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Texas Railroad Commission Extends Rules, Declines Production Cut

1200px-New_Official_Railroad_Commission_of_Texas_Logo.svgThe Texas Railroad Commission met on May 5 to discuss decisions made by the Commission to provide relief, as well as rule on a Market Demand petition that had been previously filed. The entirety of the hearing may be viewed by clicking here.

Chairman Wayne Christian announced Commission staff has determined Texas currently has an estimated 71.2 million barrels of unfilled crude storage capacity, based on reports from 78% of refiners and 73% of common carriers. As storage is expected to continue to be a significant issue in the near term, the Commission unanimously adopted an order to provide an exception to Statewide Rule 95 allowing the storage of crude oil in formations that are not salt formations. To qualify for this exception, applicants will need to demonstrate that the formation is confined to prevent the escape of crude oil, and the order will expire in one year. All stored oil must be removed within five years.

The Commission also adopted orders on the following:

  • SWR 8(d)(4)(H); extension on deadline to dewater, backfill and compact authorized pits; expires one year from May 5, 2020, unless terminated or extended.
  • SWR 13(d); extension on 180-day limitation on administrative approvals of alternative casing and tubing programs to allow administrative approvals to exceed 180 days; expires one year from May 5, 2020, unless terminated or extended.
  • SWR 14(b)(2); extension on 1-year deadline to plug wells to two years for wells reporting production in February 2020, and subsequently shut-in with no reported production from March 1, 2020 to March 1, 2021; will not limit authority of RRC to require plugging of leaking well.
  • SWR 107(b); allows legal enforcement to exercise discretion in assessing penalties for violations occurring March 1, 2020 to March 1, 2021 that do not implicate health, safety or environmental concerns; expires one year from My 5, 2020, unless terminated or extended.

As expected, the Commission also took action to dismiss the petition by a motion made by Commissioner Ryan Sitton on market demand and to consider pro-rationing. This was in regards to a Complaint filed by Pioneer Natural Resources USA Inc. and Parsley Energy Inc. to Determine Reasonable Market Demand for Oil in the State of Texas.

By a vote of 2-1, this complaint was dismissed. The Commission cited the fact that drilling activity is already falling naturally due to market forces and that there were serious questions of whether or not the commission had the authority to act in the manner that was being requested.

 

 

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