Texan’s Plan to Meet With OPEC Raises Questions

A suggestion that Texas may cut production and cooperate with OPEC to shore up oil prices raises serious antitrust questions and would not be in the country’s best interests, oil analysts and Reagan Administration officials said Thursday.

“You can imagine what the Reagan Administration thinks about it,” said a State Department official who spoke only on condition of anonymity. “It’s a cartel that does not operate in U.S. interests.”

Doug Elmets, press aide to Energy Secretary John Herrington, said, “It’s the department’s belief and the government’s policy that assistance to OPEC in its effort to manipulate the price of oil is not the correct approach.”

Kent Hance, one of three members of the Texas Railroad Commission, met earlier this month with Rilwanu Lukman, the president of the Organization of Petroleum Exporting Countries, and discussed the possibility that his state and the cartel would cooperate.

‘We Just Want Input’

Hance told Harte-Hanks newspapers Tuesday that he would attend the cartel’s April 23 meeting in Vienna. “I think that (cutting Texas production) is one of the things that has to be considered,” he said. “It would be one of the items we would discuss.”

Interviewed from Austin on Thursday, Hance said, “We have the right

“We are not trying to seek an alliance or cartel. We just want input

Hance said he wouldn’t make any deals without the approval of his colleagues and Gov. Bill Clements, who have told him to go ahead with the trip.

Hance was out of his office Thursday and could not be reached for comment.

Some industry analysts expressed doubts about the wisdom of such an action, and others questioned its legality.

“It is probably a violation of the antitrust laws,” said John Lamont, oil specialist in the Washington law firm of Lobel, Novins, Lamont & Flug.

However, William Baxter, who headed the antitrust division of the Justice Department early in the Reagan Administration, said, “It is fairly standard doctrine that the antitrust laws apply only to private activity,” not action by a state.

Hance’s efforts pose “a very interesting question. The economic evil that results is precisely the evil that the antitrust laws are aimed against,” Baxter said in an interview from the Stanford University Law School in Palo Alto, where he is a professor.

Mark Sheehan, spokesman for the antitrust division, declined immediate comment.

Ed Rothschild, assistant director of the Consumer-Labor Energy Coalition, an advocacy group in Washington, said it was “a joke” to think Texas can help OPEC be any more effective in holding up prices than it has been in recent years.

But, he said, “It would be tantamount to criminal activity if anyone in the private sector did it.”

Texas is the nation’s No. 1 oil producer. Statistics for 1986, the most recent that break down production by state, show output of 2.3 million barrels from 201,000 wells--a quarter of the nation’s production and a third of its wells.

Since 1972, the Texas Railroad Commission has set allowable production quotas at 100% of capacity. It was these quotas that had permitted Texas to serve the role of “swing producer” in world oil markets before the rise of OPEC in the 1960s and 1970s.

Texas was hit hard by the oil price collapse of 1986 engineered by OPEC’s leading producer, Saudi Arabia. The state lost 8,000 wells during that year. The average price at the well plunged from $26.80 a barrel in 1985 to $14.74 in 1986, cutting the aggregate wellhead value of the state’s crude production from $24 billion to $12 billion.

Prices have recovered from their lows of 1986, but never have approached the 1985 price.