Oklahoma Regulators Make No Move On Oil Production

The Oklahoma Corporation Commission, which regulates the energy industry in the oil state, has not taken any action regarding the control of production after hearing proposals from oil companies to declare some of the output of crude oil in the state economic waste, Reuters reports. This declaration would allow drillers to keep their leases.

According to the Commission, no vote has yet been taken.

Crude oil leases typically require the holder to perform certain activities, such as drilling a set number of wells over a given period, or risk losing the right to the land.

In addition to declaring some production waste, oil producers proposed to the Oklahoma Corporation Commission to mandate output cuts. The commission has not decided on that proposal, either.

Due to a last-minute amended application by the Oklahoma Energy Producers Alliance, or OEPA, the parties in the case will now have until May 18^th to file comment on the changed application.

Interestingly enough, the regulator last month already adopted an emergency order, under which drillers could declare some oil economic waste and shut in wells to curb their losses. In fact, one commissioner dissented officially against the emergency order, arguing it was “replete with fatal errors.”

There are opponents to the proposals among oil companies as well. According to Crawley Petroleum Corp, the order that allows companies to declare some production economic waste could lead to lawsuits, Reuters reports.

“The notion that we don’t have the right to do this (shut wells) absent of this order is a fallacy,” the company’s chief executive Kim Hatfield said.

The situation within the industry is the same as it is in Texas and other oil states; while some producers insist that the state authorities act to support the industry, others are against any regulatory interference.

Also, like in Texas, the regulators seem wary of ordering production curtailment, not least because drilling in Oklahoma is already down substantially. According to the American Petroleum Institute and the Petroleum Alliance of Oklahoma, drilling is down by as much as 90 percent from pre-crisis levels.

By Irina Slav for Oilprice.com

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