The Nickel Report

Yesterday, the Railroad Commission of Texas (“RRC”) voted by a 2-1 margin to dismiss the request that had been filed in late March of this year by two producers to determine reasonable market demand for oil and the need for curtailment of oil production in Texas.[i]

In the midst of an oil market experiencing an extraordinary downturn but citing a need for further review and coordination with other states and the federal government, the Railroad Commission of Texas (RRC) delayed a vote on oil production cuts at an open meeting held yesterday.[i] As previously reported, the RRC held a ten-hour long meeting on the issue of production cuts last week, hearing from more than 50 witnesses with wide-ranging opinions on the merits of moving forward with proration, a remedy that has not been employed since the 1970s.

Although no decision on proration was made, the establishment of a Blue Ribbon Task Force for Oil Economic Recovery (Task Force) was announced. The Task Force will be comprised of various Texas oil and gas trade associations charged with expeditiously exploring options that can be undertaken at the state level to assist operators and save jobs.[ii] During the meeting, a number of initiatives undertaken to date that provide relief to oil and gas operators were also highlighted, including those involving extensions of deadlines for various requirements and the consideration of enforcement discretion under certain circumstances. While discussing whether to prorate production, each of the three commissioners placed emphasis on different aspects of the overall issue.

With oil prices plummeting and markets battered by the disruptions caused by the COVID-19 pandemic, two oil and gas producers filed a joint motion late last month for the Railroad Commission of Texas (“RRC”) to consider curtailing oil production (“Joint Motion”), an extraordinary remedy that has not been employed since the 1970’s.[1] In response, the RRC convened an initial public meeting yesterday to consider the request and comments filed by more than 50 stakeholders with, not surprisingly, wide-ranging views on the subject.[2] The RRC took care to include in the notice of meeting a statement that the initial meeting would not be “a meeting to conduct a hearing under the Administrative Procedure Act” signaling that no determinations would be made at the initial meeting.[3] Nevertheless, due to the significance of the issues under discussion and the potential impact on not only oil and gas producers, but also the midstream and downstream sector, the ten-hour long meeting drew a substantial audience across the country and the globe.[4]