Cooper Bessemer, and as an independent producer. Typically, those serving on the Commission have been either lawyers or career politicians. "I think that kind of experience would be valuable to the Railroad Commission," Pigue says. "In my career experience, I feel like there are some things that are really important that the Railroad Commission should be involved in and there are some things that definitely need to be done differently."

For example, he says, the Commission needs to look ahead to alternative fuels and attempt to free itself from its dependence on fossil fuels. "The easy oil and gas has been found in Texas and most of it has been depleted," Pigue says. "That's the major factor -- we don't have it."

Pigue proposes a consortium of government, industry and academia to examine alternative fuels research and develop a plan of action to pursue the most promising avenues. Although he cannot provide cost figures for such a program, he says the funds could be found easily. "There's so much we can do at the Commission to save money, more deregulation of the small wells and that sort of thing," he says. "I'm sure that we can more than cover the costs."

Pigue supports Uribe's idea of replacing the three Railroad Commissioners with a single governor-appointed director. It shouldn't be an elected office, he says. "That's why we wind up with people who don't know what they're doing in there."

True to the Natural Law Party's platform, Pigue says he's in favor of promoting environmental responsibility in the oil industry and using the most cost-effective and proven methods to clean up pollution. As an independent oil and gas operator, Pigue says, he hasn't found current regulations and environmental restrictions to be too burdensome. However, he would like to see the Railroad Commission provide more assistance and information on cleanup methods.

Pigue admits his chances of being elected are slim, considering his lack of experience in the public arena and the lack of attention given to third-party candidates who lack Ross Perot's money. But he has been attending any candidates' forums that will have him, and is spending about $30,000 of his own money to reach the voters through radio and newspaper ads. "I don't know that I can convince the oil industry because they're already committed," Pigue says. "But I think I'm talking about something all Texans can be interested in outside of the oil industry."

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