Oklahoma denies request to limit oil production

Oklahoma, McGirt, Tribal, oil

By: Jack Money – The Oklahoman – The three-member Oklahoma Corporation Commission on Wednesday denied a request to limit the amount of oil that can be produced from Oklahoma wells.

Oklahoma Corporation Commission Chairman Todd Hiett, Commissioner Dana Murphy and Commissioner Bob Anthony approved a final order that ended the agency’s consideration of the case.

The Oklahoma Energy Producers Alliance (OEPA) and affiliated companies requested the relief in early April.

The OEPA represents mostly smaller, independent oil and gas producers who primarily operate older, vertical wells with smaller rates of production.

It had asked for a mandatory oil waste declaration from commissioners so that the agency could take additional steps to require operators to shut in wells or to take other actions deemed appropriate to cut crude oil production inside the state.

The OEPA had sought the relief as the price for a West Texas Intermediate barrel of crude oil approached $20 a barrel, based upon arguments that curtailment would help remove excess market supplies and improve crude oil’s price.

The OEPA’s request, however, was opposed by the Petroleum Alliance of Oklahoma and its member companies. Representatives of both the alliance and many larger oil and gas companies operating in Oklahoma countered that the free market would take care of excess supply issues on its own.

It has.

Oil prices have been steadily climbing since early May as demand for downstream petroleum products gradually returned and as the Organization of Petroleum Exporting Countries and Russia have stuck to pledged production cuts they made to ease a global glut of supply.

Closing prices for a barrel of West Texas Intermediate crude have ranged between $30 and $40 a barrel throughout June.

While commissioners on Wednesday denied the OEPA’s cause, another interim order they previously approved that relates to excess oil production remains in effect until Aug. 10.

That order allows Oklahoma oil and gas operators to decide if waste is occurring. Some operators have said that order gives them the ability to take whatever steps they deem necessary (including shutting in wells) to prevent waste, while specifically protecting correlative rights held by the company, well investors and mineral rights owners.

Wednesday’s final order was crafted by Murphy, who said changing market conditions warranted the action.

“I don’t believe the requested relief is necessary now, given conditions with pricing” and because the interim order remains in place, Murphy said.

Producers, meanwhile, continue to tweak their operations based upon those changing conditions.

Continental Resources, which shut in 70% of operated oil production in May and June, recently announced it will begin to bring some of that production back in July.

Company officials said the company will still keep about 50% of its production shut in after modifying its operations.

“Continental elected to defer production in order to preserve shareholder value over volumes and maximize the economics of the barrels we produce,” Bill Berry, Continental’s CEO, stated as part of the announcement.

“As oil prices have stabilized and begun to recover, we have partially resumed production. As improved supply and demand fundamentals benefit oil prices, we expect to continue restoring production in subsequent months.”


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