Texas railroad commissioner declares idea to limit oil production 'dead'

Houston — The idea of the Railroad Commission of Texas putting quotas on oil production is "dead," the measure's lone elected supporter said in a television interview Monday.

The commission, which serves as the state's oil and gas regulator, was scheduled to debate possibly prorating oil production at its Tuesday meeting. In an interview with Bloomberg TV, however, Commissioner Ryan Sitton said the measure probably would not even come up for a vote.

"At this point we still are not ready to act, and so it's too late, so there is no proposal to make," he said. "I think that proration is now dead."

Sitton was the only member of the three-person elected commission who backed the idea of prorationing. Chairman Wayne Christian announced his opposition to the concept in an op-ed piece in the April 29 edition of the Houston Chronicle, while Commissioner Christi Craddick said she was concerned over the prospect of legal challenges if prorationing was enacted. Sitton, on the other hand, said at the commission's April 21 meeting that he was ready to vote in favor of reducing the state's oil production by 20%.

The idea of proration was widely opposed by independent producers in the state, who argued that market forces are already reducing production at a rate faster than the commission could mandate. Most producers have already cut their capital budgets by more than 25%, and superpowers ExxonMobil and Chevron have not been immune to the price collapse. Exxon has said it will cut 75% of its rig count in the Permian Basin, while Chevron has indicated it will reduce its production in the play by 125,000 boe/d from previous guidance.

"We appreciate the Commission's interest to support producers, but proration would make matters worse, not better," the Texas Oil and Gas Association said in a statement. "Producers are acting to reduce production, and the state and federal governments are exploring additional options to assist. We applaud the Commissioners for maintaining regulatory certainty, which is essential to economic recovery, and encourage them to focus on recovery not on creating a cartel."