SHALE Oil & Gas Business Magazine: Chairman Christi Craddick

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Christi Craddick: Remember the name. That’s the very distinct impression the Chairman of the Texas Railroad Commission gave in a wide-ranging two hour talk with SHALE in early November, and it’s not just because she is one of leading figures in the new oil and gas boom currently underway here in the Lone Star State, if not the central person to making the most and best of it. Having become the agency’s Chairman last August after being elected to one of its three Commissioner positions in 2012, she very much seems to be the right person in the right place at the right time.

Our goal was to discuss with Craddick the four Ps, as it were: public service, policy, politics and who she is as a person – all so the oil and gas industry that her agency oversees and regulates can get to know her better. What we came away with was the pleasure of conversing for nearly two hours with an indeed memorably impressive woman.

Poised yet open, smart and a highly-informed wellhead of knowledge about the industry, warm, quick to laugh yet utterly professional, she related to us as both Madame Commissioner as well as Christi. She can rattle off the facts and figures essential to her job in a snap, and knows her geology, technology and other elements of the oil and gas game down cold. Craddick also showed herself highly conversant in both the agency’s and industry’s history, and can easily slip into a brief aside discussing, for instance, architecture, among other topics unrelated to her professional responsibilities, with a firm knowledge of the fields.

Hence it is all but destiny that she will leave her mark on the Railroad Commission (RRC) as well as the Republic of Texas, in which today, thanks to the shale revolution of the last 10 years or so, oil and gas is one third of the state’s economy. She also makes her imprint on the Texas Republican Party, for which she served as Chair of its obviously very successful “Victory 2014” effort. Hence it’s a sure bet that party officials, both here and nationally, must see her, at age 44, as a potential shining star on the political horizon.

After all, it’s a momentous juncture in the state’s oil and gas business as well as at the Commission, to which Craddick readily agrees. “It is a very interesting time to be at the Railroad Commission. It is a very interesting time to be in and around the oil and gas industry. And you’re right, it is somewhat of a pivotal time I think.”

Bringing a Vision to the Commission for Today and The Future

The view from Craddick’s 12th floor office in the William B. Travis State Office Building at 17th Street and Congress Avenue is quite broad, scenic and even a bit spectacular, looking south over downtown Austin to the hills that rise beyond. Close by at its center through the large picture windows looms the State Capitol rotunda. With the oil and gas industry helping to drive the “Texas Miracle” of economic growth, the times call for someone of vision to take the lead in the contributions of the energy industry to further and sustained state success. With the 84th Texas Legislature convening at the start of 2015, it looms large as to what the Railroad Commission must address.

Craddick expressed a clear sense of the agency’s mission and challenges when she ran and was elected in 2010. One of them was to increase the Commission’s efficiency to meet the need of an industry on the rapid rebound in Texas, and to especially decrease the time it takes to get drilling applications approved by ramping up its staffing and modernizing its computer and online systems. The agency has made significant progress on those fronts. So what does Craddick now see as its short and long term goals?

“We’re also trying to continue our IT upgrade,” she points out. “When I started almost two years ago, that was one of the things we wanted to do: make it more efficient. But also make it more transparent over here. And make it easier to navigate this agency, get our permits more timely. So we’ll be back at the legislature asking for additional dollars to put into IT; actually we have the dollars and will be asking to use those dollars. The long-term goal is to get all of our oil and gas permits online.”

During this year’s legislative session, “for us as an agency, we hope this will be a budget cycle,” she stresses, shrugging a bit to accentuate her hopes. “That’s the main thing as an agency we are going in and talking about.” But some of the key overall issues facing the legislature this year – water, transportation and infrastructure, and possibly eminent domain – involve and have a direct impact on oil and gas activities. “We are ready for where we can be a resource or expert witness for those issues and any others that come up this session,” Craddick notes.

“They’re all still timely issues even though the legislature took a big cut at water in particular in the last session as far as funding. Who controls the water and how we continue to use water in the state continues to be a conversation. They took a good bite at the apple on transportation with the constitutional amendment that passed about a week ago.”

Craddick is no stranger to that august body. Her father, Representative Tom Craddick, was first elected from Midland to his office a little over a year before his daughter was born in 1970, and served as Speaker of the House from 2003 to 2009 (and was the first Republican to do so since Reconstruction). Christi served as an advisor to her father from 2002 to 2011. If anyone is capable of making the Railroad Commission’s goals a priority and pulling a few key levers and strings at the legislature, it’s her.

A Statewide Seat With National and International Impact

The view south from Craddick’s office also looks towards the Eagle Ford Shale, an important component in today’s Texas energy industry. And a region that the “Texas Miracle” of economic success over the last two decades had largely passed over until drilling began there some eight or so years back.

“It always amazes me when we go back and look at numbers from this agency. In 2008, we permitted 26 wells in the Eagle Ford. And we’re almost at 4,300 as of the end of October,” she notes. “A lot of those are big horizontal wells. That’s a huge amount of growth. It’s real opportunity for South Texas. And real job growth down there. And it’s not just a today growth, I think it’s a long term growth.”

And her view as Commission Chairman extends beyond the state’s southern the border. “It’s opportunities from San Antonio in everywhere all the way south. Not just in Texas. With Mexico now opening up it’s markets, it’s real potential long term continued growth.

“I want to praise Mexico and their president for what he’s already done in just the last 21 months now,” Craddick stresses. “I think Mexico saw the growth that was going on in Texas and said, we know the Burgos Basin” – which is the geological extension of Eagle Ford south of the border – “is right there, and our technology is behind in oil and gas. Let’s figure out what we can do. I think that’s an opportunity for job growth across the whole region.”

Hence the Commission has become involved in assisting our neighboring nation to the south. “They have some rules they’re trying to put in place in the next year. At the Railroad Commission we’re trying to work with PEMEX and their federal government. We’ve met with their government to tell them what our rules are. I think they’ve got an aggressive way to put their rules into place in a year. It took us a year-and-a-half to do our casing rules. So I’m impressed that they can do it that quickly. But I think it’s three to five years until we see them actively trying to develop the Burgos Basin. We’ll see what they can do,” she says.

Her purview also extends to the Middle East and Saudi Arabia, especially with the drop in oil prices around the time we met and an OPEC meeting that followed our talk by about two weeks. “It was nice at the pump for me yesterday,” Craddick happily notes. But on the other hand, she has to be mindful of the economic and geopolitical consequences and how they affect the Texas oil and gas industry as well as our nation and hemisphere.

“The Saudis and OPEC have controlled the price of oil for a long time now,” she explains. “But we have to look in the long-term to shipping oil overseas. People are sometimes nervous when you have that conversation because they don’t understand it. The reality is this: We have some constraints internally in this country as far as shipping; pipelines are being built, and they’re being built quickly. Companies are seeing the economic opportunity so they’re building the pipe.”

But there’s a struggle going on with OPEC. “The gap between the international crude market and the West Texas intermediate crude has been as high as $14. Last week it was $67 at the well head in West Texas, and that’s becoming uneconomic out there,” Craddick observes. “We’ll have to see what OPEC does in the next few weeks. It may slow us, it may dip us, but not shut us down – normal cycle.

“I think if Texas continues to lead and the United States opens up our oil market internationally with our friends in Mexico and Canada, we can get off imported oil,” Craddick predicts. “And part of the reasons that the Saudis don’t like us this week is that we are importing 700,000 barrels less of their crude than we were a year ago.”

A Newer, More Modern and Responsive RRC

“It’s a fun time to be here,” says Craddick of her job. “It’s a different project every day and a different challenge. And that makes it even more interesting.” She is just as concerned and involved in the day-to-day activities and recent industry and state events as the big state and global picture. “Texas to me had always been a leader in this industry to begin with. But I think it is even more important now for us to continue being a leader. We have redone several rules in the past two years, particularly Rule 13, our casing and well integrity rule, and I think we are the leader in the country as far as that particular rule, and recycling. Those two rules to me are some of the most important rules that we’ve done. We are always looking at rules anyway, and I think that best practices are important.”

Her goal of more rapid agency responsiveness shows its success in dealing with the more than 30 earthquakes that hit the Azle area in the Barnett Shale play since late 2013. The Commission hired its first seismologist at the beginning of last April, held hearings in Azle, and in late October instituted new rules governing injection wastewater wells that some attribute as a cause of the earthquakes. “I think it was pretty quick for an agency, and it will give us the tools if and when we need them to go get information on injection wells if there are issues,” she notes.

Nearby in the Barnett play is Denton, which voted in November to ban hydraulic fracturing in the city limits. At the time of Craddick’s interview, the Commission had not decided whether to join with the General Land Office and the Texas Oil & Gas Association in filing suit against the law. The three Commissioners were meeting the next day to discuss the situation (among other matters). The Texas RRC did decide to continue issuing permits to drill in the city limits.

“We’re all discussing what’s appropriate amongst the agencies,” she reports. “Obviously we have to respect the vote. They banned a completion technique; they didn’t ban permitting. We will be continuing to permit because that’s our job as an agency. We haven’t historically ever, that I’m aware of, looked at what local ordinances are before we give a permit. This is a completion technique that companies use before they complete a well; it’s not the only technique.

“As an agency we believe that we have a right and responsibility to continue to give drilling permits,” Craddick adds. “Mineral owners have primacy over surface owners in this state. That’s the way it’s historically been. It’s case law, it’s the way it’s always worked here.”

She has also been involved in supporting two different educational efforts. One is preparing new generations to work in the industry and help overcome its current workforce shortage. “Somebody came up to me after a speech I gave on the industry outlook recently and said: Where are you going to get the people? And I said, ‘I don’t know.’ And I don’t just mean us as an agency. So that’s a long term challenge for the industry,” she points out.

“There have been people who have worked as roughnecks etcetera out on these rigs for years and years. You’ve now got to teach a new generation to do that. So that is a long term challenge that I think we’ve all got. I have met with some of the higher education groups, whether it’s at the technical colleges or the universities, and there’s a lot of conversation going on not just within my agency but obviously at the legislature as well about how, as a state, we can continue to make sure we have an educated workforce. I’m personally excited to now see how some groups are going in and educating at the junior high and high school levels, because it starts there, and get some of these people workforce ready coming out of high school,” says Craddick.

The other is joining with the industry to help better educate the public about hydraulic fracturing and other drilling techniques. “There’s a lot of misinformation out there,” she notes.

Part of the purpose for the RRC’s IT upgrades is to enable the agency to offer more in-depth information on oil and gas activities and drilling technology, and to enable citizens to access specific information when they need it. “One of the things we want to make sure of with our IT system is that the GPS systems are being upgraded. The next version is coming out in the next couple of weeks,” she reports.

“If you’re down the street from somebody, and they’re drilling a well, or they’ve got a pipeline in your backyard, you want to know what’s going on. It’s my agency’s job to make sure you know what’s going on and that the information is made available to you. I don’t think people understand that there’s a lot more going on with agencies than they see on a daily basis. If I had a well in my backyard, I’d want to know what’s going on and who the operator is and that they’re following the rules – I think that’s common sense,” she points out.

“We’ve been fracking in Texas for 60 years,” notes Craddick. “This is not a new technology in Texas. As an industry, oil and gas is the second most technologically advanced industry in the world. Fracking has come leaps and bounds because of increased technology. But there is not any place in this state – and actually the head of the EPA agreed with my statement earlier in the summer, she said nationwide – that fracking has caused any problems with water. That’s the facts. If there was an issue, let me tell you, it’s my job to make sure there’s not and that companies are doing it well.”

Poised Between Public Interests and Serving a Vital Industry

Being Chairman of the Texas RRC involves a balancing act. “I think that’s always a challenge as a regulator – to make sure, one, that everybody knows that you are responsible to the entire state, and it isn’t just us as regulators,” Craddick explains. “I talk to other state regulators, and they also see how if we say one thing everybody thinks we’re oil friendly. If we say another thing, everybody thinks we’re environmentally friendly.

“Look – the goal is to have consistent regulations, and use science when you are doing your rules and putting them into place and enforcing them,” she adds. Her enthusiasm about the industry and understanding of its technology and mechanics – even though she was a Plan II liberal arts student at the University of Texas before attending its law school – plus seeing her mission at the RRC as one of public service have their roots in her Midland upbringing.

“My dad’s in the industry and sells mud and puts together deals. So if you grew up out there, even if your dad or parent wasn’t directly involved, you were still involved because that’s what that whole community was about,” she explains. “And I think it’s an interesting industry. And as I became a lawyer I decided that the environmental piece is interesting, and oil and gas, and administrative law always interested me. But the other thing in West Texas that’s a huge thing is water. So water became a passion of mine, because if you grew up in West Texas you were thrilled when it rained, no matter if you’re in drought like we are now or not. Those issues I took away from West Texas.” She pursued them all in her work for law firms after becoming a lawyer.

There is also a service to others component that reflects her family background as well as a tradition within Craddick’s Catholic faith. “I grew up in a family that was very active in the community. So we learned that it was important to do community service. Mother was chairman of the chamber at one time and active on the hospital board, and at one point was chairman of my brother’s and my PTAs; we went to different schools,” she points out.

As well, “I was interested in politics, but I never thought I’d run for office. I went to my first Republican state convention when I was 12. But I was always interested in behind the scenes, what I call it the back of the house part – helping people in their campaigns, block walking and phone calling. It morphed into fundraising after I got out of law school at some point. But I wasn’t ever going to run for office. That was a big step for somebody else to do.”

But then that big step came knocking at her door, or less metaphorically, rang through to her family home. “The week after the 2011 session my father got a phone call,” she recalls. “The rumor was out that Michael Williams was going to resign early from the Railroad Commission. Was he interested in becoming a Commissioner? No, he wasn’t. Did he know anyone who was potentially interested? My Dad came in and told me that, and I said, I’m interested. And my mother was sitting down and about fell out of her chair. She was like, you what?

“But I said, look, this is a great agency. It was going through sunset. I sat through the Sunset Commission hearing the month before. I was concerned about this agency and the people who wanted to be here. Oil and gas is an important part of this state’s economy, 33 percent now. And I had grown up in it. I understood the importance of the industry. But I also knew that the industry isn’t perfect and you still have to have good regulations in place.”

She eventually ran for the RRC seat, held then by Elizabeth Ames Jones, for a full six year term. And against former State Representative Warren Chissum, who had been one of her father’s primary aides when he was Speaker. And who is, she says, “a lovely man and a really good friend. I believe I just worked harder and raised more money.” And in her typical thoroughness, “We went to 50-plus counties and hit pretty much all corners of the state. We talked about issues and talked to people about what my vision was and what they thought that the issues were at the Railroad Commission.”

A Practical Politician and Public Servant

Craddick’s official bio says that she is a pragmatic conservative. Asked to define that further, she explains, “I consider myself a Reagan conservative; a fiscal conservative. Family values are important. But you also have to know how to govern and work and communicate with people, and that is the pragmatism part of it.”

And then adds, “The DC model does not work here.” Hence, “We’ve opened up this office to people like the EDF [Environmental Defense Fund] and groups that aren’t always aligned with traditional oil and gas views and people that may have thought they weren’t welcome her, but they are in my office. You’ve got to work with everyone.”

Which means she also has to interact with the federal Environmental Protection Agency (EPA) even if, like many in Texas and the oil and gas industry, she is not happy with aspects of it. “One of the biggest challenges we’ve got with this new clean air rule – besides that it’s not clear how it affects us all and we’re all still trying to figure it out – is that everything that we’ve done going forward in Texas to be the biggest in renewable with wind, none of that counts. So it’s very onerous on us,” Craddick explains.

“We need to have clean air and clean water, there’s no question. That’s one of the things that we want to make sure of when we regulate and write our rules.”

The RRC’s relationship with the federal government is also a factor in the ongoing matter of changing the name of the agency, as it hasn’t regulated railroads since 1984 when the federal government deregulated the industry. The Sunset Commission recommended a new name in its recent review of the RRC, and Craddick supports the notion, though with certain provisos and understandings.

“I think a name change is a great idea,” she explains. “This agency and people who work for this agency love the Railroad Commission name, by the way. But here’s our big challenge as far as a name thing: One, historically it’s a great name. And once you get over here you realize that it’s not as big a priority, but it’s important for people to know who we are as an agency so they can come over here and ask questions. But until the legislature gives us a new name, number one, and changes the name constitutionally, I think the name can stay.

“And there are some things that we get from the federal government that we have primacy on, underground injection wells being a good example, and we don’t want to lose those and have the federal government think we have changed substantially, whatever that means, and the EPA specifically,” Craddick points out. “So I think we need to be very careful about changing our name or anything substantially unless we are doing it constitutionally. It’s a protection for us and frankly what we do as an agency.”

She does point out that “if you want a national energy plan, we are a good example. As a state we have the highest amount of renewable energy in the country, highest amount of wind. So if you want a perfect example of a national energy plan, come to Texas, because we use it all. And we use it all well.”

The Woman Behind the Chair

Craddick currently lives in the Tarrytown neighborhood of Austin with her daughter Catherine, who she adopted when she was running for office and who just turned three years old last Thanksgiving. “Families are important. My mother has 40 first cousins, something like that. My Dad has a large family too,” she points out. “You get to a certain age and say, well, I haven’t stopped to get married yet. But I really want…. We have a bunch of adopted kids in my family. Catherine is one of 12. A big family tradition. So I thought, I’m going to try adoption. It’s hard anyway, but it’s harder as a single parent. And if it works, and I hope it works and pray it works, then that’s great. And along she came. She’s great. We have a great time.”

As an independent woman with an impressive resume even before she ascended to a state government power center, does Craddick consider herself a feminist? “I’m not sure what that means for my generation. I think if you are smart and have opportunities, it doesn’t matter if you are male or female. I’d love to see more women want to run and be elected to statewide and other offices.” In fact, with Comptroller Susan Combs’ term expiring in December, “I’m going to be the only non-judicial statewide female official.”

She does display an impressive facility with the technical, mechanical and scientific matters related to the industry she regulates. And not just for a woman but someone of any gender. In what may seem ironic at first blush, Craddick credits her undergraduate liberal arts education for that. “I guess I’m a generalist and I think it’s my liberal arts background. I was a true Plan II person. I didn’t concentrate in anything and took a class in most of the colleges over there and I loved it.

“I just love knowledge and love information,” she adds, “and I think being a true liberal arts major you are always looking for new ways to look at things and answers.”

Asked towards the end of the interview if there is something about her that the public may not know and might be surprised to learn, she is at first stumped by the question. “I don’t know,” Craddick ponders. “Kinda what you see is what you get with me.”

Her Director of Public Affairs, Lauren Hamner, who is sitting in on the interview, chimes in. “She’s a lot younger and hipper than you would imagine. Often we will be in the car and she’ll say something, and I say, you know what that is?”

“This comes from a 31 year old,” Craddick points out with a chuckle. On the other hand, she is someone who says in a youthfully-phrased aside during the interview, “I think technology is really cool, by the way.”

What may not largely be known about her is that “I’m a huge sports fan. I loved playing sports and watching sports” in her youth. (Her high school years were when the book about Permian Basin high school football, “Friday Night Lights,” was being written.) “That’s a big reason I came to the University of Texas even though their football team was on a bit of a dip at the time. I’m probably more current on college football than most men. And basketball too,” she says.

“The other thing people don’t know is I am actually an introvert,” Craddick adds. Which is hard to believe given how engaging she is as an interview subject.

Though she is only two years into her first elected office term of six years, speculation has already started about Craddick’s political future. “The reality is this: I have four more years here,” she explains. “I like being here. We’ll see what comes. I don’t have an answer to that. No preconceived idea. We’ll see. I may be here again. I may move to higher office. I may decide that this part of my public service is done and go do something else.

“But for four more years I want to make this agency a better place and a better part of the community, and that’s what I am here for.”