Railroad Commission of Texas, Gas Utilities Division:

An Inventory of Gas Utilities Division Audit Files at the Texas State Archives, 1974-1979

Agency History

The Railroad Commission of Texas regulates the exploration, production, and transportation of oil and natural gas in Texas. Its statutory role is to prevent waste of the state's natural resources, to protect the correlative rights of different interest owners, to prevent pollution, and to provide safety in matters such as hydrogen sulfide. It oversees hazardous materials pipelines and natural gas pipelines and distribution systems as well as propane, butane, compressed natural gas, and liquefied natural gas. It works to make sure a continuous, safe supply of natural gas is available to Texas consumers at the lowest reasonable price. Additionally, the Commission regulates surface mining for coal, uranium, and iron ore gravel, and conducts a program for reclaiming lands that were mined and abandoned before 1975.

The Railroad Commission of Texas had its origin in the demands of the shipping public in the late 1880s that insisted that railroads be subject to regulation based on public interest. An advocate for governmental regulation, Attorney General James Stephen Hogg ran for Governor in 1890 with the issue of railroad regulation as the focal point of the campaign. Hogg was elected Governor in the general election and the voters also approved an amendment to Article X, Section 2 of the Texas Constitution that empowered the Legislature to enact statutes creating regulatory agencies. These elections paved the way for the Legislature to enact on April 3, 1891 "An Act to Establish a Railroad Commission of the State of Texas," that later was placed in the Texas Revised Civil Statutes under article 6444 et seq. (House Bills 1, 3, and 58, 22nd Texas Legislature, Regular Session).

The Commission originally consisted of three members appointed by the Governor for three-year terms. Governor Hogg appointed the first three Commissioners in 1891 including John H. Reagan, who resigned as U.S. Senator from Texas to serve as the first Chairman. The Texas Constitution, Article XIX, Section 30 was amended in 1894 to provide for elective six-year overlapping terms for the Commissioners. That same year John H. Reagan was elected and served until his retirement in 1903.

The Texas Railroad Commission was the first regulatory agency created in the State of Texas and originally had jurisdiction over the rates and operations of railroads, terminals, wharves and express companies. The legal focus was on intrastate passenger and freight activities. Interstate jurisdiction fell under the U.S. Interstate Commerce Commission. For the first twenty-five years of its existence, the Railroad Commission was largely concerned with regulating railroads, setting rates, receiving complaints, and making investigations. As other controversies arose where the Legislature deemed that the public interest could best be served by regulation, additional duties were assigned to the Railroad Commission.

The Railroad Commission's authority was broadened beginning in 1917 with the passage of the Pipeline Petroleum Law (Senate Bill 68, 35th Legislature, Regular Session) that declared pipelines to be common carriers like railroads and placed them under the Commission's jurisdiction. This was the first act to designate the Railroad Commission as the agency to administer conservation laws relating to oil and gas. The Commission's regulatory and enforcement powers in oil and gas were increased by the Oil and Gas Conservation Law (Senate Bill 350 of the 36th Legislature, Regular Session), effective June 18, 1919. This act gave the Railroad Commission jurisdiction to regulate the production of oil and gas. Acting upon this legislation, the Commission adopted in 1919 the first statewide rules regulating the oil and gas industry to promote conservation and safety, including Rule 37. This rule requires minimum distances between wells at drilling sites in order to protect field pressure and correlative rights.

The Gas Utilities Act of 1920 (House Bill 11, 36th Legislature, 3rd Called Session) gave the Commission regulatory and rate authority over individuals and businesses producing, transporting, or distributing natural gas in Texas. In 1937, following a large natural gas explosion in a school in New London, Texas, the 45th Legislature passed legislation giving the Railroad Commission the authority to adopt rules and regulations pertaining to the odorization of natural gas or liquefied petroleum gases (House Bill 1017, Regular Session).

The passage of the Public Regulatory Act of 1975 (PURA) (House Bill 819, 64th Legislature, Regular Session) required certain state regulatory agencies, including the Commission, to set the overall revenues of a utility based on its "cost of service." Regulation of liquefied petroleum was added to the Commission's responsibilities in 1939 by the 46th Legislature (House Bill 792, Regular Session). The legislation authorized the Commission to adopt and enforce safety rules and standards in the storage, handling, transportation, and odorization of butane or LP-gases. Regulation of compressed natural gas was added to the Railroad Commission's responsibilities in 1983 (Senate Bill 617, 68th Legislature, Regular Session).

In 2005, the Rail Division and its remaining function, rail safety regulation, were transferred to the Texas Department of Transportation (House Bill 2702, 79th Legislature, Regular Session). The Railroad Commission no longer has any railroad-related functions.

Three divisions with the agency have regulatory functions: the Gas Services Division, the Oil and Gas Division, and the Surface Mining and Reclamation Division. The Office of the General Counsel's Enforcement Section has enforcement powers, the Safety Division is responsible for the safe transportation of products through pipelines, installation of LP-Gas (propane), and the reporting of damage to pipelines through third-party damage reporting, and the Alternative Fuels Research and Education Division has research and education functions. Support divisions include the Public Information Office, Personnel, Finance and Administration, Information Technology Services, Intergovernmental Affairs, and the Office of Internal Audit. Three elected Commissioners direct the operations of the agency.

The Gas Services Division works to ensure that a continuous safe supply of gas is available to Texas consumers at the lowest reasonable rates. The division establishes rates and services that are fair and reasonable for gas utilities and their customers; enforces those rates; maintains safety standards in the gas and hazardous liquids pipeline systems throughout the state by inspection and investigation of any hazards or accidents; oversees intrastate gathering and storage services; and adopts and maintains adequate safety rules and standards in the handling, transportation, and odorization of LP-gases (liquefied petroleum gases) for dealers, handlers, and consumers. It further regulates propane and compressed natural gas by requiring anyone working with these gases to pass a written qualifying exam administered by the Commission. The division also focuses on regulatory policy and analysis as well as identifying and eliminating natural gas transportation problems. There are four main sections in this division - Audit, Liquefied Petroleum Gas, Pipeline Safety, and Regulatory and Analysis.

(Sources: Guide to Texas State Agencies, various editions; general laws and statutes; the Railroad Commission website, accessed on August 24, 2008; and the records themselves.)

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Scope and Contents of the Records

The Gas Services Division of the Railroad Commission of Texas (RRC) establishes rates and services for gas utilities and their customers and enforces those rates. These files contain gross receipts tax forms, audit field forms, and correspondence of the Gas Utilities Division (GUD) (later called the Gas Services Division) of the Railroad Commission of Texas. Dates covered are 1974-1979. Field audits of gas utilities were conducted to enforce the natural gas rates set by the Railroad Commission, to collect the gas utilities gross receipts tax, and to ensure utility compliance with all other statutory and regulatory requirements. The audit consisted of a visit to the gas utility by a GUD auditor who examined the companies' records to verify selected entries in the company's annual report. The audit file for each company is divided into three parts: gross receipts tax forms, audit field forms, and general correspondence. Frequently, only the gross receipts tax forms are present in a company's file since companies are not audited every year and no correspondence is necessary if there are not violations or problems.

The gross receipts tax was required of every utility that received revenue from its pipeline operations. The tax was paid quarterly and reported on form GU-3A. Also included is form T-4 - "Application for Permit to Operate Pipeline or Pipelines in Texas." This form determined which gas utilities were required to pay the tax and which were not.

The audit field forms were the paperwork filled out by the auditor when checking the figures in the utility's annual reports, the payment of the gross receipts tax, and for compliance with regulations. The auditor filled out separate forms for each of the following: gross receipts tax paid, natural gas purchase contract terms, quality of service, current monthly cost of service, gas operation revenues, purchased gas expense, unaccounted for gas distribution, and a summary field report.

The general correspondence between the utilities and the GUD, and the internal memos of the GUD concern the payment of the gross receipts tax, setting up visits by the auditor, the filing of annual reports, and requests for corrections of any violations found. Any violations were reported to the company via correspondence and the company was urged to comply. If compliance was not forthcoming, the matter was referred to the Railroad Commission's Legal Section.

This finding aid describes one series of the Railroad Commission of Texas records. See Railroad Commission of Texas: An Overview of Records for more records series.

To prepare this inventory, the described materials were cursorily reviewed to delineate series, to confirm the accuracy of contents lists, to provide an estimate of dates covered, and to determine record types. The audit files are on microfilm; the inventory provided by the Railroad Commission does not list the dates for these files.

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Restrictions

Restrictions on Access

Materials housed in the State Archives do not circulate, but may be used in the State Archives search room. Materials will be retrieved from and returned to storage areas by staff members.

Restrictions on Use

Most records created by Texas state agencies are not copyrighted and may be freely used in any way. State records also include materials received by, not created by, state agencies. Copyright remains with the creator. The researcher is responsible for complying with U.S. Copyright Law (Title 17 U.S.C.).

Technical Requirements

Microfilm readers are available in the Geneology and Reference reading rooms at the Texas State Library and Archives.

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Related Material

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Administrative Information

Preferred Citation

(Identify the item), Gas Utilities Division audit files, Railroad Commission of Texas. Archives and Information Services Division, Texas State Library and Archives Commission.

Accession Information

Accession number: 1981/120

These records were transferred to the Archives and Information Services Division of the Texas State Library and Archives Commission by the Railroad Commission of Texas on February 12, 1981.

Processing Information

Inventoried by Laura K. Saegert, 1981

Described by Paul Beck, January 1987

DACS compliance by Laura K. Saegert, September 2008

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Detailed Description of the Records