Low Flow: Some Texas Oil Companies Want to Cut Output

The recent plunge in oil prices brought on by the coronavirus pandemic and a price war between Russia and Saudi Arabia has some Texas producers considering drastic action. This week, Irving-based Pioneer Natural Resources and Austin-based Parsley Energy sent a joint letter to the Texas Railroad Commission asking the agency to consider reducing the state's oil output---a move known as proration---until the market stabilizes.

State regulators limiting oil production in Texas is an extremely rare occurrence, and one likely to cause controversy. But Railroad Commissioner Ryan Sitton says they are willing to listen to the idea. "(Railroad Commission) Chairman Wayne Christian has put out a statement saying he, like me, we're both free market guys and we don't like the idea of government involvement," Sitton told a webinar this week. "But at the same time, these are extraordinary times, and we want to listen to whatever ideas are out there."

While the two oil companies argue proration is warranted "in the public interest" due to the "extraordinary circumstances," other stakeholders disagree. Texas Oil and Gas Association President Todd Staples released a statement saying, "Proration is not a remedy TXOGA members are seeking, as it would disadvantage Texas, its producers, mineral owners and taxing entities." Staples goes on to say, "While individual members may differ on approaches, TXOGA members remain committed to free market solutions."

Sitton says the Railroad Commission is planning a virtual meeting to hash out the issue. "On April 14 we'll have an open meeting in which we can take opinions, feedback, input from everybody," he told the webinar. "The idea is to allow us to gather data to figure out, one--is (proratioin) a good idea, two--how might it be done, and three--how might it be used to drive an international movement to stabilize oil markets."

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