The Texas Railroad Commission must tap the brakes on oil and gas production

[Tom Kirkman + 8,860]

Finally!  Some long overdue common sense!  Yes, please make this happen.  The Texas RR Commission was extremely successful in the past in putting in some order into the yowling herd of wild cats of U.S. domestic oil production.  Time to bring back the Texas RR Commission.

 

The Texas Railroad Commission must tap the brakes on oil and gas production

It’s time for the Texas energy regulator to step into its historic role of setting regulations that keep the industry healthy.

 

Texas is now the center of history’s biggest oil and gas boom. This boom, like past booms, is cementing the U.S. as the world’s superpower. But as in those earlier booms, our regulators may need to slow production slightly to preserve our natural resources and the health of our oil industry.

Texas producers are now draining so much oil and natural gas that there aren’t enough purchasers to use all of the gas. Oil and gas often come from the same well. The industry sells the oil but cannot build pipelines fast enough to get all the new gas production to distant gas consumers. As a result, producers are burning off, or flaring, more and more gas — wasting this clean burning gas, which is prized by consumers and industry around the world.

The U.S. Energy Information Administration recently reported that the U.S. is flaring more gas than ever before. Texas alone now flares more gas than many states use. These flares, burning round-the-clock, can be seen from space — nighttime satellite pictures make the Permian Basin look like Texas’s biggest metropolis. This tremendous waste of resources is sparking both public concern and private lawsuits, with regulators, landowners and the industry all pointing fingers at different villains. But for solutions, Texas need only look to its past.

The Railroad Commission of Texas, despite its name, is the world’s premier oil and gas regulator. During the 1930s, Texas dominated oil production to an extent never equaled, pumping as much as a quarter of the world’s oil. During that oil boom, the Railroad Commission learned an important lesson: Sometimes to maximize the value of an oil bonanza, you have to slow it down a little.

Everyone knows that as oil production rises, the price of oil falls. But individual companies can’t do anything about that. Instead, they have to take what they can get for their oil, find ways to produce more for less, and hope for higher prices. But a dominant regulator can help all companies by slowing down all production a bit. As production slows, prices rise, benefiting all companies.

In 1931, the Railroad Commission changed the oil industry forever when it began limiting oil production to ensure higher prices. Companies tried to evade these limits and cheating on the limits became more profitable as prices rose. Texas eventually had to send in the Texas Rangers and the National Guard to enforce the law. But when the limits were enforced, oil companies benefited. They sold slightly less oil, but received substantially higher prices. Ever since, the Railroad Commission’s limits on oil production have been used as a model by dominant commodity producers around the world.

Today, the Railroad Commission has far less influence on Texas oil prices.  ...

 

[Douglas Buckland + 6,308]

You mean to tell me that the RRC just became aware of all this!

[Jan van Eck + 7,558]

What the Texas RR Commission creates and enforces is basically a cartel.  A similar situation exists in yet another consumer good with an inelastic demand curve - maple syrup.

Maple syrup is a sugary substance that comes from the sap of the sugar maple tree located in snowbelt States and Canada. The stuff is pure heaven when poured onto pancakes, French Toast, and other breakfast delights.  Aficionados  will pour out the syrup onto cubes of snow outside in winter, it tastes fabulous!   Now, the syrup is crafted by first tapping into the trees, then running tubes down to a collector bucket, then the buckets of raw syrup and hand-coiled in vats to boil off the water and concentrate the sap remains into a thick syrup.  So you have this army of small entrepreneurs out there in the beginning of the thaw season tapping into maple trees in the woods and collecting the syrup - very similar to what the oilmen do when they go drilling their speculative wells. 

Now the problem is that the producers have the ability to produce much more syrup than consumers demand, thus triggering over-supply and a price collapse.  The biggest player in syrup is the Canadian province of Quebec.  A small increase in supply will result in a large price drop, and with the syrup producers being price-takers, they suffer large income drops.  So the Province has set up a purchasing cartel.  All syrup must be sold to the cartel,which  then releases the product into the marketplace as demand materializes.  The excess production is kept in storage and off the market.  In effect, the Quebec syrup production Board controls both the supply and, thus, the retail price and the prices obtained by the individual producers.

Doing so is not "legal" inside the USA due to the Sherman Anti-Trust Act (passed in 1890), which you can find the text of at 26 Stat. 209. So the syrup producers of Maine, Vermont, New Hampshire, New York State, even Connecticut, face constant pricing pressures in good production-run years.  Since going out into the snow to drill holes in trees is hard work, there is a natural winnowing process where the faint of heart get removed from the industry, so the inherent cottage nature of syrup production remains.  Vermont is the big producer inside the USA, although always threatened by what the Quebec cartel might do.  It is an uncanny parallel to the Texas RRCommission!

[footeab@yahoo.com + 2,131]

Well, I would put a permanent ban on crude oil.  You can buy refined product, crude?  No.  Should never have been lifted.  Stop becoming the 3rd world selling raw commodities

[cbrasher1 + 272]

2 hours ago, footeab@yahoo.com said:

Well, I would put a permanent ban on crude oil.  You can buy refined product, crude?  No.  Should never have been lifted.  Stop becoming the 3rd world selling raw commodities

bernie or joe biden has joined us?? 🤔🤔😂

guess you think we should all lose our jobs too?

 

Edited January 6, 2020 by cbrasher1

[Douglas Buckland + 6,308]

1 hour ago, cbrasher1 said:

bernie or joe biden has joined us?? 🤔🤔😂

guess you think we should all lose our jobs too?

 

Dammit! Just learn to code and you’ll be fine!😂

[footeab@yahoo.com + 2,131]

1 hour ago, cbrasher1 said:

bernie or joe biden has joined us?? 🤔🤔😂

guess you think we should all lose our jobs too?

 

Uh, just noticed a MASSIVELY important word was missing....

***Exporting*** before crude...  🤣🙄

[cbrasher1 + 272]

7 minutes ago, Douglas Buckland said:

Dammit! Just learn to code and you’ll be fine!😂

I will give that a laugh cause I'm sure you're making a joke about what that idiot said.  I am computer savvy, did accounting for 12 years, not sure of your affiliation with the industry, but as anyone who's worked in the patch can attest it gets in your blood, it's a lifestyle, and I love every minute of it..I'm currently sitting on location waiting for an h&p rig to rollup and rigup 😁

[Douglas Buckland + 6,308]

I’ve been in the game for about 35 years. First as a Subsea Engineer and Rig Engineer before starting as a consultant Night Companyman, Senior Drilling Engineer, Drilling Superintendent, Drilling Team Leader and Drilling Manager. It definitely gets into your blood!

Been out of work since my last gig in Papua New Guinea in 2015. This slump has been brutal. Fingers crossed that things pick up in 2020.

I am not digitally inclined...learning to code is not an option!

[0R0 + 6,251]

I think the TRRC and regulators in other shale areas is free to start gradually tightening the flaring permits and slow production to when pipelines or reinjectors or field NG compressors are in place. US oil production is sufficient and the flaring is an enormous waste of resources. 

Does anyone know how far field NG compressors and LNG truck mounted transport equipment have fallen in cost of production? Is this now an economically  viable alternative to flaring?

 

[Tom Kirkman + 8,860]

12 hours ago, footeab@yahoo.com said:

Uh, just noticed a MASSIVELY important word was missing....

***Exporting*** before crude...  🤣🙄

Yeah, that's a pretty key word, exporting changes the entire context of the sentence.

You can go back and edit your comment, if you wish.

[footeab@yahoo.com + 2,131]

5 hours ago, Tom Kirkman said:

Yeah, that's a pretty key word, exporting changes the entire context of the sentence.

You can go back and edit your comment, if you wish.

Dude!  It is hilarious as posted!  Some mistakes are just too danged funny to edit.