Pipeliners Podcast

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The Pipeliners Podcast kicks off 2019 with a very special episode. Russel Treat welcomes Ryan Sitton, a Texas Railroad Commissioner, for the first episode of the new year.

In this episode, you will learn about the three primary functions of the railroad commissioners in Texas, how the Railroad Commission acts as an advocate for the oil and gas industry at the state level, the mind-blowing future growth opportunities for production in Texas, and how technology is affecting the law of the land.

Listen to this important and encouraging episode for pipeliners, then share the episode with your friends, family, and colleagues in the industry.

Show Notes, Links, and Insider Terms

  • Ryan Sitton is a Texas Railroad Commissioner. Connect with Mr. Sitton on LinkedIn.
  • The Railroad Commission of Texas serves the state of Texas by stewarding natural resources and the environment, enhancing personal and community safety, and supporting the enhanced development and economic vitality of the energy industry for the benefit of Texans.
    • The current Railroad Commissioners are Ryan Sitton, Christi Craddick (chairman), and Wayne Christian. They are elected officials by voters in the state of Texas.
    • Wei Wang is the current executive director of the Railroad Commission. Mr. Wang was named the executive director in April 2018.
  • PinnacleART was founded by Ryan Sitton in 2006. The company designs, implements, and maintains asset reliability and integrity programs for process facilities in the oil and gas industry and other critical industries.
  • An H2S release occurs when hydrogen sulfide is released into the atmosphere, potentially causing damage to people and the environment.

Full Episode Transcript

Russel Treat:  Welcome to the Pipeliners Podcast, episode 56. This episode of the Pipeliners Podcast is sponsored by EnerSys Corporation, providers of POEMS (Pipeline Operations Excellence Management System), industry-leading software for the pipeline control center. To find out more about EnerSys control room solutions, visit enersyscorp.com/podcast.

Thanks to EnerSys for being the inaugural sponsor of the Pipeliners Podcast and allowing us to continue to offer this podcast to the pipeline industry.

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Announcer:  The Pipeliners Podcast, where professionals, Bubba geeks, and industry insiders share their knowledge and experience about technology, projects, and pipeline operations. Now your host, Russel Treat.

Russel:  Thank you for listening to Pipeliners Podcast. We appreciate you taking the time, and to show that appreciation, we’re giving away a customized YETI tumbler to one listener each episode. This week’s winner of the YETI tumbler is Carl Gonzales with Kendrick Consulting. Congratulations, Carl, your YETI is on its way.

This week, we’re very fortunate to kick off the new year. We have with us Ryan Sitton. Ryan is one of the commissioners of the Texas Railroad Commission, an entity that governs all oil and gas and pipelining in the state of Texas. With that, help me welcome Ryan to the podcast.

Ryan, thank you so much for joining us, and welcome to the Pipeliners Podcast.

Ryan Sitton:  Thanks for having me, Russel. It’s good to be on with you.

Russel:  I know a lot of our listeners, particularly listeners in the state of Texas will know what the Railroad Commission is, but maybe you could tell us a little bit about what is the Railroad Commission, and what is its role in oil and gas in the state of Texas.

Ryan:  Sure. By the way, I will correct you. I’m sure your listeners are much more knowledgeable than the average listener in Texas or the average citizen in Texas, but it always surprising to me how few people actually are aware of what the Railroad Commission does.

Let’s face it. When your name is the Texas Railroad Commission, most people assume you’re primary job is building railroads or regulating locomotives. We deal with that constantly.

I will go to conferences and make speeches in which I lead off saying that we do absolutely nothing with trains and still, at the end of my speech when I take questions, people say, “Ryan, what do you feel about the new high-speed rail project from Houston to Dallas?”

Russel:  [laughs]

Ryan:  It’s a constant challenge to remind people what our job is.

Since you asked, if you want to drill a well, an oil well, a gas well, a disposal well, you want to drill a well onshore in Texas, you have to come to the railroad commission to get a permit.

You have to follow all of our rules that tell you how to do that, everything from what depth you’re drilling to, to how you case the well, to how you cement the well. We’ve got very robust processes and procedures that make sure people are doing things right.

A whole division of our agency regulates the pipeline industry. If you want to build a pipeline in the state of Texas that doesn’t cross state or international lines, you have to come to the railroad commission to get a permit. Once again, you have to follow our rules that describe not only how you have to build that pipeline, but also how you have to maintain it and inspect it.

We even send our own people out to inspect wells and pipelines to make sure that the people in the state are following our rules adequately. That, in a nutshell, is what the railroad commission does.

Russel:  How did you come to be a railroad commissioner?

Ryan:  I actually did not grow up in the oil and gas space. My parents were both teachers. They were science teachers. My dad taught physics. Mom taught chemistry. I always had a love for science. When I got to college, an engineer was a natural transition.

I went to school not knowing what I wanted to do with an engineering degree. I thought, maybe, I’d work on cars. Who knows, do something with planes. Engineers did everything. I just knew I wanted to be an engineer.

Well, (Texas) A&M is a heavy oil and gas school. I was recruited from large to tiny oil and gas companies. My first job out of college at A&M was with Oxy, Oxy Petroleum. I actually started my career with Oxy in the downstream side of their business, working at one of their chemical plants out in the east side of Houston.

In 2006, I started a little company called Pinnacle, where we focused on reliability and mechanical integrity programs. I was really blessed. That company started with just me in 2006 and grew, and grew, and grew. That company, Pinnacle, is still around today. It employs nearly 900 people and does business all over the world in your mechanical integrity and reliability program.

Russel:  We could do a whole conversation, I think, that people in this audience would have a lot of interest in just on that subject itself.

Ryan:  We probably could. In fact, my small bragging rights is prior to serving as a railroad commissioner, my real area of expertise was risk analysis. Looking at probability and consequence of failure, dispersion of fluids, fire, business reliability, business interruption. That was my real expertise.

In fact, I did expert witness work for companies in the integrity space, both on a civil and a regulatory, litigation perspective. I really have a lot of background in that.

Around 2008, 2009, 2010, I started getting more interested in public service, because I realized that — I saw very personally the difference between good regulation and bad regulation. As oil and gas was starting to come back in the state of Texas, you saw oil production and gas production ticking up in large rates.

I had developed a passion for energy policy. I thought, “Man, you know what? There are not enough people in elected office who actually have a technical background in energy. That’s the biggest industry in our state.”

In 2012, 2013, decided I would run for Texas Railroad Commission. I was elected at the end of 2014 and was sworn in in 2015. The rest is history.

Russel:  You’re establishing a precedent of somebody holding an office with actual experience and technical training to administrate that office.

Ryan:  I don’t know if precedent is…That may be saying it too strong. I am the first engineer in 50 years to serve as a railroad commissioner, so who knows? It may be another 50 years before there’s somebody crazy enough to do it.

Russel:  I’m being a little flippant, but I think it’s really interesting. That’s one of the reasons I wanted to reach out to you and ask you to come on because I knew this about your background. We haven’t had an opportunity to talk before.

I find it really interesting — the background in risk analysis. I’m curious how that plays in your perspective in terms of the railroad commission and its work and what you might be doing as a commissioner that’s applying that expertise and experience.

Ryan:  I tell you, it ranges. I’ll talk beyond just risk analysis. One of the jobs of a railroad commissioner…Let me explain that to your listeners. What does a railroad commissioner actually do? We have three jobs, or three roles; three functions. There are actually three railroad commissioners.

The three of us act as a three-headed monster that is not really the CEO of the railroad commission, but we are like a three-member Board of Directors that oversees the agency and provides policy direction and philosophical direction for the agency that our executive director, who’s like a CEO, goes out and executes.

The second piece of our job is we are like judges. If you want to drill a well and someone else says, “I don’t want you to drill that well,” who rules on that? Who makes the decision? Ultimately, it’s the three railroad commissioners who hear all of these cases in which people say they disagree on what should be allowed. We read the cases. We vote on the cases and make decisions.

Our third function is as an advocate. I don’t mean an advocate on behalf of the industry, but an advocate on behalf of the people of the state. I am elected statewide, just like the governor and lieutenant governor. I work for the people of the state to advocate for what they’re interested in and communicate with them about what’s happening.

If you have a concern or a question about what’s happening in oil and gas in this state, well, hey, the railroad commissioner works for us because we vote for him.

You combine those three things together, and get back to your question, if you do risk analysis, how does risk analysis, or — even broadly — technical expertise figure into your job? Certainly, when I review these cases — a case could be about spacing in a lease, a case could be about rates on a pipeline, a case could be around whether or not to approve a disposal well — these are highly technical questions. I approach each one of them from, firstly, what does the law say? Secondly, what does our regulatory history say; our rules or our regulations say?

Finally, if there are gray areas in those, what’s in the long-term interest of the state of Texas? In all those, once again, it’s both technical, in that there are technical questions at hand, and also very legal. What are the questions of law and case history here?

It’s interesting how often there is still some gray area, particularly with advancements in the industry. As new technology and new methodologies are used, we have to always be considering, “These things are different than they were just five years ago or 10 years ago.” All of that comes into play.

I will get to one specific thing that affects the pipeline industry, and regulation, in general, as well. Back 50 years ago, the role of regulation, I believe, was different than it is today, because back then, we didn’t have good data to understand what would happen if operators of any kind made certain decisions or followed certain practices.

Therefore, if you were going to make somebody follow best practice, if you were ensuring that they were safe in their operation, or that they were protecting the community or the environment in their operation, you probably had to have pretty strict, pretty hard guidelines about what they had to do.

Interestingly, today, if an operator, a big company, is going to go out there and operate in the oil and gas business, it is in their business interest not to have failures, not to have downtime, and for sure, not to have safety incidents.

As that evolution has come around, I think our job as regulators becomes less and less prescriptive, in other words, tell them what to do, and more and more, “Here is what best practice looks like. It’s up to you, operator, to figure out how to apply that because it is in all of our interest for you to be safe, for you to respect your community, and for you to do good.”

Russel:  Yeah. I just recently had David Murk from the API on the podcast. David is the senior policy guy for midstream at API. We were talking about pipeline safety management systems. One of the things, to me, that’s very compelling about that, and being a guy that’s kind of a technologist and works in pipeline safety, is the level of technical knowledge you need to have to be able to evaluate somebody’s program.

There’s a big difference between doing what’s compliant and doing what’s ideal sometimes. Sometimes they’re the same thing, but sometimes they’re different. There’s a level of technical acumen required to understand that and get clear about what that means, what that difference means.

With technology moving as quickly as it is versus the speed at which regulatory governance moves, it makes sense that something that’s proscriptive versus prescriptive is ideal from a regulatory standpoint. It’s also, I think, more difficult to administrate.

Ryan:  That’s funny. I would say it actually isn’t, if done right. In other words, there’s something you said that I think is very accurate. The difference between doing what is right, and what is the best, and what is required are often all three different things.

Russel:  Exactly.

Ryan:  What’s the right thing to do? That doesn’t necessarily mean spending the most money or building the more robust system. The difference in a business decision about what lasts for a long time may not be the same in terms of doing what’s right today to make sure that I’m protecting my staff today.

You look at what’s required. What’s required may be based on 5-or-10-year-old technology. Maybe it required based on what a government agency can efficiently review, versus what is best.

I’ll give you a very specific example of a recent case at the commission. It’s not a pipeline case, but it could easily be translated. A drilling contractor here in the state of Texas was doing some work. They had a H2S release on a well.

No one had any long term injuries, but a couple of people, they were exposed to H2S levels above the OSHA lower exposure limit, which is…I can’t remember if it’s 25 or 50 parts per million. It’s very low. They were exposed to that. OSHA came in and did an investigation and decided to fine the drilling contractor for not having individual PPE monitors.

The railroad commission requirements are that you have fixed H2S monitors on the equipment. In other words, right on top of the wellhead, there’s a fixed H2S monitor sitting right above the wellhead. You can imagine, if nobody’s standing up there, that monitor still goes off. OSHA, in its H2S safety protocol, requires individual monitors. The OSHA guys said, “We’re just using our protocol. We’re going to trump the railroad commission protocol.”

I will tell you that what has been proven through history here is that, actually, having the fixed monitors is safer because if you’ve got a fixed monitor right at the wellhead, then you get an alert before it ever gets to any people, whereas if you use only personnel monitors, then the personnel monitors go off when they’re actually being exposed to H2S.

OSHA, following its protocol, was going to issue a fine based on following a protocol that would have been less safe than what the railroad commission advocates for. You saw a conflict between regulatory requirements and what’s actually right or best to do.

Luckily, in this case, the drilling contractor notified my office. We issued a letter in the case, an Amicus brief, and sent it to the administrative court. They found in favor of the guy. Look, he was following railroad commission rules. That’s adequate.

Russel:  Ryan, I think you make a really, really good point here. I think that a lot of people probably do not realize about the way that the regulatory infrastructure is built in the United States. That is that the federal government sets minimum standards, and then states are allowed to set standards that exceed that.

The case you’re talking about illustrates the point where that’s not necessarily intuitively obvious what the distinctions are. The point you’re making is that the railroad commission’s here to support and advocate for that which is best.

Ryan:  Right. You can even argue this is one of the reasons why, in today’s environment, I’m a very big advocate of pushing as much government, as much regulation to as local a level as makes sense.

If someone asks me, “Ryan, does that mean that you think that counties should regulate oil and gas operation?” I’d say, “If it makes sense to do that, absolutely.” The fact is, counties usually aren’t big enough. Cities, they’re not big enough. They don’t have enough horsepower to regulate something that spans not just cities and counties, but spans entire regions of the state.

In the case of oil and gas, it makes sense to regulate that at a state level. If you’re talking about things like school districts or traffic, it makes sense to regulate that at a city level or a school district level.

Oftentimes, at a federal level, the only way to regulate something at that level, you’re talking about 340 million people that live in the United States, and such diversity — even in oil and gas in different geologies and geographies — it is ineffective to expect that you’re going to have a universal best practice at a federal level.

To your point, for a lot of people, that nuance can get missed.

Russel:  The other thing, and I know, given your experience, you know this, that the details of how I operate a facility are tied to the facility.

In particular, when you’re talking about oil fields and pipelines — not to the same extent —    you’re really constrained by the reservoir and how it’s produced as to what to do. It’s very hard to standardize that across every reservoir. I think the point is extremely well made.

Let’s talk a little bit about what’s going on in Texas, because we probably have an unprecedented level of pipeline construction of all types going on. Maybe you could talk a little bit about what you’re seeing in your role with the commission and give the listeners some insight as to what you think the near-term might hold in terms of the future and where we’re headed.

Ryan:  Sure. You started off by saying we’re having an unprecedented level of pipeline construction in the state of Texas. We’re seeing an unprecedented level of demand for pipelines in the state of Texas. It makes sense that the two would go together.

The big thing that I tell anybody who is paying attention, right now, you cannot overstate the growth in industry that has happened in this state in the last 10 years and the growth in industry that’s going to happen in this state in the next 10 years.

The world today is using around 100 million barrels of crude oil per day, and around four-and-a-half million barrels of that crude oil is being produced right here in Texas. About three-and-a-half million of those four-and-a-half million are being produced in the Permian Basin. When you’ve got one state that’s producing close to five percent of the world’s oil, that’s a big deal just by itself. Then, you consider the fact that the state of Texas has about six million barrels a day of refining capacity.

We have about probably 450,000 miles of pipelines. We have greater diversity of import/export capability on the Gulf Coast than anywhere else in the country. We have 20 billion cubic feet a day of natural gas supply. We are sharing a border with Mexico who wants more and more U.S. natural gas and gasoline to supply its energy infrastructure. We are the epicenter of oil and gas growth for the next decade right here in Texas.

Let me give you a couple more numbers to put this in perspective. Some experts believe that over the next five years, you could see the Permian Basin go from three-and-a-half million barrels a day, to it could double that. You could literally go to 7 million barrels a day out of the Permian Basin.

Imagine what it takes to move that kind of product from an oil field in West Texas to somewhere where it will be refined or fractionated, or both. Then to get that product from that facility to a gasoline station somewhere, or even just to an export terminal that’s going to put it on a barge and take it to an import terminal that’s going to put it back in a pipeline and get it to a gasoline station somewhere.

When you think about the infrastructure required to move that much product, this is a huge undertaking. We’re talking literally hundreds of billions of dollars in infrastructure that’s going to be constructed.

At that point, you’ve got the state of Texas representing somewhere in the 8 million to 9 million barrels a day of crude. Literally, the state of Texas will be arguably the fourth or third largest producer.

In fact, we’d be in that point the third largest producer of crude oil in the world behind only Saudi Arabia and Russia. We’re stepping into this realm where we’re going to be arguably the dominant producer. The state of Texas by itself — when you consider our import/export infrastructure, our refining capacity, our oil and gas production — we will be the largest energy producer on the planet. It’s hard to overstate how huge that is.

To get there is going to be a trial because this kind of growth we have not seen ever. Literally, the only time it ever gets close is if you go back to the ’50s and ’60s in the state of Texas, oil production was ramping up like crazy. But you didn’t have this type of sophistication that came along with it, the kind of infrastructure that was required to develop it. This is going to be something we’ve never seen before, and it’s really going to redefine the state of Texas in terms of our economic impact on the rest of the world.

Russel:  Yeah. As I’m listening to you talk about this — and I haven’t heard these numbers before, but I’m not surprised; I’ve not actually thought about it. The thing that comes up for me as I’m listening to this is what’s going to be the primary constraint? I think about the construction that has to occur. I think about the steel that has to be rolled.

More than anything else, you’re talking about doubling the number of energy jobs in the state of Texas if you’re doubling the infrastructure roughly. Where are those people going to come from? Many of those jobs, particularly the ongoing operations and maintenance jobs, those are skilled jobs.

Ryan:  They are. In fact, what’s interesting about the oil and gas industry is the average of what you’d consider non-professional job in the oil and gas industry still pays something like $80,000 a year. As you said, these are machinists, they’re pipe thinners, these are welders, even what you’d consider normally administrative staff but have a technical bent to them because you are processing permits or documentation.

There are so many jobs. Think about that. Think about an industry in which you could see a growth in the next, let’s say, 10 years of 100,000 to 200,000 jobs in that time, all of which are skilled technical labor. Whether it’s engineers, economists, it’s finance folks, it’s skilled labor, technical labor. The average job is paying somewhere in the range of $100,000 a year. Wow, what a massive boom to our state’s economy.

Once again, you’re going to be talking about revenues, money coming into this state in amounts we’ve never seen before because of how much oil and gas and gasoline and fine products we’re going to be exporting. It blows your mind when you start thinking about it.

Russel:  You’re certainly getting me excited about the future. [laughs]

Ryan:  Yeah, you can tell I’m a big geek and I love this stuff.

Russel:  Oh yeah, definitely. Me, as well. In fact, in the lead in to this show, I talk about Bubba geeks, guys with satellite uplinks to their game cameras. Those are my people right there. I know there’s a lot going on around the border, and in particular pipelines crossing the border.

There’s a number planned. There’s been some leadership changes in Mexico. To what degree does the Railroad Commission get involved in those international crossings and that kind of pipeline infrastructure? Are you actively involved in that? Is there a role the Railroad Commission is playing?

Ryan:  I have been actively involved in that, but it’s been more in an informal way than it has been a formal way. In other words, the Railroad Commission doesn’t have a jurisdictional responsibility to oversee transactions or permits when you cross U.S. borders.

That said, when you talk about you’ve got a country down there who’s really working to grow their economy and grow their energy portfolio, the raw products are being developed as cheaply as anywhere else in the world right across the border from them. They’re looking at the state of Texas saying, “Wow, we’d sure like to buy those products from you.” At least those who are economically sound are doing that.

Who is it they talk to not so much about a regulatory or a commerce perspective, but where the rubber meets the road perspective. Who is it we engage? What companies should we talk to? We’re a great connection for them. I’ve actually been to Mexico and visited with some of their regulatory folks over there sharing ideas and also making connections for some of their producers and their users of energy to connect with our folks here.

It’s, once again, a bit of an informal and even a “lessons learned” perspective to try to advocate or advise them on how they can make positive impacts. Because, look, anyone who wants to buy our products, that’s good for the state of Texas. I’m in the business of helping them buy our products. If I can advocate in a way that helps people in the state of Texas, that’s my job. That’s what I’m elected to do.

Russel:  Absolutely. Ryan, this has been awesome. I would like to ask just one last question. Is there any message you’d like to give to people working in the pipeline business in particular from your perspective as a railroad commissioner?

Ryan:  Let me say it this way. It probably sounds a bit — I don’t want to say it sounds negative, but there’s a positive lining on this. If you’re in the pipeline business, at the end of the day, no one likes stuff in their backyard. I don’t care how pro-oil and gas you are or pro-economic growth you are, when that pipeline is coming through your community, you’re not happy about it. That’s just the way it is.

What I’m going to tell you is this. When people look at what it takes for our energy economy in this state to boom, one of the biggest advantages that we have in this state versus any other state and, frankly, any other nation is our ability to move product.

When we get all these new pipelines built to the Permian Basin, all of this oil and natural gas, when they can sell it at the wellhead in the Permian Basin for just $1 a barrel or $2 a barrel discount over what I can export it for over the Gulf Coast, that’s pretty cheap. Because having to move it via truck, it’s a $6, $8, maybe $10 discount.

My point in all this is is to those who are in the pipeline industry, while it’s not glamorous as most jobs in oil and gas aren’t, boy, it is arguably one of the three biggest linchpins that enables us to compete on an international basis. Feel very proud of the things you’re doing because there are a lot of other states, and certainly, a lot of nations that wished they had the kind of pipeline infrastructure that we do.

Russel:  That infrastructure is not just the pipe in the ground. It’s the people that are operating it. I think that’s the point you’re making. We have a uniquely qualified skill set here and a density in that skill set that’s unique to other states and other nations. Just a general interest in the business I think, more so than you find in other places. Certainly, there’s plenty of folks that are not in favor of energy and Texas, but there’s a lot of people that are.

Ryan:  You know how you can tell if someone is in favor of energy, Russel? It’s not to ask them, “Hey, what do you think of the energy industry?” It’s to ask them, “Hey, do you want to pay more for gasoline?” If you ask that question, they’re like, “Absolutely not! Gasoline is too expensive as it is.” They’re in favor of the oil industry.

Russel:  Did you know you can’t make electric cars without hydrocarbons?

Ryan: I’m telling you that if you don’t have the affordable, reliable infrastructure, and abilities that we have, as you said, not just metal in the ground but people that know what they’re doing, if you were paying $2 a gallon instead of $5 a gallon like they are in Europe, what would that mean to you and your pocketbook at the end of the year? It’s a big difference. You ask that question, 90 percent of the people in this state sure like them some oil and gas people when they’re paying those cheap prices, they just don’t know it.

Russel:  Exactly. Ryan, thank you so much for coming on. This has been really interesting. You got me all excited about what I do again. That’s awesome and I hope the listeners feel the same way. Would love to have you back at some point in the future and again thank you so much for coming.

Ryan:  I’m glad to do it, Russel. Thanks for having me today.

Russel:  I hope you enjoyed this week’s episode of the Pipeliners Podcast and our conversation with Ryan Sitton.

Just a reminder before you go, you should register to win our customized Pipeliners Podcast YETI tumbler. Simply visit pipelinerspodcast.com/win to enter yourself in the drawing.

If you would like to support this podcast, please leave us a review on Apple Podcast, Google Play, or whatever smart device podcast listening app you use. You can find instructions at pipelinerspodcast.com.

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Russel:  If you have questions, ideas, topics you’d be interested in, please let us know on the Contact Us page at pipelinerspodcast.com, or reach out to me on LinkedIn. Thanks for listening. I’ll talk to you next week.

Transcription by CastingWords

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