Ethics Debate Swirls in Race to Be the Next Railroad Commissioner

*Editor's Note: This story has been updated to include a statement from Steve Brown.  

On the campaign trail, Ryan Sitton, a Republican running for Texas railroad commissioner, has pledged to improve the agency’s efficiency, allow the free market to bolster oil and gas production, and push back against the federal government. His three primary opponents have touted similar ideas.

But Sitton’s plans differ in one major respect. If elected, he says, he will stay involved with the engineering company he and his wife founded. The firm, PinnacleAIS, consults with some of the world’s largest oil and gas companies, including those that could appear before the Railroad Commission of Texas.

That plan, which Sitton shared at a candidate forum last month in Alvin and later confirmed to The Texas Tribune, has sparked debate in a race for an office that, by its nature, already toes a line between industry champion and watchdog. 

Sitton said he would focus first on the railroad commissioner job, working at his firm only after hours. And he anticipates that few conflicts would arise. PinnacleAIS, which analyzes the integrity of oilfield equipment, has contracted with companies including Valero, Marathon and Chevron. But Sitton said his firm deals with wings of the companies separate from those that appear before the Railroad Commission. 

“It’s so segregated. It’s so different,” he said, calling his work history an asset rather than a liability. “What makes me the best-qualified candidate for railroad commissioner is that I have real experience in the industry."

Sitton's opponents are skeptical. Two of them — Malachi Boyuls, an oil and gas investor and former regulatory attorney, and Becky Berger, a geologist who spent years on the oilfields — also emphasize their industry ties, a common campaign tactic in a state whose voters tend to place higher value on economic development than on new regulations. But they say Sitton's plans to continue at PinnacleAIS would stir ethical concerns.

“It just raises questions about your loyalty and commitment,” Boyuls said in an interview.

“If you’re going to run for this office, you need to dedicate your time to this office,” Berger also said in an interview. 

Travis McCormick, the campaign manager for former state Rep. Wayne Christian, R-Center, another candidate for the commission, said, “It could be problematic.”

As four Republicans and two Democrats jockey to fill the seat of departing Commissioner Barry Smitherman, who is running for Texas attorney general, they have different opinions about how close is too close to the oil and gas industry.

Railroad Commission hopefuls commonly — and legally — accept campaign contributions from the companies they might regulate. This year’s race is no different.

Sitton’s last two campaign finance reports show he collected close to $137,000 from the oil and gas sector from July 2013 through late January 2014. Those numbers make up a sizable chunk of his roughly $356,000 in total collections.

The industry sent even more dollars Boyuls’ way during the same period. Oil and gas interests contributed more than $212,000 — more than half the nearly $419,000 he raised. Those numbers do not include a $67,500 donation earlier last summer from Jason Hoisager, the president of Arabella Exploration.   

Christian collected about 20 percent of his $194,000 from the industry. And Berger, who raised about $45,000, reported receiving just $207 from oil and gas sources.

Neither of the two Democrats running for the seat has accepted any industry money, according to their filings. But, as long shots, they haven’t raised much money at all.

One of those candidates, Dale Henry, a retired petroleum engineer, refuses to accept any contributions. He pays his own campaign bills. 

“Any time you’ve go those contributions being made, there has to be payback,” he said.

Henry, who is running against Steve Brown, the former chairman of the Fort Bend County Democratic Party, has failed in three previous runs for the commission, which has not had a Democratic member in two decades.

Brown does not appear to have any industry ties. He called transparency "so important when dealing with elected regulatory bodies," and said he would support new campaign finance rules such as a limit to year-round fundraising.

Texas lawmakers have increasingly scrutinized the financing of railroad commissioner campaigns. During last session’s “sunset” process — the periodic review of a state agency — the Legislature debated several campaign finance reforms for commissioners, which ultimately failed. The sitting commissioners argued that new rules would subject them to different standards than other statewide officeholders face.

Republican hopefuls agree that accepting campaign cash from the industry is not inherently problematic, but they disagree on other ethics questions.

Boyuls said that, if elected, he would take several steps to sever his strong industry ties. He will give up all active interest in St. Augustine Partners, an oil and gas investment firm where he is a partner, and he will step down from the board of Arabella Exploration, which he joined this month.

“The issue here is ensuring there’s not even the appearance of a conflict of interest,” Boyuls said.

That’s similar to the route Commissioner David Porter took after voters elected him in 2010. He stepped away from his accounting firm, which catered to oil and gas companies. 

“He absolutely realized immediately that it was a full-time job,” said Katie Carmichael, Porter’s spokeswoman.

Porter also shed stock in any companies that regularly deal with the agency, Carmichael said. 

But not everyone agrees that commissioners need to change their investment strategies. 

Lauren Hamner, a spokeswoman for Commissioner Christi Craddick, who in 2012 reported holding shares of energy companies including ExxonMobil and Whiting Petroleum, said the Railroad Commission’s actions do not affect public trading prices.

“Commissioner Craddick’s investments in stocks are part of a diverse portfolio that is in no way connected to the decisions she makes at the Railroad Commission,” Hamner said, adding that ethics questions are “high on our radar.”

Boyuls said he would follow in Porter’s footsteps by divesting of any oil and gas holdings, placing remaining investments in a “blind trust” that we would not control.

Randall "Buck" Wood, an Austin-based ethics lawyer, described Boyuls’ plans to step away from the companies as “the right thing to do,” but he questioned the use of a blind trust.

“There’s no such thing as a blind trust,” he said. “I want to know what you’re buying and selling. All that does is keep people from knowing what you’re doing.”

Berger, whose filings with the Texas Ethics Commission do not show any major investments in oil and gas companies, said, “That’s the kind of thing I would do,” when asked about Boyuls’ plans. “If you don’t do it, all you’re doing is making people more skeptical.”

Christian's campaign said he has no direct investments in companies regulated by the Railroad Commission. His personal finance statement lists holdings in more than 100 different mutual funds, but none directly related to oil and gas.

Berger said she had no plans, if elected, to give up her working interests in wells operated by Occidental Petroleum Company and Marquee Corporation, which she reported to the Texas Ethics Commission on her personal financial statement. ("Working interests" refers to a situation in which an investor earns profits from a well, but is also liable for drilling and production costs.) She is not required to report her earnings from the wells, which she described to the Tribune as “not what I consider a lot of money.”

In the unlikely case that questions about her wells appeared before the commission, Berger said, she would recuse herself from any votes.

As for Sitton, he said that he would either recuse himself from a vote or disclose any conflicts that crop up. He also said he would evaluate his investment portfolio for any potential conflicts.

“It’s our responsibility as citizens to make sure that our representatives are representing our best interests,” he said. “I will always do what’s in the best interest of the state of Texas.”

Sitton said he has not decided how large of a role he would play at PinnacleAIS if elected; he would adjust while growing into the Railroad Commission job. But Sitton would continue to “steer” the company in some capacity, he said, helping him to keep his industry knowledge fresh.

“I think people will be excited about somebody with that experience,” he said. “I want to leverage my experience.”