Texas Railroad Commissioner Christi Craddick doubled down Tuesday on the agency’s recent decision not to cut oil production and provided more detail on what discussions looked like in the weeks leading up to that high-profile vote, when the price of a barrel of oil sank into the negatives before climbing back up into the double digits.
“I think we’ve clearly made the right decision in my mind,” Craddick said during a live interview with The Texas Tribune. “Look at where we are and what has happened just in the last couple of weeks. And it’s even more important to back up a few weeks before we took the vote of what was beginning to happen within the industry — they were cutting themselves.”
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Craddick’s comments came a week after the three-member commission, which regulates the state’s oil and gas industry, decided against taking action to curb Texas oil production. The agency hasn’t cut production since the 1970s. The decision not to cut production came after some of the state’s oil producers appeared split about production cuts at a marathon public hearing during the coronavirus pandemic.
Craddick and Railroad Commission Chairman Wayne Christian opposed cutting production; outgoing Commissioner Ryan Sitton supported it.
The push to cut production came on the heels of two major hits to the industry: an overseas oil price war that flared up between Saudi Arabia and Russia, and Texas officials’ restrictions aimed at stopping the spread of the virus that halted the state’s economy. That prompted oil prices to plummet to their lowest prices in decades, which sent the state, a top oil producer in the country, financially reeling since its economy and budget are highly sensitive to oil prices.
Craddick said Tuesday that the agency had started seeing cuts within the industry before the pandemic gripped the state.
“Our April 2020 numbers reflect where we were in February — and we had already seen production cuts … of about [300,000] to 400,000 barrels at that point,” she said. “We were beginning to see cuts to begin with.”
Craddick also said that she started receiving questions about curbing oil production the day Gov. Greg Abbott declared a statewide emergency over the pandemic. Companies at that point, she said, were trying to figure out how to proceed with decreased demand and increased supply. Craddick said the questions she had about proration ranged from what the procedure would even look like, since it had not been done in roughly 50 years, to how the agency could do it correctly.
The commissioner did not mince words about how challenging the recovery process could be.
"This is going to be painful. ... How do you get demand back up where people are comfortable driving, comfortable flying, still moving forward, and how do we continue to make sure we're doing the smart thing so business has an ability to come back? I think consistency is going to be really important," Craddick said.
She also pointed out how unemployment in the industry equates to a loss of talented workers — some of whom may never return because they need immediate paychecks. Craddick described that as a typical challenge during downturns.
"How do we maintain some talent, and where can we keep them?" she said.
Craddick also said "it's going to be a challenge" for the agency to ensure stability in the industry as the recovery process gets underway and noted that Comptroller Glenn Hegar's revised forecast of state finances in July would provide a better idea of where things stand from an economic standpoint and how extensive state budget cuts end up being.
“We’ve been through this before as an agency,” she said. “We look at where nonessentials are as far as travel. We look at do we need to buy equipment, do we need to continue to hire people — it’s all things like you’d run a business, that’s how you run this agency.”