Texas regulators are under growing pressure to curtail oil production for the first time since the 1970s but the head of the Texas Railroad Commission isn’t so sure about such a move.
“I am very concerned about the impact the international oil market instability has on the Texas economy, state budget, and the hundreds of thousands of Texans who rely on the oil and gas industry for a paycheck,” said RRC Chairman Wayne Christian. “A couple of operators have suggested pro-rationing oil as a solution. While I am open to any and all ideas to protect the Texas Miracle, as a free-market conservative I have a number of reservations about this approach.”
“First, Texas does not operate in a vacuum. If we prorate our oil, there is no guarantee other nations, or even states will follow suit,” continued Christian. “From a practical standpoint, the Railroad Commission has not prorated oil in over forty years; we do not have staff at the agency with experience in this process and our IT capabilities to handle this process are limited at best.“
Chairman Christian had a conference call with the Department of Energy (DOE) early Monday to discuss what the United States can do to stabilize the oil market. On the call, the DOE asked Christian to notify Texas operators that they have initiated an initial solicitation for 30 million barrels to begin filling the Strategic Petroleum Reserve.
Christian instructed staff to put out a notice to operators to ensure the Texas industry is aware of this opportunity.
In order to stabilize markets, a few oil and gas producers have suggested that the Railroad Commission of Texas resume prorating the production of oil.
It is unclear whether regulators ultimately would curtail production, but staffers are studying what would be required in such an event.
Several oil executives have reached out to members of the Texas Railroad Commission, which regulates the industry, requesting relief following an oil-price crash, the people said. U.S. benchmark oil closed around $25 a barrel Thursday.
Tapping the brakes in the nation’s largest oil-producing state would, in theory, help balance the supply and demand of oil and buoy prices.
Source: WSJ/POLITICO