Well-Funded: Keeping Texas Strong

The Texas Railroad Commission (RRC), the regulatory agency for the Texas oil and gas industry, is seeking additional funding sources in order to plug orphaned and abandoned wells, particularly in the Permian Basin.

Texas is America’s top producer of crude oil and natural gas, and the Permian Basin is one of the nation’s most prolific oil and gas producers, accounting for 44% of U.S. crude oil production and 17% of U.S. gas production. Texas benefits greatly from energy production.

Of the $4.7B funding for orphan well plugging in the 2021 Bipartisan Infrastructure Law, Texas received an initial $25M, followed by an additional $80M in early 2024.

The RRC used the funds to plug 737 wells, around 10% of the documented estimated orphaned wells in Texas. With another $63 million state-funded initiative, in 2023 the RRC oversaw the plugging of 1,754 wells, and plugged 1,012 more so far in 2024. Recent eruptions of brine from older wells have potentially contaminated land and water resources, and the RRC is researching the underlying issues and working to acquire funding for rapid, effective well closures.

One lawmaker in West Texas, State Rep. Brooks Landgraf, has proposed reallocating part of taxes paid by oil and gas companies into the Economic Stabilization Fund (ESF), the Texas “rainy day” savings account, to funding to assist communities in the Permian Basin. Approval in 2025 from both legislative chambers, the governor, and voters are needed for enactment.

Paying Back Oilfield Communities

Taxes paid by oil and gas companies are currently split between the Texas ESF account, public schools, and highway funding with over 80% of funds generated coming from 32 counties (many in the Permian). The Texas STRONG (Severance Tax Revenue and Oil and Natural Gas) bill would redirect some of the state savings account (currently at ~$24B) to new spending. The bill calls for 1% of taxes from oil and gas production to be used for well plugging, overseen by the RRC. Another 1% of the tax funds would go to the Texas Commission on Environmental Quality (TCEQ) for additional emissions reduction projects.

Landgraf’s Texas STRONG bill to reallocate funding collected under Texas severance tax laws also would use up to $500M for infrastructure repairs. Expansion of emergency, health care, and educational services would also be funded, in addition to workforce development programs, through grants to counties with high oil production. Remaining funds would be used to provide property tax relief for state residents.

Current public school and highway funding support through oil and gas taxes would be retained.

Protecting the Permian: RRC Seeks More Funding

The RRC asked for an additional $100M (to augment the $225M two-year budget plan) in November to address the growing challenges of addressing leaking wells and forestalling emergency well failures by promptly closing high-priority wells. RRC seeks additional funding to allow inspection of problem wells, as current resources for assessments and evaluations are limited.

According to the RRC executive director, cement and equipment costs for plugging wells have risen over 36% since 2022. This can largely be attributed to a shortage of plugging services due to increased plugging activity as a result of federal funding to decommission orphan wells.