An Area Bank Failure Sparks Railroad Commission Lawsuit

COLEMAN COUNTY, TX — The suspected fraud that contributed to the June 2025 collapse of Santa Anna National Bank has now reached federal court in San Angelo, where the Texas Railroad Commission is fighting the FDIC to recover money pledged as financial assurance for oil and gas well plugging.

In a complaint filed May 28, 2026, in the U.S. District Court for the Northern District of Texas, San Angelo Division, the Railroad Commission of Texas seeks a de novo judicial determination of two proofs of claim the agency filed against the FDIC as receiver for the failed bank.

A “de novo” (fresh, independent) review means the federal judge will decide from scratch whether the claims are valid and how much the RRC is owed — without deferring to the FDIC’s earlier decision to reject them.

The claims total $51,390 and stem from irrevocable letters of credit the bank issued to the RRC on behalf of two small operators.

The lawsuit does not target the operators themselves. However, RRC records show that one of them — Grooms & Grooms Trucking Co Inc. of Brownwood — was notified in September 2025 to replace its letter of credit after the bank’s failure and did not do so within the required 30 days, resulting in a delinquent Organization Report.

Bank Failure and Fraud Findings

Santa Anna National Bank, a single-office community bank in Coleman County, was closed June 27, 2025, by the Office of the Comptroller of the Currency. The FDIC was appointed receiver, and Coleman County State Bank assumed the insured deposits. The FDIC has estimated the loss to the Deposit Insurance Fund at approximately $23.5–23.7 million. Officials cited “suspected fraud” as a contributing factor.

A March 11, 2026, limited review by the U.S. Treasury Department Office of Inspector General confirmed that fraud was a “significant contributing factor.” The OIG found a critical breakdown in internal controls that allowed fraudulent activity to affect a substantial portion of the bank’s credit portfolio. Deficiencies in board oversight and other unsafe practices masked weaknesses in the loan portfolio, leading to inaccurate financial reporting. The bank ultimately became insolvent and critically undercapitalized. The OIG recommended a full in-depth review, expected to be completed by December 2026.

Letters of Credit and Oil & Gas Operator Obligations

The RRC requires oil and gas operators to maintain financial assurance — such as bonds or letters of credit — so that wells can be properly plugged at the end of their productive life. This protects the environment and prevents plugging costs from falling on the state’s industry-funded program.

Santa Anna National Bank had issued:

• Letter of Credit No. 393002 for $1,390 on behalf of **Grooms & Grooms Trucking Co Inc.** for one well in Brown County (aggregate depth 685 feet; estimated plugging cost $1,712.50).  
• Letter of Credit No. 482070 for $50,000 on behalf of Sub Surface Operations for 13 wells (aggregate depth 23,758 feet; estimated plugging cost $59,395).

On July 18, 2025, the FDIC notified the RRC of the bank’s closure and later repudiated both letters of credit. The RRC gave the operators 30 days from September 12, 2025, to obtain replacement assurance. According to the complaint, neither operator complied, and their Organization Reports became delinquent.

Grooms & Grooms Trucking Co Inc., a small local operator with a Brownwood address and wells on the Cleo lease in Brown County, remains listed in recent RRC operator and proration records as of April 2026. No additional public enforcement actions or plugging orders specifically naming the company have been identified in recent RRC enforcement summaries.

How Texas Financial Assurance Rules Work

Under Statewide Rule 78 and the Texas Natural Resources Code, most operators filing an annual P-5 Organization Report must maintain continuous financial assurance in one of two forms:

• Option 1 (Individual) — Available only to operators whose sole activity is well operations. Amount = $2.00 per foot of total aggregate well depth on the proration schedule. This is the option Grooms & Grooms used; its 685-foot well required roughly $1,370–$1,390 in coverage.
• Option 2 (Blanket) — Available to all operators. Fixed tiers based on number of wells: $25,000 (1–10 wells), $50,000 (11–99 wells), or $250,000 (100+ wells).

Letters of credit must be irrevocable and filed on RRC-approved forms from acceptable financial institutions. Assurance must be maintained at all times. When a bank fails and repudiates an LOC, the RRC notifies the operator and typically allows 30 days to replace it. Failure to do so makes the Organization Report delinquent, restricting permits and operations.

A key feature of the system is that the minimum required assurance ($2 per foot under Option 1 or the blanket tiers) is often lower than actual plugging costs. In this case, the RRC used a more realistic $2.50 per foot estimate when calculating the need for the claims — showing why even the original $1,390 LOC was already insufficient on its face.

When an LOC is repudiated, the RRC files a proof of claim with the FDIC receiver for the face amount. If disallowed, the agency can sue for judicial review — the step taken in this San Angelo case.

Local Impact

The case is being heard in the San Angelo Division, giving it direct local relevance for the Concho Valley and surrounding counties. Grooms & Grooms operates in nearby Brown County, and Santa Anna lies in Coleman County.

The situation illustrates how the failure of a small community bank can create downstream compliance challenges for rural oil and gas operators who relied on local institutions for regulatory financial instruments. While operators have an independent duty to maintain valid assurance, the RRC’s lawsuit focuses on recovering pledged funds from the failed bank’s estate to help fulfill plugging obligations.

The slight shortfall between the original LOC amounts and current estimated plugging costs further highlights why the RRC will pursue even modest claims.

No trial date has been set. The case remains in its early stages.