Agency delays vote to cut oil production
The Railroad Commission of Texas, the state agency that regulates the oil and gas industry, postponed for two weeks a vote on state-mandated oil production cuts.
The three-member commission delayed action until May 5 after debating the issue for 30 minutes during a Tuesday hearing.
The proposed cuts, pushed by Irving-based oil company Pioneer Natural Resources and Austin oil company Parsley Energy, has been floating around since the end of March. Executives with the companies want the panel to require drillers in the state to cut production to help boost oil prices, which are in the midst of a historic crash. The Railroad Commission hasn’t enforced such a requirement since the early 1970s.
Parsley CEO Matt Gallagher said he was disappointed by the delay but praised the commissioners for scheduling a vote next month.
“It is clear we are not in normal market conditions and we need a symphony of solutions to bring
stability back to our industry,” he said.
The industry is facing unprecedented challenges after demand disappeared as the world’s populations have shut themselves indoors to slow the spread of the coronavirus.
OPEC, its allies and other oil-producing nations have agreed to cut nearly 10 million barrels of oil a day beginning next month, but the loss of demand is estimated to be at least twice that much. The growing glut of oil sent the U.S. benchmark crude price deep into negative territory Monday, but it rebounded Tuesday to $10 per barrel — too low for U.S. shale producers to break even.
Railroad Commissioner Ryan Sitton, who is finishing his term on the panel after he lost his re-election bid in the GOP primary this year, wants the the commission to order a statewide cut of 1 million barrels a day, as long as other producers around the world cut another 4 million barrels.
But Commissioner Christi Craddick opposed taking action Tuesday, fearing potential lawsuits that the cuts could bring.
Chairman Wayne Christian suggested that the agency’s lawyers and Texas Attorney General Ken Paxton review any motions or proposed mechanisms to implement production cuts.
The debate over forced production cuts pits those who believe markets should be left alone and those who say that the unusual circumstances of the current oil crash require government action.
“Today, the Railroad Commission made the right decision,” said Todd Staples, president of the Texas Oil & Gas Association, an industry trade association. “(Forced production cuts) would make matters worse, not better. Producers are acting to reduce production, and the state and federal governments are exploring additional options to assist.”
The Sierra Club and Environment Texas, which support the mandated production cuts, criticized the commission for delaying the decision on production cuts, then turned to another issue the panel dealt with Tuesday. Commissioners agreed to issue permits that would allow 11 companies to burn excess natural gas from 16 oil wells across the state.
“The commission has put in place a reckless policy whereby oil and gas companies are allowed to flare — often taking a worst case scenario so they can pollute as much as possible — with the right paperwork, instead of what the policy should be: no flaring except where it is necessary for safety or unique circumstances,” Sierra Club Lone Star Chapter Interim Director Cyrus Reed said. “The commission must use the ‘waste-not’ approach, and require companies to either capture well gas or simply stop producing.”