Texas Railroad Commission holds hearing on cutting oil production
The Texas Railroad Commission held an online hearing all day Tuesday to consider cutting the state's oil and gas production. Nearly 60 industry leaders and market experts gave their testimonies for or against proration.
For those that don’t know, proration means the government would cut production for all Texas producer’s by a set percentage.
Pioneer Natural Resources was one of the companies pushing for regulation.
“We didn’t do that for any reason other than the simple laws of economics,” Pioneer Executive Vice President Mark Berg told the Commission. “When you have an oversupplied market, if you cut supply it stabilizes and improves price.”
Conversely, other producers and experts testified that cutting Texas supply won’t solve the oil and gas crisis.
“Do you really think that a cut by Texas can fill a 25 million barrel demand hole?” Enterprise Products Partners Co-CEO Jim Teague asked the Commissioners. “Asking for you to take this action makes me wonder about the true agenda. Are they really trying to fix a problem, or do they want to argue that government action by you gives them the opportunity to get out of some of their obligations?”
Opponents of proration argued that decisions on cuts should be left to the producers, and that a free market will sort itself out.
However other oilmen, including some of those here in the Permian Basin, think a market without regulation will eliminate smaller companies.
“If you let the market do its thing, it will be a completely unfair situation for the 2900 smaller Texas independents,” Latigo Petroleum President and CEO Kirk Edwards testified.
With nearly 60 of those kind of testimonies to sort through, it is unknown when a final decision on regulations will be made.
Something of note, the Texas Railroad Commission hasn’t limited production in the state since 1973.