Texas regulators spent Tuesday hearing calls for the state to forcibly reduce oil production while others in the oil and gas industry argued against it.
The Texas Railroad Commission heard testimony from those for and against the issue and it came only a few days after OPEC struck a deal to reduce oil production by 10 million barrels a day.
Commissioners could take action on approving proration of the Texas oil supply, which would require companies to decrease production. They are set to listen to testimony from 55 speakers, many of whom are representatives of oil and gas companies or trade groups, according to a report by CBS News in Austin.
Ahead of the meeting, Texas Railroad Commissioner Ryan Sitton released a statement saying, in part:
“I have not advocated for Texas to prorate. I have advocated that we consider it. I felt that we should be open to evaluating any path that helps to bring the international oil community together in a global deal. While I have been public about my thoughts that Texas should take a lead role in this conversation, I still have many reservations, and I will be examining heavily if and how proration could be done.”
The first few speakers at Tuesday’s meeting – all oil companies – were split on the idea of proration of supply.
Speakers in favor of proration – which included Pioneer Natural Resources and Parsley Energy – say temporary supply regulation can protect oil companies from a catastrophic crash, intervention is needed during unprecedented times like now, and if there is no regulation, prices will continue to drop and oil will be wasted. Pioneer Natural Resources leaders who testified suggested a supply cut by 20 percent.
One Oklahoma oilman who supports the prorationing is Continental Resources Founder Harold Hamm who sent a brief letter in support last week.
Meanwhile, those against – including Marathon Oil and Ovintiv – say there should be no interference in the free market of oil, companies will adjust supply themselves, and regulation can hurt companies in the long run.
If the Railroad Commission of Texas approves proration, it would be the first time statewide oil production is cut since the 1970s.
Source: CBS Austin