(Reuters) – Oklahoma’s energy regulators on Monday took no action on applications from oil and gas producers seeking to win state-support for measures they said would help stabilize oil prices.
FILE PHOTO: An oil drilling rig is seen near a parking lot in front of the state capitol building in Oklahoma City, Oklahoma U.S. March 9, 2016. REUTERS/Luc Cohen/File Photo
The Oklahoma Corporation Commission, which regulates the state’s oil and gas industry, heard proposals seeking to declare some oil production in the state waste, and a plan submitted by trade group Oklahoma Energy Producers Alliance (OEPA) that included mandated output cuts.
After a five-hour meeting, the commission took the two under advisement and did not set a date or timeline for any decisions.
U.S. oil futures CLc1 this year have fallen about 60% to $24.14 a barrel as coronavirus-related lockdowns have crushed demand for fuel. The price collapse has companies in major oil-producing states pushing for regulatory action to stave off further declines.
Oklahoma last month adopted an emergency order that said some oil production could be considered economic waste. That allowed operators to opt to shut wells without losing valuable leases.
One commissioner last week submitted a dissent to the emergency order, saying it was “replete with fatal errors” and said he was not satisfied that the “basic requirements of due process had been met with respect to notice of the hearing.”
Last week, Texas regulators struck down a proposal to mandate output cuts.
“We’re floating out there in dangerous waters,” said Lee Levinson, owner of LPD Energy Company LLC, which submitted the order requesting some output be considered waste and was granted the emergency order.
Darlene Wallace, a member of the OEPA, said she has shut-in most of her wells and has had purchasers say they may not take her oil because of lack of storage.
“I cannot stay in business if I continue to lose money,” she said in support of the proposals.
Oklahoma has some of the highest production costs in the country. Breakevens in its SCOOP (South Central Oklahoma Oil Province) and the STACK (Sooner Trend, Anadarko, Canadian and Kingfisher) plays are roughly $48.19 a barrel, versus about $40 a barrel in the Permian basin, according to an analysis by Deutsche Bank.
But Crawley Petroleum Corp voiced opposition to the economic waste motion, arguing that it could lead to lawsuits.
“The notion that we don’t have the right to do this (shut wells) absent of this order is a fallacy,” said Chief Executive Officer Kim Hatfield.
The American Petroleum Institute and the Petroleum Alliance of Oklahoma also opposed regulatory measures, noting production had been curbed, and Oklahoma drilling cut by 90% from its recent highs.
Brook Simmons, president of the Alliance, said the state could do nothing to stop an “armada” of tankers waiting to unload foreign oil at refineries.
“The markets have already responded” to the glut, said the API’s Dean Foreman.
Reporting by Liz Hampton; Editing by Marguerita Choy