On November 1, 2022, the Railroad Commission of Texas (“RRC”) adopted amendments to the RRC’s rule on Critical Designation of Natural Gas Infrastructure (16 Texas Administrative Code §3.65). The RRC proposed these amendments on August 30, 2022, seeking to simplify the rule, address points of confusion among oil and gas operators, and ensure the rule focuses on truly critical natural gas facilities. The amendments change which facilities will be designated as critical and the circumstances under which exceptions may be available. Please also note that critical-facility operators must file their first Weather Emergency Readiness Attestation by December 1, 2022.

Rule §3.65 Background

The RRC initially adopted this rule in December 2021 to implement post-Winter Storm Uri legislation. Generally, Rule §3.65 requires operators of “critical gas supplier” facilities to either acknowledge their critical status (and file Form CI-D) or apply for an exception (and file Form CI-X). Operators of those critical facilities must then weatherize their facilities in compliance with Rule §3.66 (Weather Emergency Preparedness Standards).

Rule §3.65 Amendments

The proposed and adopted amendments make eight changes to the rule to standardize the term “energy emergency,” reduce the number of low-volume facilities designated as critical, and provide examples of acceptable exception circumstances. The amendments:

• Clarify the definition of “energy emergency.” The prior version defined “energy emergency” as “an event that has the potential to result in firm load shed.” The amendments specify that such an event occurs when the Texas grid operator (the Electric Reliability Council of Texas, Inc., or ERCOT) “has issued an Energy Emergency Alert Level 1 or 2.”

• ERCOT issues Level 1 alerts when operating electric generation reserves drop below 2,300 MW and are not expected to recover within 30 minutes.


• ERCOT issues Level 2 alerts when operating reserves are less than 1,750 MW and not expected to recover within 30 minutes.

• Define the terms “electricity supply chain map,” “Director,” and “EOR project.”
  
  • The “electricity supply chain map” is “the electricity supply chain map produced by the Texas Electricity Supply Chain Security and Mapping Committee.”
  
  
  • The “Director” is “the Director of the Critical Infrastructure Division or the director’s delegate.”
  
  
  • An “EOR project” is “an enhanced oil recovery project as defined in §3.50(c)(6) . . . with at least one injection well permitted under §3.46 . . . whether or not the project has received [RRC] approval or certification under Rule §3.50.


• Raise the critical-designation threshold for gas wells producing gas (from 15 Mcf/day to 250 Mcf/day) and oil leases producing casinghead gas (from 50 Mcf/day to 500 Mcf/day).
  
  • According to the RRC, raising these thresholds will still leave 78.4% (approximately 24.5 Bcf/day) of the total natural gas produced per day in the state designated as critical. That amount of gas production is sufficient to meet Texas’ total gas-fired power generation capacity (requiring approximately 15 Bcf/day) and the estimated peak day demand for gas during Winter Storm Uri (approximately 9 Bcf/day).
  
  
• Revise the critical designation of oil leases to exclude an EOR project that “consumes more energy than it produces calculated by comparing the amount of electricity used to the amount of gas produced both in Million British Thermal Units (MMBTU).”


• Simplify the term “critical customer” to mean “a critical gas supplier that requires electricity delivered by an electric entity.”


• Explain that the process to request critical designation of a facility not designated as critical under the rule is the same as the process to request a critical designation exception: the Director will review and approve the application, and if the application is denied, the applicant may request a hearing.


• Remove the requirement for a non-critical facility listed on the electricity supply chain map to apply for critical designation with the RRC. Thus, if a non-critical facility is included on the electricity supply chain map, that facility does not become critical simply by being listed on the map and is not required to file Form CI-D.


• Restructure the exception provisions to delete a list of facilities that are ineligible for an exception. In place of that list, the amendments provide (1) a general statement that only critical facilities not listed on the electricity supply chain map can apply for an exception and (2) a list of the following five examples of a “reasonable basis and justification” for an exception:
  
  • all of the natural gas produced at the facility is consumed on site;
  
  
  • all of the natural gas produced, processed, or delivered by the facility is consumed outside of Texas;
  
  
  • the facility does not provide gas for third-party use;
  
  
  • the electric entity delivering electricity to the facility has provided notice that the facility’s request for critical designation status was rejected, denied, or otherwise disapproved by the electric utility; or
  
  
  • for saltwater disposal facilities and saltwater disposal pipelines, the facility or pipeline does not support a facility designated critical by the rule.

The RRC is publishing the rule amendments in the November 18, 2022 issue of the Texas Register, and the rules take effect on November 21, 2022. Additionally, the RRC acknowledged that operators reported experiencing issues when filing Forms CI-D and CI-X. The RRC noted that it has increased its critical infrastructure designation staff and “is working to improve the filing process and resolve any technical issues.”

Please contact the Baker Botts Energy Regulatory team listed below with any questions about the rule amendments or compliance with RRC requirements, including filing Weather Emergency Readiness Attestations.

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