The Railroad Commission of Texas was created by the State in 1891 to regulate the private railroads spreading across the state. This resulted in economic regulation (passenger fares, shipping rates), including entry and exit authority (what locations to be served).
Over the years, the Commission's jurisdiction grew to encompass many activities: oil and gas production and transportation (1919), gas utilities (1920), buses and trucks (1931), liquefied petroleum gas (1939), surface mining and reclamation (1976), and alternate fuels research (1991). Economic regulation was joined by health, safety, and environmental regulation.
The last decades have brought regulatory changes. The Commission no longer regulates buses and trucks, and railroads.
The state's oil and gas industry remains, however, a primary focus of the Railroad Commission of Texas.
REGULATION UNDER THE OIL AND GAS DIVISION
In the United States, ownership of minerals initially resides with the owner of the surface land. If the government (federal, state, or local) owns the land, the government may also own the minerals. If the land is privately owned, the minerals may also be privately owned. Over time, this ownership has frequently been separated through sale, with the land having one owner, the mineral rights other owners. Owners of the minerals may then lease out to a "lease operator," the right to produce the minerals, retaining a royalty interest.
The Railroad Commission, through its Oil and Gas Division, regulates the exploration, production, and transportation of oil and natural gas in Texas. Its statutory role is to (1) prevent waste of the state's natural resources, (2) to protect the correlative rights of different interest owners, (3) to prevent pollution, and (4) to provide safety in matters such as hydrogen sulfide.
To carry out its regulatory responsibilities over the state's oil and gas wells for prevention of waste and protection of correlative rights, the Commission grants drilling permits based on established spacing and density rules. In addition, each month (1) the Commission assigns production allowables on oil wells and gas wells, (2) receives operators' production reports on oil leases (an oil lease may contain multiple oil wells) and gas wells, and (3) audits the oil disposition path to ensure production did not exceed allowables. Allowables are assigned according to factors such as tested well capability, reservoir mechanics, market demand for production, and past production.
The Commission also regulates oil field injection and disposal wells under a federally-approved program, including permitting, annual reports, and tests. Through this program, fluids are injected into either productive reservoirs under enhanced recovery projects to increase production or into non-productive reservoirs for disposal. In other pollution prevention activities, waste management is carried out by permitting pits and landfarming, discharges, waste haulers, waste minimization, and hazardous waste management.
To prevent pollution of the state's surface and ground water resources, the Commission has an abandoned well plugging and abandoned site remediation program that uses funds provided by industry through fees and taxes. Many wells and sites are remediated with these funds when responsible operators cannot be found.
The Oil and Gas Division is headquartered in Austin, Texas with nine district offices spread over the state. The district offices ensure compliance with Commission rules by field inspections, witnessing of well completions, pluggings, testing, etc., and investigating complaints, blowouts, fires, and oil spills.