Texas Oil Regulator Poses The Fundamental Question: “How Do We Start?”

After taking more than 10 hours of verbal testimony from more than 50 witnesses at Tuesday’s hearing, the three members of the Texas Railroad Commission tabled any decision on whether to move to limit oil production from Texas wells through its power of prorationing. During the course of the hearing, Commissioner Christi Craddick hit on the fundamental impediment that will likely prevent the RRC from any quick implementation of limits: There is no institutional memory on how to do it.

“We don’t know how to do it at the agency anymore,” Craddick said to one witness who was around during the last time the RRC enforced prorationing back in 1972. “Do we start on Jan. 1? Where do we start? How do we start?”

Exactly. As much as many struggling independent producers would like to think the Commissioners possess some magic bullet power that would boost prices and help them survive the most severe oil industry downturn in modern times, reality tells a different story. No one working at the RRC today was there in 1972, and even if they were, the industry the Commission regulates has fundamentally reinvented itself at least half a dozen times since then. The Commissioners and their current staff can read all the history books on the market about the golden age of prorationing, but that wouldn’t be much help to them in implementing new production limits soon.

Commissioner Craddick’s mention of a possible January 1 date for trying to implement the change is very telling. If professional industry analytical firms like Rystad EnergyIHSMarkit and Wood MacKenzie are accurate, the immediate crisis in global oil over-supply will have been resolved well before then, and oil prices should be well on their way back up to higher levels. It is equally likely that dozens of Texas oil producers will have been forced into bankruptcy in the meantime.

Another potential logical date of implementation would be September 1, which is the start of Fiscal Year 2021 for the Texas government. Even if the RRC currently possessed the budget and staff to meet that quick goal (it possesses neither) it is quite likely that the Texas industry will have already lost upwards of 2 million barrels of daily oil production by that time due to dramatically-lowered drilling activity and voluntary shutting-in of production.

Then there is the other practical limiter that the commissioners must consider: The budget. The Texas government famously operates on a two year budget cycle, with the legislature meeting for 140 days in odd-numbered years to make biennial adjustments. The RRC is currently operating under a budget that does not expire until August 31, 2021. Any upward adjustments to that budget designed to enable the Commissioners to hire in additional staff and build new computer systems to implement and police prorationing would have to be authorized by a special session of the Texas Legislature, subject to a call by Governor Greg Abbott.

Think of how unlikely that is to take place at a time when Texas is currently functioning under an executive order to avoid gatherings of more than 10 people due to the COVID-19 pandemic. Also consider how unlikely Gov. Abbott and the legislature would be to agree to increase any agency’s budget during this time of massive economic destruction.

Read the Rest at Forbes.com

5 thoughts on “Texas Oil Regulator Poses The Fundamental Question: “How Do We Start?”

  1. Gregg - April 15, 2020

    Off topic, but here in TN, I went shopping at the local Walmart for the first time in two weeks. I donned a dust mask and rubber gloves and got there at 7:00 AM. The place, as I hoped, was nearly deserted.

    What I did find amazing was that fewer than 20% of the staff and venders stocking the shelves and doing other duties such as cashiers, were wearing any masks of any type or rubber gloves. I asked a couple of them about that and they said it was optional to wear PPE. Less than half of the customers wore any kind of PPE. There were a couple of 6′ social distancing stickers on the floor, but much of the stocking staff were working in much closer proximity. In other words everything was pretty much normal – they even had toilet paper!

    If a high volume business such as Walmart and its employees can willingly operate normally in a middle TN county of over 260,000 people, with relatively few China Virus cases, then surely the vast majority of similar and lessor populated counties can be opened for business nationwide – TODAY!

  2. Jimmy MacAfee - April 15, 2020

    With officials fining people for attending church in automobiles, arresting a young woman out for a drive and other attempts to stop people from using their cars, you can see that a lot of the governmental reaction shows intent to kill oil and gas.

    More and more people are driving now, as drive-thru restaurants are becoming the norm, and people who are sick of being cooped up by Stalinist/Maoist governors and mayors are resisting, going for drives and telling these tin pot tyrants to go stuff themselves. As consumption goes up, so will prices; as vacationers will be encouraged to go on vacation – sooner than you think – gas will become more valuable.

    The Left has used this to try to kill gas and oil, but I’m thinking that the President has something in mind other than that, considering how he’s frequently compared oil and energy independence a national security issue. Meanwhile, patriots should get out of the house, go for a drive and get some sunshine, and tell these idiots where they may stuff themselves and with what.

    1. brian - April 15, 2020

      “patriots should get out of the house, go for a drive and get some sunshine, and tell these idiots where they may stuff themselves and with what.”

      ABSOLUTELY…

  3. Jimmy MacAfee - April 15, 2020

    Governor “Stoneface” Whitmer of Michigan made the sale of garden seed at Walmart”non-essential,” (so much for Victory Gardens: in WWII, she’d have been telling people to give up and be a good Nazi) while she says pot, lottery tickets and others are considered “essential.” She has the brains of a stone idol – Easter Island stones, as I’ve written earlier – and has the same capacity for warmth and humanity as any basalt stone anywhere. So it is to Her Ignorance that I post this Babylon Bee excerpt:

    ” WASHINGTON, D.C.—By all accounts, President Donald Trump has now gone completely mad with power. In a press briefing, he laid out his insidious plan.

    “When I’m done with this country, everyone will be able to leave their houses whenever they want and do whatever they want,” Trump told the press with an evil grin. “They’ll be able to peaceably assemble in whatever size groups they desire! Muhahaha!”
    “You’re a mad man!” a CNN reporter cried. “You don’t have the power to let people have freedom! You’re a tyrant!”
    “My power is absolute!” Trump screamed. “No one can stop me! Soon everyone will be able to go back to work and buy whatever they feel like from the store even if bureaucrats don’t like it!”’

    https://babylonbee.com/news/vicious-tyrant-trump-wants-to-let-people-leave-their-homes

  4. Jimmy MacAfee - April 15, 2020

    This is no minor issue, our oil and gas independence: China is very likely planning an attack on Taiwan as soon as our infrastructure is devastated and our oil independence eliminated.

    China is at war with us, and has been for years. Oil is now a crucial element in this war, even though China isn’t a producer – though they might be looking at the 7.5 billion barrels in the South China sea, some of it extracted by Malaysia and others. With total hegemony over the region, they’ll try to become energy independent and make serfs of every neighboring nation – especially Japan, South Korea, Taiwan (the real China) and Malaysia.

    War is on the horizon, and oil is one of the weapons in the arsenal. We need to protect our producers, and make more solid alliances with those under China’s malign influence.

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