HOUSTON (Reuters) - The chairman of Texas’ energy regulator on Wednesday came out in opposition to a proposal that would force oil producers in the state to cut production by a combined total of 1 million barrels per day.
Wayne Christian, who has not previously taken a public stance, said in an op-ed in the Houston Chronicle newspaper that a state-mandated cut would not significantly impact global oil supply and that he will “stick to my free market principles.”
Texas energy regulators next week will vote on the proposed reduction in the state’s oil output after delaying it on concerns of legal challenges.
Oil and gas companies have been gushing red ink and cutting tens of thousands of workers as prices tumble, prompting regulators in the largest U.S. oil-producing state to wade into global oil politics and consider some producers’ calls for cuts.
The Texas Railroad Commission, the state’s energy regulator, has the authority to curtail output but has not done so since the early 1970s.
Unlike Christian, Commissioner Ryan Sitton has said curtailments are needed to address historically low oil prices and favors a cut of 1 million barrels per day, or about 20% of the state’s output. “The longer we wait the more the damage has already been done,” Sitton said.
Commissioner Christi Craddick has not said how she might vote, but has raised legal concerns about curtailments.
Two of three votes would be needed to approve curtailing output.
The agency has a mandate under state law to “prevent waste of the state’s natural resources,” and some argue that the current oversupply of oil and price crash amounts to “economic waste.”
Curtailments done with other states and countries could help create some certainty in the market, said Mark Berg, executive vice president of operations at Pioneer Natural Resources, which with Parsley Energy asked the commission to consider cutting output. “That would be constructive for relieving stress on storage and provide some price support into 2021,” Berg said.
At a meeting last Tuesday, the day after U.S. crude prices crashed into negative territory for the first time, two of three commissioners opted not to make a decision but agreed to talk about output curbs again on May 5.
Companies have been divided on the issue, with Parsley and Pioneer leading the support for curtailments, while other shale producers such as Marathon Oil Corp and majors Exxon Mobil Corp and Chevron Corp oppose the idea.
Reporting by Jennifer Hiller; Editing by Chris Reese and Tom Brown