HOUSTON — The state agency that regulates the Texas' behemoth energy industry is weighing a reduction in oil production — at the behest of some producers — as the public health and economic crises fueled by the new coronavirus continue deepening both nationally and here.
The Texas Railroad Commission's inquiry into its options come as demand for oil across the globe has dropped significantly, with people staying home and implementing social distancing practices in hopes of avoiding the spread of the virus that causes COVID-19.
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“A couple of Texas producers have inquired into the feasibility of the Railroad Commission prorationing production," said Travis McCormick, chief of staff to commission Chairman Wayne Christian. "No formal change in policy has been proposed. Staff is looking into what that change in policy would entail from a practical standpoint at the agency.”
The Wall Street Journal first reported the producers' request and commission's response Thurday.
As the new coronavirus has spread across the planet, oil prices dropped from over $60 a barrel at the beginning of the year to about $25 a barrel Thursday.
Oil production revenues made up about 6.1% of the state’s tax revenues in 2018, according to the Texas Comptroller’s office. But the industry helps power the state’s economy, which is also being impacted by social distancing practices pushed to stop the virus’ spread. Things are likely to only get worse since Gov. Greg Abbott on Thursday ordered statewide closures of bars and restaurant dining rooms as health officials prepare for an exponential increase in the number of Texans testing positive.
According to the most recent figures for this fiscal year's state budget, Texas collected $17.5 billion in sales taxes and $2.5 billion in oil taxes. Together, those figures make up about 75% of the $26.3 billion in taxes the state has collected since September. But those figures only run through February. They do not include figures from March, which is when the virus upended Texans' daily lives, entire industries and the economy.
When asked for comment, a spokesperson for the Texas comptroller's office referred to a March 9 statement from Comptroller Glenn Hegar, which said the agency "is monitoring weakness in financial markets" and is "tracking revenues carefully since markets began to soften."
"Certainly, Texas has exposure if oil prices remain depressed for a sustained period of time, and slowdowns in economic activity related to the COVID-19 outbreak could also be a headwind," Hegar said in the statement. "We are still only six months into the current budget cycle, however, and it is too early to tell with certainty how current fluctuations will impact long-term economic performance and state revenues."
This is a developing story and will continue to be updated.