The Oklahoma Corporation Commission approved an emergency order on Wednesday declaring oil production in the state could constitute economic waste during the current price slump.
That will let energy companies temporarily halt drilling — or shut in wells — while the battered oil market recovers.
LPD Energy owner Lee Levinson filed the emergency application. He said it takes prices of $30 to $40 a barrel for many companies to break even, but state law requires them to keep extracting oil.
"If you shut in the leases, you’re in jeopardy of losing the lease, like it terminates. It’d be like if you quit paying rent on a commercial lease. You could lose your lease," Levinson said.
Levinson said that should be enough to correct a supply and demand imbalance, though the corporation commission will consider another request for relief next month.
"That application seeks to establish basically a mandatory quota that would shut in some production, but I strongly believe after what’s happening now that there’ll be enough production shut in that, that application will never even have to be considered," Levinson said.
In a statement, Corporation Commissioner Dana Murphy said the order will give oil producers flexibility to respond to market forces.
"Oklahoma’s oil producers have faced and triumphed over many challenges in the past 100 years. I have no doubt they will win out even over these previously-unimaginable market conditions," Murphy said.
West Texas Intermediate crude has fallen from $63 a barrel in January to less than $15 as of noon on Wednesday. Prices fell below $0 for the first time in history late Monday as commodities traders rushed to offload oil they couldn't find buyers for.
The commission's order is in effect for 90 days or until superseded by another order.