James Coburn | Pauls Valley Daily Democrat
The Oklahoma Corporation Commission approved an interim emergency order saying the commission finds certain production in Oklahoma for current conditions could be deemed economic waste, said Matt Skinner, public information manager.
Tulsa-based LPD Energy had asked the commission to allow a voluntary curtailment of oil production, said Corporation Commissioner Dana Murphy, R-Edmond.
On May 11 there will be a hearing on the merits of two applications, Skinner said.
The second application comes from the Oklahoma Energy Producers Alliance that calls for the commission to order a production cut, Skinner said.
One application represents Wednesday’s order citing economic waste.
“The global energy landscape has been turned upside down due to the COVID-19 pandemic,” Murphy said. “While overproduction by Saudi Arabia and Russia has played a role in the collapse in oil prices, the far bigger factor is a drop in oil demand that only weeks ago would have been thought impossible.”
Murphy said the commission was asked to issue an emergency order based on economic waste resulting from a world-wide wasteful glut of oil. Each company may have different economic thresholds, she said.
“There was no way for Oklahoma and other U.S. producers to anticipate and plan for up to 30 million barrels per day of consumption to disappear within just a few weeks,” she explained.
The order allows producers flexibility in determining whether to curtail or shut-in their production, Murphy said.
“Some companies may have hedged their oil and saved $40 or $50 a barrel. So it’s beneficial for them to continue to produce, but then again, you’re going to have an issue with the storage that is going to continue to be a problem.”
Murphy said no one understands the oil business better than Oklahoma’s operators. So action taken by the Commission gives operators the freedom to respond to volatile market forces and take action to survive, she said.
“Oklahoma’s oil producers have faced and triumphed over many challenges in the past 100 years. I have no doubt they will win out even over these previously-unimaginable market conditions,” Murphy said.