Oklahoma Corporation Commissioners have yet to set a date for any public comment or decision on a request by some oil operators to declare the current production of crude oil a “waste” thereby allowing those operators to safely shut-in their wells.
The Commission has a Tuesday morning signing agenda but it does not include any mention of the request of the Oklahoma Energy Producers Alliance and several oil operators.
Operators have the ability currently to shutin their producing wells, but they also take a risk of facing legal liability for possibly breaking a lease contract for failing to produce the product. However, were the state regulators to formally declare the production of crude oil a “waste” it might offer some form of legal protection in court for the operators if they are sued.
While the OEPA and some operators initially pushed for a prorationing of the crude production—that is requesting the Commission to set a limit statewide, it appears the request has been modified, pushing mostly for the declaration of “waste.”
In taking the issue under advisement at a May 11 hearing, the Commission gave some of the supports of the request more time to file additional information.
Continental Resources was one of those firms and in a filing made on Friday, attorney Karl Hirsch, representing the Harold Hamm company said the firm supports the Commission issuing an Interim Order that recognizes the unprecedented market conditions the oil industry is facing.
“We believe the record supports a finding and order: that operators/producers may shut-in or curtail oil production from wells where such operators/producers determine action is needed to prevent economic waste; that during shut-in or curtailment of such wells, the wells shall be deemed for all purposes as producing under the Commission’s orders and rules; and the Commission’s order is subject to extension or modification as necessitated by this current market environment or as the Commission determines otherwise.”
Hamm, founder of Continental Resources was one of those advocating for a prorationing of oil in Texas and said so in an early April letter to the Railroad Commissioners of Texas.
“Dear Commissioners:
At least through the remainder of the select demand period for oil, I believe it is necessary for the Texas Railroad Commission to institute prorationing to the limited market.
Sincerely,
Harold Hamm
Executive Chairman”