Industry Update: Texas Mandates All Texas-Produced Natural Gas Be First Made Available for Sale to Power Producers Before Export Out-of-State
by Brooksany Barrowes, David Castro Jr., P.C., Robert S. Fleishman, John D. Furlow, Nicholas Gladd, Chris Heasley, Chad M. Smith, P.C. and Anthony Speier, P.C.
On February 17, 2021, Texas Governor Greg Abbott, citing emergency powers, issued a mandate directing the Texas Railroad Commission (“RRC”), the state’s oil and gas regulator, to require “all [Texas] sourced natural gas be made available for sale to local power generation opportunities before leaving the state” temporarily through Sunday, February 21, 2021. In response, the RRC issued a formal Notice to Operators (the “Notice”) the next day restating (verbatim) the Governor’s mandate but did not otherwise issue any rules or provide any formal guidance to the industry.
The lack of specificity in the Notice has left natural gas producers, shippers, marketers, customers and end-users questioning how to interpret the mandate, what the penalties will be for non-compliance (if any), and how (or whether) the RRC will enforce it, if it is enforceable at all. (Continue reading)