[Editor’s note: This story was updated at 2:14 p.m. CT May 4.]

The Texas energy regulator who pushed the state to consider cutting 20% of its oil output and promoted the idea with calls to Russia's energy minister and OPEC officials abruptly abandoned the proposal on May 4.

U.S. oil and gas companies have been gushing red ink and cutting tens of thousands of workers as prices dropped 66% since December. Global energy demand has tumbled amid coronavirus-related travel and business restrictions and a glut of oil from shale and the end of an OPEC and allies production pact.

The market turmoil prompted State Railroad Commissioner Ryan Sitton last month to urge the first state-mandated cuts in 50 years. He promoted his idea on Twitter and TV, calling for regulators to curb 1 million bbl/d, and won endorsements by OPEC Secretary-General Mohammad Barkindo and Russian Energy Minister Alexander Novak.

His plan ended a day before the state commission was to vote on the proposal. Small and large companies including Chevron Corp., Exxon Mobil Corp. and Occidental Petroleum Corp. were already planing to cut hundreds of thousands of barrels per day of shale, well ahead of any state action.

"This is dead," Sitton told Reuters in an interview. "What we should have done six weeks ago now would no longer have the right impact. We lack the leadership between the three commissioners to get that done."

The group's chairman, Wayne Christian, last week said he would oppose state-mandated cuts and would "stick to my free market principles" and vote no. Christi Craddick, the third commissioner, had worried about legal battles. Two votes are needed to pass a measure in the three-member commission.


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Sitton's proposal grew out of a request from Texas oil producers Parsley Energy Inc. and Pioneer Natural Resources Co. But the idea was staunchly opposed by oil trade groups and large shale producers Exxon Mobil, Chevron and Occidental Petroleum.

"The Texas Railroad Commission had an opportunity to lead and bring a level of stability to the market chaos and it chose not to act," said Matt Gallagher, CEO of Parsley Energy.

Commissioners in April held a more than 10-hour hearing on curtailing output.

Exxon and Chevron, the top two U.S. producers, on May 1 said they plan combined global shut-ins of 800,000 bbl/d in response to plunging crude prices and fuel demand. ConocoPhillips Co., the world’s largest independent oil and gas company, plans to cut output in North America by June to 460,000 bbl/d, the largest cut by any producer.

By the end of May, Texas output is likely to drop by 20% anyway, said Karr Ingham, executive vice president of the Texas Alliance of Energy Producers, which opposed the Texas curtailments.

"Operators are shutting in anywhere from 20%-50%, and some more than that, based on what they think they can get to market," Ingham said. The idea that producers needed the state to tell them to cut is "hubris and nonsense," he added.

Texas regulators have a mandate under state law to "prevent waste of the state's natural resources," and some argued that the current oversupply of oil and price crash amounts to "economic waste."

Oklahoma regulators recently approved an order saying some production in the state could be deemed “economic waste,” which companies have said they could use it to shut in their wells without risk of losing their leases.