Texas Railroad Commission & Global Geopolitics

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The Texas RRC is the state’s oil & gas regulatory agency whose mandate is as follows:

“The Railroad Commission, through its Oil and Gas Division, regulates the exploration, production, and transportation of oil and natural gas in Texas. Its statutory role is to (1) prevent waste of the state’s natural resources, (2) to protect the correlative rights of different interest owners, (3) to prevent pollution, and (4) to provide safety in matters such as hydrogen sulfide.”

https://www.rrc.state.tx.us/about-us/organization-activities/divisions-of-the-rrc/oil-gas-division/

Unfortunately has been deficient in the first 3 mandates due to political pressures. It has allowed operators to flare produced gas above the allowed amounts. This act alone creates waste, pollutes and erodes the correlative rights of adjoining landowners which would otherwise enjoy the benefits of keeping the gas in the ground thereby maintaining reservoir pressure and extending the life of the oil fields beneath them.

Due to the recent crash in oil prices, the TX RRC is set to have a hearing on whether it should enforce production cuts throughout the state.

Ryan Sitton, one of the commissioners of the RRC, claims to be a free market believer. Based on the context of his statement, it may be assumed that he would prefer not to institute any cuts, but that is yet to be seen.

The TX RRC is in a precarious position since in the world there are 3 main players that are materially contributing towards the current oil price crash, OPEC, Russia and US Shale (particularly in the Permian Basin).

The 2 prior have a command and control mechanism that allows for broad and coordinated decision making, but US Shale is made up of a large and varied group of companies each with their incentives that unfortunately cannot easily act in unison. This puts a US State agency in a conspicuous position in global geopolitics.

It would behoove all parties concerned to educate themselves on these matters.

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Comentary on U.S. energy industry

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