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Proration at the Railroad Commission: Sitton’s motion to conditionally order Texas operators to reduce their oil production by 20% is tabled.

The Texas Railroad Commission at open meeting today considered Pioneer and Parsley’s petition asking the Commission to institute oil proration. Commissioner Sitton moved to institute proration, conditioned on other states and countries committing to a total of 4 mm bbls/day additional reduction in oil production by June 1. Sitton’s motion provided that each Texas operator would be required to reduce its production by 20% effective June 1, amounting to 1 mm bbls/day of Texas production, but exempting operators producing less than 1,000 bbls/day. Sitton got no second on the motion.

Commissioner Christian announced he has appointed a blue-ribbon panel to study the issue. He named only associations – TxOGA, TIPRO, Panhandle PRA,O and Permian Basin PA, and Pipeline Association — and not individuals, to be on that panel.

Commissioner Craddick said she wanted staff to present “all options” for how to institute proration and wanted guidance from the Texas Attorney General as to what was legal before taking any action, commenting that any action by the Commission is bound to end up in litigation.

But, it appeared from both Christian’s and Craddick’s comments that they agree some sort of proration should be implemented, and soon.

Oklahoma and South Dakota are also taking up proration motions. OPEC is considering additional reductions in production.

I expect that, by June 1, market forces will already have reduced Texas production by 20%.

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