SECTION 3.26. Separating Devices, Tanks, and Surface Commingling of Oil

(a) Where oil and gas are found in the same stratum and it is impossible to separate one from the other, or when a well has been classified as a gas well and such gas well is not connected to a cycling plant and such well is being produced on a lease and the gas is utilized under Texas Natural Resources Code §§86.181 - 86.185, the operator shall install a separating device of approved type and sufficient capacity to separate the oil and liquid hydrocarbons from the gas.

(1) A separating device shall be kept in place as long as a necessity for it exists, and its use shall not be discontinued without the consent of the Commission.

(2) All oil and any other liquid hydrocarbons as and when produced shall be adequately measured pursuant to paragraphs (3) and (4) of this subsection before the same leaves the lease from which they are produced, except for gas wells where the full well stream is moved to a plant or central separation facility in accordance with §3.55 of this title (relating to Reports on Gas Wells Commingling Liquid Hydrocarbons before Metering) (Statewide Rule 55) and the full well stream is measured, with each completion being separately measured, before the gas leaves the lease. If an operator commingles production pursuant to subsection (b) of this section, the operator shall comply with paragraphs (3) and (4) of this subsection but the operator is not required to measure the production stream before it leaves the lease.

(3) Sufficient tankage and separator capacity shall be provided by the producer to adequately take daily gauges of all oil and any other liquid hydrocarbons unless LACT equipment, installed and operated in accordance with the latest revision of American Petroleum Institute (API) Manual of Petroleum Measurement Standards, Chapter 6.1 or another method approved by the Commission or its delegate, is being used to effect custody transfer.

(4) For Commission purposes, the measurement requirements of this section are satisfied by the use of coriolis or turbine meters or any other measurement device or technology that conforms to standards established, as of the time of installation, by the American Petroleum Institute (API) or the American Gas Association (AGA) for measuring oil or gas, as applicable, or approved by the Director of the Oil and Gas Division as an accurate measurement technology.

(b) Surface commingling of oil, gas, or oil and gas production from two or more tracts of land producing from the same Commission-designated reservoir or from one or more tracts of land producing from different Commission-designated reservoirs is permitted and authorized if:

(1) the operator measures the production stream from each tract and each Commission-designated reservoir separately before combining it with a stream from another tract or Commission-designated reservoir; or

(2) the tracts and Commission-designated reservoirs have identical working interest and royalty interest ownership in identical percentages.

(c) Production that complies with subsection (b) of this section is authorized even if the separator, metering, or storage is located off the tract or tracts. If production is surface commingled pursuant to subsection (b) of this section, the operator shall file Form P-17A, Application for Commingle Permit Pursuant to Rules 26 and/or 27.

(d) If an operator does not meet the requirements of subsection (b) of this section, the Commission may approve surface commingling of oil, gas, or oil and gas production from two or more tracts of land producing from the same Commission-designated reservoir or from one or more tracts of land producing from different Commission-designated reservoirs in order to prevent waste, to promote conservation, or to protect correlative rights.

(1) Administrative approval. After receipt of a completed Form P-17, the Commission may grant approval for surface commingling administratively when the tracts or Commission-designated reservoirs do not have identical working interest and royalty interest ownership in identical percentages and the Commission has not received a protest to an application within 21 days of notice of the application being mailed by the applicant to all working and royalty interest owners or, if publication is required, within 21 days of the date of last publication and the applicant provides:

(A) a method of allocating production to ensure the protection of correlative rights, in accordance with subsection (e) of this section; and

(B) an affidavit or other evidence that all working interest and royalty interest owners have been notified of the application by certified mail or have provided applicant with waivers of notice requirements; or

(C) in the event the applicant is unable, after due diligence, to provide notice by certified mail to all working interest and royalty interest owners, a publisher's affidavit or other evidence that the Commission's notice of application has been published once a week for two consecutive weeks in a newspaper of general circulation in the county or counties in which the tracts that are the subject of the application are located.

(2) Request for hearing. When the tracts or Commission-designated reservoirs do not have identical working interest and royalty interest ownership in identical percentages and a person entitled to notice of the application has filed a protest to the application with the Commission, the applicant may request a hearing on the application. The Commission shall give notice of the hearing to all working interest and royalty interest owners. The Commission may permit the commingling if the applicant demonstrates that the proposed commingling will protect the rights of all interest owners in accordance with subsection (e) of this section and will prevent waste, promote conservation or protect correlative rights.

(e) Reasonable allocation required. The applicant must demonstrate to the Commission or its designee that the proposed commingling of hydrocarbons will not harm the correlative rights of the working or royalty interest owners of any of the wells to be commingled. The method of allocation of production to individual interests must accurately attribute to each interest its fair share of aggregated production.

(1) In the absence of contrary information, such as indications of material fluctuations in the monthly production volume of a well proposed for commingling, the Commission will presume that allocation based on the daily production rate for each well as determined and reported to the Commission by semi-annual well tests will accurately attribute to each interest its fair share of production without harm to correlative rights. As used in this section, "daily production rate" for a well means the 24 hour production rate determined by the most recent well test conducted and reported to the Commission in accordance with §§3.28, 3.52, 3.53, and 3.55 of this title (relating to Potential and Deliverability of Gas Wells to be Ascertained and Reported, Oil Well Allowable Production, Annual Well Tests and Well Status Reports Required, and Reports on Gas Wells Commingling Liquid Hydrocarbons before Metering).

(2) Operators may test commingled wells annually after approval by the Commission or the Commission's delegate of the operator's written request demonstrating that annual testing will not harm the correlative rights of the working or royalty interest owners of the commingled wells. Allocation of commingled production shall not be based on well tests conducted less frequently than annually.

(3) Nothing in this section prohibits allocations based on more frequent well tests than the semi-annual well test set out in paragraph (1) of this subsection. Additional tests used for allocation do not have to be filed with the Commission but must be available for inspection at the request of the Commission, working interest owners or royalty interest owners.

(4) Allocations may be based on a method other than periodic well tests if the Commission or its designee determines that the alternative allocation method will insure a reasonable allocation of production as required by this paragraph.

(f) An operator that commingles production from different Commission-designated reservoirs, whether under subsection (b) or (c) of this section, shall comply with §3.10 of this title (relating to Restriction of Production of Oil and Gas from Different Strata).

(g) An operator that commingles production, whether under subsection (b) or (c) of this section, shall review and correct any forms related to its commingle permit as necessary in order to maintain accurate information on file with the Commission.

(h) If oil or any other liquid hydrocarbon is produced from a lease or other property covered by the coastal or inland waters of the state, the liquid produced may, at the option of the operator, be measured on a shore or at a point removed from the lease or other property on which it is produced.

(i) Oil gravity tests and reports (Reference Order Number 20-55, 647, effective 4-1-66, and Reference Order Number 20-58, 528, effective 5-10-68.)

(1) Where individual lease oil production, or authorized commingled oil production, separator, treating, and/or storage vessels, other than conventional emulsion breaking treaters, are connected to a gas gathering system so that heat or vacuum may be applied prior to oil measurement for Commission-required production reports, the operator may, at the operator's option, apply heat or vacuum to the oil only to the extent the average gravity of the stock tank oil will not be reduced below a limiting gravity for each lease as established by an average oil gravity test conducted under the following conditions (Reference Order Number 20-55, 647, effective 4-1-66):

(A) the separator or separator system, which shall include any type vessel that is used to separate hydrocarbons, shall be operated at not less than atmospheric pressure;

(B) no heat shall be applied;

(C) the test interval shall be for a minimum of 24 hours, and the average oil gravity after weathering for not more than 24 hours shall then become the limiting gravity factor for applying heat or vacuum to unmeasured oil on the tested lease.

(2) Initial gravity tests shall be made by the operator when such separator, treating, and/or storage vessels are first used pursuant to this section. Subsequent tests shall be made at the request of either the Commission or any interested party; and such subsequent tests shall be witnessed by the requesting party. Any interested party may witness the tests.

(3) Each operator shall enter on the required production report the gravity of the oil delivered to market from the lease reported, and it is provided that should a volume of oil delivered to market from such lease separation facilities not meet the gravity requirement established by the described test, adjustment shall be made by charging the allowable of the lease on the relationship of the volume and the gravity of the particular crude.

(4) Where a conventional heater treater is required and is used only to break oil from an emulsion prior to oil measurement, this section will not be applicable; provided, however, that by this limitation on the section, it is not intended that excessive heat may be used in conventional heater treater, and in circumstances where such heater treater is connected to a gas gathering system and it is found by Commission investigation made on its own volition or on complaint of any interested party that excessive heat is used, either the provisions of this section or special restrictive regulation may be made applicable.

Source Note: The provisions of this §3.26 adopted January 1, 1976; amended to be effective February 23, 1979, 4 TexReg 436; amended to be effective March 10, 1986, 11 TexReg 901; amended to be effective February 18, 1994, 19 TexReg 783; amended to be effective June 23, 1997, 22 TexReg 5747; amended to be effective May 1, 2000, 25 TexReg 3741; amended to be effective November 24, 2004, 29 TexReg 10728; amended to be effective April 28, 2015, 40 TexReg 2275; amended to be effective February 25, 2019, 44 TexReg 812