With just ten days left in the legislative session, a lot of attention is (rightfully) focused on bad bills. But some lawmakers are pushing forward thoughtful, future-focused energy policy and Chairman Drew Darby is at the forefront.

For this episode, I sat down with Chairman Darby, a West Texas Republican and Chairman of the House Energy Resources Committee, to talk about what an energy-secure Texas really looks like and how we get there.

We covered a wide range of topics: from his 50-year career in oil and gas law — including getting started during the oil crisis of the 1970s — to the centrality of energy not just to his district but for the whole state, to what it’ll take to build a grid that keeps up with the state’s growth.

Chairman Darby makes a strong case for all-of-the-above energy policy.Solar, wind, and batteries? Absolutely. Oil and gas? Also yes. Nuclear, geothermal, demand flexibility, transmission upgrades? Yes, yes, yes, and yes.

As Darby, a former UT football player under legendary Coach Darrell Royal, put it: if you want to win, you need a full team, not just one kind of player on the field.

We talked about:

* Why solar + storage projects are already transforming his district, including one project near his hometown that charges and discharges batteries up to six times a day

* How renewable projects support school districts, landowners, and local governments in rural Texas

* The dangers of the many anti-energy development bills this session

* How House Bill 3069 would help fix the transmission approval process and reduce costly congestion across the ERCOT grid

* Why House Bill 3970 and Senate Bill 6 offer complementary approaches to large flexible loads—and why Texas needs a clear path forward now

* How abundant energy, including small modular nuclear reactors, can help solve our water challenges

* And what it means to be a pragmatic conservative working across geographies and many other divides to put solutions above ideology

We also discussed the danger of overregulation and the need for regulatory certainty: Do we really believe in market forces or don’t we?”

If you care about grid reliability, economic development, or the future of rural Texas, this conversation is worth your time. Chairman Darby brings experience, insight, and a level-headed approach that’s too often missing from the energy debate.

If you enjoyed this episode, please share it and consider becoming a paid subscriber to get access to full archives, Grid Roundups, paid-only podcast episodes, and more.

Timestamps

0:00 Intro

3:00 Chairman Darby’s background, West Texas roots

6:00 The boom-bust of the oil industry during his career

8:00 The fracking revolution making the Permian the center of the oil-producing world

10:00 The rise of renewables in Texas, particularly in West Texas, and

12:00 Using the best of each resource, integrating diverse resources and getting the most out of each

14:00 Creating a good investment environment for Texas

15:30 Texas’ water problems and how abundant energy can help solve them

18:00 Treating “produced water” and the symbiotic relationship with oil and renewables

23:00 Examples of renewable and storage projects in Chairman Darby’s district, benefits to landowners

27:00 Fixing Texas’ transmission planning and construction to avoid reliability problems

30:00 Reducing congestion charges, currently $2 billion annually, “generic transmission constraints”

31:30 Geothermal in Texas using techniques from the oil and gas industry

34:45 Large load flexibility and blending SB 6 and HB 3970 together

38:00 Saying “yes, if” to large loads, reducing energy peaks, filling in energy valleys

41:00 Do we believe in markets or not?

43:00 Finding common ground and solutions

47:30 Pragmatism over ideology

Resources

Energy Capital Podcast Episodes

* Texas' Load Growth Challenges – And Opportunities, with Arushi Sharma Frank

* How Load Flexibility Could Unlock Energy Abundance with Tyler Norris

* Geothermal’s Moment with Jamie Beard

* Drilling for Geothermal Power and Storage with Cindy Taff

* New Nuclear in Texas, with Doug Robison and Dr. Rusty Towell

* Rural Texans Speak Against Senate Bill 819

The Texas Energy and Power Newsletter Grid Round Ups

* Large Loads at the Lege – Grid Roundup #40

* Peak Performance – Grid Roundup #58

* ERCOT CEO: “We Need All Resources” – Grid Roundup #56

Related Technologies

* Texas Geothermal Energy Alliance

* Texas Nuclear Alliance

* ERCOT Transmission Planning Reports

* ERCOT Load Forecast Dashboard

* DOE Office of Geothermal Technologies

Reports and Analysis

* Aurora Energy Research – Renewables Restriction Study

* Aurora Energy Research – Demand Flexibility Study

Legislation Mentioned

* House Bill 3069 (Transmission Planning)

* House Bill 3970 (Large Load Interconnection)

* Senate Bill 6 (Large Load Reliability)

* Senate Bill 2627 (Texas Energy Fund)

* House Bill 3240 (Geothermal Policy Council)

* Senate Bill 1656 (Permitting Reform)

Transcript

Doug Lewin (00:05.484)

Welcome to the Energy Capital Podcast. I'm your host, Doug Lewin. Humans have a very common problem, often called negativity bias. We tend to focus on the negative things. It's the negative things that drive headlines. But there's a lot of good things happening at the legislature too. And while I spend a lot of time also shooting videos or writing articles about the negative things, I wanted to take a minute to talk about, and we will in this conversation talk about some of the negative to be sure, but also some of the positive things happening and some of the leadership that is happening in the legislature on the positive side of energy. Because while there are a few that are trying to tear down, there are some members that are trying to build up. So here today to share his energy vision for Texas is Chairman Drew Darby of San Angelo. Chairman Darby was first elected in 2006. He is one of the most respected members in the Capitol, not just on energy, but across a wide range of issues.

He represents San Angelo. His district includes the Permian Basin, has both a lot of oil and gas production and a lot of renewable energy. It's one of the windiest and sunniest areas in the whole country. For projects already installed in his district, there are billions of dollars of investment going to local schools, hospital districts, landowners, all throughout his district. This session, he is chair of House Energy Resources, a member of the House Committee on State Affairs. He's vice chair of the Climate and Energy Caucus, and he's chairman of the Energy Council, which spans a dozen states and a few Canadian provinces. It's a nonpartisan organization that facilitates dialogue among legislative policymakers on critical energy issues affecting their states. And that piece right there, Mr. Chairman, that dialogue is something I think you have really brought to the Texas legislature and has kind of defined your 20 years. So first of all, thank you for being on the show and welcome.

Chairman Darby (02:05.41)

Well, Doug, thank you for those very kind comments. Sometimes we hear a lot of negativity and I liked your intro. There is a lot of negativity, certainly around this building this time when we meet every other year for 140 days. We cram a seventh or eighth largest state economy into trying to figure out what we need to do in 140 days. And it gets hectic at times, but certainly there's a fair amount of negativity that swirls around the building from time to time.

Doug Lewin (02:37.39)

And of course we are recording on May 22nd, so we're like 11 or 12 days from the end of the session. So I really appreciate you taking time in this particularly hectic moment, but there are people all around, like you said, eighth largest economy in the world. There's people not just around Texas, but around the country and the world wondering what's going on. So I really appreciate you taking time to share what's going on here. But before we jump into the legislative session and what's going on in the moment, let's start at a little bit of a higher level. You were born and raised in San Angelo, a real sort of energy hub and energy center. You've worked on energy issues throughout your career, not just in the legislature, but before that. Tell us a little about yourself, your energy background, and what energy means to your district.

Chairman Darby (03:20.738)

Of course, energy is important to everybody's district wherever you live. I've been fortunate. I was born and reared in San Angelo and West Texas. It was a small, smaller community back then. After, we had an air force base, Goodfellow Air Force Base. And my father was stationed there during the war and met my mother and they married and I came along shortly thereafter. And so I enjoyed an upbringing of sports and outdoors, enjoying hunting, fishing, all the things young men tend to do. And I was fortunate to have been blessed with a little bit of athletic ability and I was able to come to the University of Texas on a football scholarship.

Doug Lewin (04:05.0)

I did not know that.

Chairman Darby (04:10.06)

My freshman year was 1965. Amazing. I've had some good coaches. Emery Ballard was my high school coach. Spike Dykes was my linebacker coach.

Doug Lewin (04:20.0)

Legend. He went to Tech then, right?

Chairman Darby (04:23.0)

Thanks. Spike went on to Tech. Yeah. But he was a linebacker coach there for San Angelo Central. All right. All right. Back in the early '60s. And then I went on to Austin where Darrell Royal was coach.

Doug Lewin (04:38.094)

We're going to have to do a separate podcast of just Darrell Royal stories. That'll be the follow-up.

Chairman Darby (04:42.414)

That'll be fine. That'll be fine. But I had some knee injuries that kind of limited my playing ability, but I went on to stay at the University of Texas. After I got my degree in finance, I was able to get into the University of Texas Law School and was able to complete a juris doctorate degree there in the early seventies. And it's amazing Doug, how life throws you lemons from time to time. They're trying to make lemonade as the story goes, but I was going to take a job with the Securities and Exchange Commission in Washington after I graduated. But the day I finished my last law school exam, my father was killed in a plane crash.

Doug Lewin (05:32.0)

Oh my God.

Chairman Darby (05:37.294)

And left my mom who was, and you'll know this term, she was a June Cleaver mom who didn't hardly drive. She managed myself and my sister and so when my father was killed, she needed some help. And so I took a job with a small law firm there in San Angelo. And quite frankly, you know, that changed the direction of my life. And I don't regret any of that. So living there in West Texas, I was able to appreciate kind of the changing economic landscape that is a rural lawyer. When I first got out of law school, we had the Arab oil embargo back in '74. And so the area responded by trying to find and produce oil back then. And so I did a lot of oil and gas work. I represented a lot of operators who were getting into the business. We drilled a lot of wells. Some were successful, some were not. But as the peaks and valleys go, there's a boom bust every oil cycle.

So our world ended in October of 1983 when the First National Bank of Midland failed and most every operator I know had to file bankruptcy. So I did a lot of bankruptcy work during that period of time. And along that same time, I got into digitizing, if you will, all the deed records in Tom Green County and I created a title plant in order to have a computer that would produce those records in expedited form and spent a lot of money and bought a lot of very expensive equipment that turned out five years later to be worthless.

Doug Lewin (07:18.37)

You have seen kind of the expanse of the energy industry in Texas. I mean, from the oil embargo through that bust in the eighties and obviously a lot in between, all the way through to the shale revolution. I mean, you, you, you've been there.

Chairman Darby (07:31.806)

I've been there and done that, as they say, and I did a lot of bankruptcy work. I've done a lot of real estate work, a lot of real estate, what they call land men, you know, the new series Landman. Well, that's what a rural lawyer does.

Doug Lewin (07:47.914) Maybe not exactly what's depicted on the TV series.

Chairman Darby (07:51.198) Some of it might be a little exaggerated, but yes, I have been associated with that. I've been an oil and gas lawyer for all of my legal career, 50 plus years. And so we've seen it, we've watched it develop, we have watched it mature and then disintegrate and reemerge in a reconstituted form. And that's what's happened in the fracking boom, as they say. And so that has revolutionized and taken producing zones that we knew were there, but were too tight, quote, did not have the porosity necessary to produce in paying quantities. And so the new completion techniques opened up those new horizons.

Doug Lewin (08:39.789) It was just unthinkable. It was unthinkable. Not even in the early days, just like 15 years ago.

Chairman Darby (08:45.824) Absolutely. And so areas of this state, and I remember reading projections that said the Permian Basin would be played out by a certain date. I can't remember what that date is right now.

Doug Lewin (08:59.34) Yeah, there was all those discussions around peak oil and yeah.

Chairman Darby (09:02.828) But we all realize that in most producing zones, under current completion techniques and production techniques, you can only recover about 50% of what's in the horizon. And so these new completion techniques have allowed us to seek and improve production and increase dramatically that production to make the United States and certainly the Permian Basin, the center of the oil and gas production world if you will with regard to our economic and strategic security here in this country.

Doug Lewin (09:37.474) You know, it's interesting cause you're talking about the oil embargo and the seventies with some of the stuff going on in the world right now. I think a lot of the oil producing world in the Middle East, they would love to be able to have a similar dynamic and they can't because fracking really did kind of change that game. Of course, also in your district and I don't know if it's part of your business or not, but just so it is part of the district and it's part of what you've seen out there. This rise of wind really kind of in the, about 20 years ago really kind of taken off through the early 2010s and even mid 2010s and kind of leveling off. And then the solar boom happened in the last five years. The most recent podcast I did was with Glenn Hamer, the president CEO, Texas Association of Business. And one of the things we talked about was, I think there's a lot of folks, particularly those that are pushing the various negative proposals that a lot of times are viewing this as like oil and gas versus renewables. Like it's a football game and we've got different jerseys on and we're lining up across the ball. I remember on one of those bills, Senate Bill 819, I believe the gentleman was from the San Angelo chamber, if I'm not getting that mixed up, and said, like, look, we got a lot of oil and gas, we got a lot of renewables, they work together on projects, oil and gas buys power from renewables. It's not a us versus them thing out in San Angelo.

Chairman Darby (10:56.59) No, it's not. And we are a very diverse region. Clearly we have a lot of land and that has a lot of radiant heat associated with large swaths of land. We have a lot of wind and certainly we have oil and gas production. It's a diverse portfolio that we have.

Doug Lewin (12:20.052) I really do love the sports analogies because they really do kind of work. You don't want just one type of player on the field. You need the fast guys, but you also need the big guys to block and tackle. Like you said, and you know, I hear people talking about, well, you know, we're just going to build out a ton of gas and we'll just run our grid on gas. And I hear some people say it's going to be a hundred percent renewable. And I kind of hear both of those things and I'm like, why would you do that? Why wouldn't you use the strength of the different resources that are out there and put them together in a smart way?

Chairman Darby (12:50.675) Some are very nimble. Yeah, some are quick, some are speedier. They get really cheap, some are cheaper.

Doug Lewin (12:58.384) And not exposed to the ups and downs of that boom and bust cycle because when it booms, prices go high and that's good for the state, you're exporting a lot, but if you got a whole grid based on gas, consumers are going to hurt under that scenario.

Chairman Darby (13:10.552) Exactly right. And so I think if we're going to be smart about this, then it takes all these players to have a perfect team. And that's what we're trying to achieve with a perfect team is this integration, if you will, of the energy portfolio into a fully functioning, efficient team.

Doug Lewin (13:30.574) So let's talk about that from a policy perspective. Maybe first of all, kind of, if you want to flesh that out a little bit more, like what's your vision? I like to ask this question, sort of a common question I ask the guests on the pod is like, what is your vision of where energy's headed in five to 10 years? And just kind of related to that, like what kind of policies do you actually need to get to that place?

Chairman Darby (13:50.21) Well, of course, my role as a policymaker is to try to provide this pathway, if you will, for private industry and people who want to invest in this state to have an ability to do that in a cost efficient and a timely fashion. With all the population growth that the state is seeing, these needs are ever pressing forward and needing to respond quickly and efficiently. This combined with the revolution in technology with AI development and the need to make sure the state is prepared for that and takes advantage of that. We have to have policies that encourage and enhance and incentivize that.

So where I see is energy. I see oil and gas has an important role to play. Certainly natural gas and generation is always going to be critical. But there are other aspects of that too. I mean, we've got a wonderful opportunity in nuclear. Yeah. There is a small modular reactor currently being developed in Abilene. We currently have large load generators here and they continue to play a role. I don't know that we're going to see another one of those type of facilities built, but certainly...

Doug Lewin (15:14.51) But the small ones, absolutely.

Chairman Darby (15:17.322) And specifically, you're a supporter of HB4?

Doug Lewin (15:19.856) Absolutely. And, you know, the effort to expand our nuclear capability and understanding is critically important. It's critically important because it ties into the other ever pressing need in this state. And what we talk about a lot in the legislature is water. Yeah. And without water, then all of this really doesn't matter. Because if you don't have water in this state, then you don't have people. If you don't have people, then you can't develop these resources. I tell people that the last time I checked, they don't raise beef cattle in the back of the H-E-B in San Antonio, nor do they grow cotton in the back of the Men's Wearhouse in Dallas, Texas. But they have people that want to live in cities and they want to eat and they want to wear clothes and they want to have electricity. But these resources are developed and managed in rural Texas so that they can be delivered to people who want to live in urban Texas. So if you want to live in cities, then you have to allow people who live in rural Texas the ability to have basically four or five things. You need to have a good education system. Mama's not gonna want to have their kids in a poor performing school, so you got to have good education. You have to have good roads to get your goods and services, food and fiber, hide and hair to market. You have to have good healthcare. Mama's not gonna wanna live in an area where her kiddos don't have access to quality healthcare. You have to have water. And we are water challenged, certainly in West Texas. And then you have to have good jobs, okay?

Part of those jobs are what we've been talking about this morning is energy jobs. That's an important component of that. So with those pillars, if you will, of what it takes for people to live in rural Texas, then we can deliver those resources to urban Texas. And so that's the challenge. So energy, again, plays an important part of that, not only for jobs, but for support for schools and other institutions that it takes us to live in rural Texas, but I see a proliferation. So I think nuclear from the standpoint of certainly the small modular units, I think it helps solve another problem. And that is the water need that I've spoken of. Oil and gas production with fracking have developed enormous amounts of produced water that comes back from the formation not only do you inject it down in the fracturing process but you produce back much more than you put down and you produce back oil and gas mixed therein you separate that out and you have a residual product.

Doug Lewin (18:22.912) And it's water that at this point can't really be used for anything, but could be if you had power to actually clean the water.

Chairman Darby (18:30.799) Absolutely. We know what this water consists of, what sort of chemicals, what sort of solids. We know how to treat that water, to clean it up, to make it reusable. The big challenge is energy. What is the energy source to do that? Where is it located and what does it cost? Provided it's located where we need it and it has an affordable cost, then operators should be incentivized to treat that water to a level of reuse so that we can utilize that water source as opposed to throwing it back down a hole at deep depths where we have seismicity issues.

Doug Lewin (19:15.274) It's actually like a double win because you, cause you're, you don't have then the seismicity issues, which are a problem right now. Cause you're some even like five points something. So you deal with that problem, but then you also have water to grow things.

Chairman Darby (19:22.51) I think a 5.2.

Doug Lewin (19:28.392) Where we're running out of places to put the water. Quite frankly, East Texas, they have been receiving Louisiana water for a number of decades. Produced water. Produced water from Louisiana coming to Texas to dispose of it. And so we're seeing some of that happen in West Texas when you have New Mexico water being brought to Texas for disposition. And certainly we have oil and gas production here in this state that needs to do something with the water. So from a policymaking standpoint, we need to see how we can incentivize operators to spend the extra dollar to treat that water so that they can reintroduce that water into the hydrological stream of the state, both literally and figuratively. And so we have to create liability protections, say if you're doing it right according to the permits, absent gross negligence, you're covered in that process. We have to figure out again the energy, where it's gonna come from. So these small modular nuclear units, I think are particularly well adapted to simply locate them where we have large amounts of produced water. Let's accumulate that water in a centralized processing location and then let's treat it. People out there may be thinking, I won't drink that water. Well, I can assure you, I have had a glass of that water and it has no taste. It's like drinking distilled water. They can make it so clean and pure that it has no taste to it.

Doug Lewin (21:05.268) So I think nuclear potentially could be very important for that. Obviously, it's going to take a little while to develop nuclear. You could also potentially use renewables for that as well, particularly because like you don't necessarily care when you're cleaning that water, right? You don't need to do it necessarily. There might be some processes that need to be 24/7, so maybe some nuclear, some storage, some gas, whatever in the mix. But generally, that's kind of a variable process. So sunshine and wind rather than just waste in the energy because the lines are congested. You could actually use that to clean the water. And you get the water savings from the renewables too, because a lot of other forms of generation use a lot of water.

Chairman Darby (21:45.23) But renewables don't. Right. The symbiotic relationship between cleaning up produced water and renewables is clearly there. Yes. They're locatable to where you need to use that electricity for that cleaning process. And that is very encouraging. And we saw a fight on the floor of the house this past week about the surface reservoir, the Marvin Nichols Reservoir in East Texas, but you've got 10 million people that live in the Dallas-Fort Worth area that need to drink.

Doug Lewin (22:17.102) This has been an issue. I used to be a staffer in this building 20 years ago. They were talking about all that back then. And way before that too.

Chairman Darby (22:23.779) When I first got here, we were talking about the Marvin Nichols Reservoir. Yeah, it continues to remain a problem, but I see a bright future for energy development of all sorts. And we haven't talked about geothermal, which I think is particularly compelling. We have brine mining. We have certainly we have the ability to develop these resources and co-locate them where they're most efficient.

Doug Lewin (22:49.582) So these are all things I want to talk about, but before we move on to those things, I just want to drill down just a little bit more on something we were talking about related to your district. Could you just give some examples of where, because I was talking about the gentleman from the San Angelo Chamber, I think his name is Michael Looney.

Chairman Darby (23:12.0) Michael Looney, yes.

Doug Lewin (23:14.7) So he's talking about how energy development of all kinds, like you're talking about rural Texas needing healthcare and schools and roads. Can you give some examples from your district of where renewable projects have brought benefit to local school districts or local governments?

Chairman Darby (23:27.406) Absolutely, I can tell you that we have been blessed. We have seen very large projects come to this region. One is located just adjacent to the city of San Angelo. It's a little bit north, a little bit west of San Angelo. It's a solar project, but it has a wonderful component of battery storage. And literally this project, a thousand plus acres, is located right next to a residential subdivision in close harmony with it. I toured the facility about a month before the session began and this whole facility is being operated by two people. Two people are able to manage that. And I had never understood this and I'm sure a lot of your listeners do understand. I thought the battery component was simply there in an emergency situation to help dispatch ability. That's too simple a view of it.

When I asked the operators, how often do you discharge? And I expected once a week or something like that. They said, we charge and discharge four or five, six times a day. And we do it, and it's all price motivated where we see opportunities to discharge at a favorable rate and then charge back up at a lower rate. I had no idea about that capacity, but those are the type of innovative working techniques that make these projects viable and important. We had hundreds of people were used in the construction of the facility. The project generates millions of dollars for our tax base there in our county and the ETJ for the city of San Angelo. It also generates royalties for the family that owns that land and they have a 30 plus year relationship with that farm.

And you know, here's the beautiful thing. I tell some of these farmers or ranchers that are considering this. I said, they're basically renting your surface. They're renting your surface for a period of time. They're paying you a bunch of money to do that. But at the end, they're going to be obligated by contract to remove every bit of that. And you're going to get your land back. You're going to be able to achieve whatever economic value at that point your land can produce.

Chairman Darby (25:47.811): can produce.

Doug Lewin (25:49.046): You can repower with new solar panels, or you could decide, "Well, there's something in the market that's really making more money than that. I'm going to do this."

Chairman Darby (25:56.274): They're not taking your land. They're just renting your land for a period of time. And so I think at every level you want to look at this. This is a project that doesn't take a lot of water—doesn't take any water that I could tell, or very little water—but it generates revenue. It generates employment. It generates tax base, and it benefits our grid and the people who live and work in our region.

Doug Lewin (26:23.084): And can support a lot of these large loads where you've talked about desalination. I want to talk about some of the things you're working on this session. You've got some bills related to transmission. You've got some bills related to large load. You mentioned geothermal a minute ago. I was going to ask you about each one, but in the interest of time, like, what do you want to talk about? What are you excited about? Can talk about all of them or one of them, whatever you—

Chairman Darby (26:45.664): I'm excited about all of them, tell you the truth. Now, some of them, as this process shows you, and you know this, some are destined for success. Some are destined for review, but lined up short of the goal line, and some never had a chance. That's just kind of how the process works. But I feel good that we've had a very strong relationship with trying to fix our transmission process. I have found it to be inefficient.

I was around my first session in 2007. We had just approved as a legislature—they had approved the CREZ project, which invested six-plus billion dollars in transmission to rural West Texas and North Texas, but yet there was no generation. We've seen a proliferation of generation that came.

Doug Lewin (27:34.734): Private investment, right? A lot of people, I think, don't understand that. I think, "Oh, the state's paying all this money for wind and solar." No, no, that's private investment. And there's actually a study by some UT researchers that that CREZ investment saved $20-30 billion because, depending on what year you're in and what—we were talking about earlier—what the price of gas is. 2022, we saved a whole lot of money because Putin decided to invade Ukraine and the price of gas skyrocketed. And thank goodness we had all those renewables to keep prices somewhat reasonable.

Chairman Darby (28:05.102): That's a great point. That's a great point. And we made the infrastructure investment, and in my travels representing the state of Texas, either through the energy council or other forums, when I talk about transmission in this state compared to transmission processes in other states, they are—their jaws drop down. They haven't built some transmission projects in 20, 30 years. Some of their states have a workable transmission approval process. It is not as efficient as I'd like it to be. I've worked on trying to make it more efficient. I've tried to put in goals where we study other things other than cost. I mean, there's got to be some economic benefits associated with it.

Doug Lewin (28:49.902): Yeah, because what I think—so you have House Bill 3069, and one of the things that does is, as I understand it, we have these tests that are basically the only transmission projects that really get through. There's an exception or two in the last decade, but really not more than that, are the quote-unquote reliability projects. But as they talk about it, the Public Utility Commission—former Commissioner Cobos used to talk about this a lot—what is today's sort of economic problem? Like, we're not building lines because there's an economic case. We wait until there's a reliability case, but what's today's economic problem becomes the reliability problem tomorrow. It takes a long time to build transmission. If you don't build it because of the economic case, then you end up running into a reliability problem. And guess what? Now you've got to wait six years for the transmission line that you've got to run. So we're literally dealing with this in South Texas right now where they're building lines, but they can't build them fast enough. And we're in a state where we really could have energy emergencies because of the congestion on a line that has a lot of wind going through it, a lot of gas going through it, but not enough capacity on the line.

Chairman Darby (29:54.69): You just mentioned the key word: congestion cost. And that is a real cost to consumers by the failure of this process to deliver enough transmission to accommodate the generation to where we need it. Somewhere around $2 billion a year is what it costs. There are 16 to 17 generic transmission constraints currently in this state. And think of that as a road monitor or bridge monitor, ERCOT being a monitor saying there's only so much traffic that can go over this bridge at a certain time. And so when they restrict the traffic, two things happen. Number one, it makes the number of cars on the other side of that constraint less efficient. They have to sit idle and burn gas and/or not get paid for their gas. And then on the other side of the constraint, the cost to get the energy needs that people need is expanded—it's increased. To me, that's inefficient. We need to incentivize it, and going back to what we're trying to do is to make sure that that cost horizon is extended beyond the current three years.

Doug Lewin (31:10.516): It is crazy, like what—you can't build anything on a three-year horizon. We know about a house. We'd never build a commercial building. We'd never build a road. We—yeah.

Chairman Darby (31:17.518): We don't build big projects based on a three-year return on money. I mean, you've got to look—industry looks 25, 30 years out on how they can cost-recover investment and assets. And so that is the current situation. And so we're trying to change that dynamic and look at different things.

Doug Lewin (31:37.942): Yeah. So I want to ask you about a couple other things too. You mentioned geothermal before. Definitely want to ask you about that because we've talked about a lot of the different—like nuclear and solar and storage—but geo's one I'm pretty excited about. You indicated a minute ago you were too, and I know you've carried bills on this. So this is like one of the innovations that's really come from shale, right? From drilling. It's the same technology being applied. Do you see any—the legislature last time, I think at least one or two of them were your bills, passing bills to... There's not necessarily incentives or anything like that. It's just kind of removing regulatory barriers, right? Is that kind of where we're at with geo?

Chairman Darby (32:15.662): That's right, and we have—again, Texas is well-suited for geothermal development. It's early along the Gulf Coast, and particularly the valley has wonderful geothermal opportunities—all that chalk region in South Texas and, interestingly enough, the Big Bend area.

Doug Lewin (32:35.327): And East Texas.

Chairman Darby (32:37.788): Yes, it's true. I think geologically we're well-suited for that, and we're deploying techniques that the oil and gas industry already deploys in finding hydrocarbons. They can now use that technology to drill just a little bit deeper and to install equipment that allows us to have, you know, closed-loop geothermal equipment that will certainly be reliable. It's always going to be there and baseload, and it's able to respond as the need develops. My job as a policymaker is to make sure that the regulatory playing field, if you will, is level—that there aren't any penalties associated with the orderly development of that, as long as you're doing it in a safe and efficient manner—and that we have appropriate regulatory oversight where we're not patting the baby to death. We have a gentle touch, if you will, to make sure they're doing it right and protecting the environment and certainly our population. So that's the challenge. And so we want to make sure that for my last couple of sessions have been to try to level that playing field and set the table, if you will, for people to invest. Now there are some wonderful projects in South Texas right now, the McAllen Ranch. There are projects there on the ground right now that they're developing data for to demonstrate the practical applicability of that.

Doug Lewin (34:19.046): I think we're really going to see this boom. And when I said we're the best for it, I didn't mean geologically because obviously there are places in the West that have better geology. But we have good geology here for it, but we have the expertise, right? I think a lot of these companies are already headquartered here. We're going to see a lot more headquartered here. I'm really excited about what geothermal will mean for the state.

Chairman Darby (34:38.218): Geothermal is located where the people are. So there's not a whole lot of transmission requirements associated with that, and maybe out west you may have a wonderful geologic opportunity, but there's no people there—you'll have to build transmission to where people need it.

Doug Lewin (34:53.313): Let me ask you about large loads. You had a bill that's trying to get large load flexibilities, House Bill 3970. I've done a couple of podcasts on large load flexibility. This seems like a really important issue, and whether or not that specific bill passes, this is an important—I mean, we talked about it already with desalination, but I think you're going to see it with all kinds of different loads, whether it be data centers—some of them have to be 24/7, 365, but some of them have a lot of flexibility—all kinds of different loads that'll have flexibility. Can you talk a little bit about what you're trying to do with that bill and why you think that's important?

Chairman Darby (35:29.114): Well, first of all, let me thank you, Doug. You did a podcast recently with Arushi—I think I pronounced it wrong. It's wonderful. I listened to it. Recently printed out the scorecard, if you will, between 3970 and Senate Bill 6—the two bills that are focused on large load and how we get that large load to market. I'm particularly pleased with how she scored my bill, and I do think it provides the flexibility that this policy needs. So that bill—I know we're tabling this today, but from my perspective, Senate Bill 6 will be on the floor of the House Friday of this week. And so we'll be watching that and hoping to shepherd that with the chairman, King, on that. And it passed out of the state affairs, which I was happy to lay out and vote for. I hope that we support that on the floor and then we support that as it moves over to the Senate. And we have a robust discussion about the relative advantages of the concepts laid out in Senate Bill 6, which I think there's some great things in that. I think our bill is good. I would like to blend that together and take the strong points out of both and come up with a policy. We need the policy now. I mean, this is not a hypothetical problem that we're experiencing. This is a very real problem. We have very real investors that want to spend billions of dollars in this state, and they require electricity for their operations. They want to come. They are willing to bring their generation with them. So how do we blend that with a fully functioning grid that we all depend upon? How do we blend that and allow them to come on, and what do they bring with them? Yes, they bring generation with them. Do they bring flexibility with them? Do they bring technology that allows them to reduce their load demand and contribute to the reliability of the grid? And what effect does that have on the grid? That, coupled with the process to figure out what their attributes are and what they can add to the grid, is critically important. And how do we incentivize that? How do we have this demand and integrate it into a fully functioning grid system efficiently and timely? Because they won't wait. They have other opportunities. They can be anywhere in this country. And other states are bidding on their projects to come to their state.

Doug Lewin (38:22.664): Texas has advantages, right? We have this abundance of renewables and gas, storage. Like, I think they want to come here, but we've got to meet them part of the way. And I really do think it's really kind of this "yes, under these conditions," right? It's not a "yes under any conditions," but that's really what they're like—bringing to power, having the flexibility. And just like you were talking about with that solar and storage where storage is being deployed four or five, six times a day. These loads can—especially if that battery's on-site—but even if they don't, some of the loads can actually just move up and down to help with grid reliability and cost and all of that. So it's kind of that "yes, if" approach.

Chairman Darby (39:01.58): Yeah. And I think certainly your podcast with Arushi—I pulled this factoid out that y'all kind of analyzed it with an eight-lane highway. And, you know, you don't need all eight lanes from time to time. You might need it occasionally, but you need to operate more than just in the first two or three lanes. You have to operate in lanes four or five, six, maybe seven in that regard. And so I like that analogy. I think clearly we've built a grid to have reliability in two or three instances in the whole year where we have really hot weather or we have really cold weather. But how do we make that margin, if you will, that remains underutilized? How do we utilize that?

Doug Lewin (39:49.666): That is the thing for the grid, right? It's like, how do you get those peaks where you're really in trouble down? And how do you use more during the times when you've got all this extra capacity and we're just wasting energy because we don't have good uses to put it towards, which is at this point, like, most days of the year? And if you can manage that peak, you could do a lot of productive things with that energy. Data centers, desalination, oil and gas operations, manufacturing—you know, there's a lot we could do with that.

Chairman Darby (40:17.834): A lot we can do with it—make it all efficient, more efficient and less costly to consumers. And my job and hopefully these bills, whichever form they take, sends messages to the investment community that we want you. Here's the pathway. It's going to be timely. Allow you to plan on that and allow you to access your project sooner rather than later and send market signals that encourage private investment to do that.

Doug Lewin (40:48.578): Yeah, that regulatory certainty is so important for investors. And I think that's why it's good to have bills like that that send a signal. It's also the danger of some of these other bills that are floating out there where investors are kind of going, "What does Texas want at this point?"

Chairman Darby (41:04.522): I think deregulation—we tried that experiment and we're currently involved in that experiment, but it seems like we don't want to leave the baby alone. We keep trying to tinker with it. And so, yeah, I don't know. Sometimes I think, "Well, we might as well just re-regulate," you know?

Doug Lewin (41:17.806): Do we really believe in market forces or...?

It's interesting, you know, the New York Times article on what was going on in Texas, and there was a quote there from Governor Stitt of Oklahoma, and he said—because I think he had vetoed some anti-wind bill, and he's like, "Look, if I'm trying to like push down wind, how am I any better than somebody in California trying to push down oil and gas?" And I think I'm paraphrasing, obviously, but like the final quote was something like, "Do we believe in markets or don't we?"

Chairman Darby (41:48.948): Exactly. And I believe in the free market, and I believe in kind of these objectives, but then I want the market to work. Let's keep our hands off a little bit to let the market work. And are we sending the right signals at the right time?

Doug Lewin (42:06.318): So what I want to ask you about here is kind of in closing, as we're winding down—I did a podcast with David Spence who wrote this book called Climate of Contempt. And it was how as a nation, we're kind of moving further and further apart toward the polls. You're obviously a conservative Republican.

Chairman Darby (42:24.288): And I don't know what that means anymore.

Doug Lewin (42:27.05): So, can we talk about that? First of all, let's talk about that. What does it mean to you to be conservative and where maybe has what it commonly means to be conservative diverged? And what I also wanted to ask was like, how do we get to a point where people are talking to each other and actually trying to find productive solutions where I may not agree with you on everything, but anybody out there, there's going to be some things you agree on. How do you find that common ground? And this is—I just feel like you're one of those legislators that really makes that a point. Sure, there's disagreements. We can disagree without being disagreeable, and we can find areas. It seems to me from the outside, like you're doing a lot of that, trying to find the common ground, even with people you may not agree with on much, and then work with them to kind of build that. I'm just kind of struggling with it this moment in our history. Like, it seems like we need a lot more of that. Why isn't there more? How do we get more?

Chairman Darby (43:21.134): That's a lot to unpack. But I will tell you this: I haven't changed. I was raised in a very modest home in rural West Texas. And I have a lot of values of family, faith. I believe in low taxation, low regulation. I believe in kind of staying out of people's personal lives. I helped organize the first Republican primary in Tom Green County in 1978. I've been a Republican for a long time. I don't think I've changed in that view, but somehow, some way, the perception of what a good Republican is is sometimes thrown up in my face. I believe that rural values mean something, and the challenges are not always between Republicans and Democrats. They're between ruralists and folks who live in cities, urbanists. Some of my closest colleagues on the floor of the house are rural Democrats who have the same family values, the same needs, the same five needs that I just quoted you. They all have those needs also. So we have some commonality, and I've always been a part of getting to know the members and find out about their families, what makes them tick, spend some time with them on the floor and in private settings where we can find those common grounds. Usually everybody has children, everybody has job nuances on what they do and how we can relate on what I have a background in. And so interestingly enough, in my 10 sessions—and 14 sessions—I've never called a point of order. And that may sound kind of nuanced, but it doesn't mean I disagree with everything. It just means that if I have a problem with the member's bill, then I'll go to that member and say, "Look, will you work with me and try to make your bill better?" And almost always during all this time, members have agreed to do that. And we've worked together and we found a common ground and we've got the project done. Whatever they were trying to do and I was trying to help with, it's worked. And so I think that's important. I try not to get on the front mic and the back mic too much. I think when I have something to say, because I'm out there often, people will stop and say, "I wonder what Representative Darby's saying." So I think that's important, and I believe in good policy. I'm not there for theatrics. I'm not a social media guy, as you might suspect. I'm technologically challenged from time to time. I don't do Facebook or any of those other things, but I think it's important that we have relationships. And to your point about how do we move on from here, we have drifted apart. Our families are not as connected. When I go to a restaurant and I see a family sitting around a table, everybody's on their phone. They're not conversing with one another. I often ask a group of teenagers, "Are y'all actually texting each other at the table here? You could just look up and say something to them as opposed to texting them." But it's a societal issue, and my children, my grandchildren are guilty of it. And so I think we just need to get back to connectivity, get back to communicating, being with one another, finding out the wants, needs, and desires of who you're communicating with.

Doug Lewin (47:05.912): Human connection.

Chairman Darby (47:08.118): That's critically important. And I would hope that political parties would reflect that, that we would be more in tune with our constituents, not just the loud folks who like to create a scene. They're not interested in solutions. I'm a solutions guy. I want to try to find solutions to problems and not just throw the problems in somebody's face.

Doug Lewin (47:30.488): So let's kind of end with this because I think that really summarizes it well. Like, what you're describing is really like pragmatism. How do we work together to find solutions? So pragmatism over ideology. And I think that that is kind of this key question in these waning days of the session, particularly when you look at some of these anti-renewable bills that would, you know, even as the ERCOT CEO says, "We need all these resources. If we don't have them all, then we're going to have less grid reliability. Prices are going to be higher." So it really comes down to: can we choose to work out the solutions, embrace pragmatism, people coming together to find these solutions over ideology? Is that kind of like...?

Chairman Darby (48:11.374): Exactly. And I think we've pretty much—we've done that in this session from a standpoint of kind of addressing our energy needs. We've still got work to do. Yeah, a lot of work to do. These large load issues remain a problem till we find a solution. I will continue to resist simply an attack on a form of generation just because they may object to it. Again, I'm an "all of the above" guy, and I think that's where we need to go. So we're going to continue to work to find that common ground, continue to work to explain the problem, and hopefully, working together, we can find an appropriate solution.

Doug Lewin (48:50.062): Chairman, appreciate you very much. Thanks for taking the time. Thanks for all...

Chairman Darby (48:52.82): Absolutely. Thank you. Have a pleasure being with you. Thanks, Doug.

Doug Lewin (48:57.198): Thank you for listening to the Energy Capital Podcast. I hope you enjoyed the episode. If you did, please like, rate, and review wherever you listen to your podcasts. Until next time, have a great day.

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Solutions Over Theatrics with Texas House Energy Resources Chairman Drew Darby

Energy Capital Podcast (private feed for [email protected])

Solutions Over Theatrics with Texas House Energy Resources Chairman Drew Darby