SECTION 3.31. Gas Reservoirs and Gas Well Allowable

(a) General.

(1) Allowables of gas wells not currently assigned an allowable will not be made effective:

(A) prior to the well's completion or reclassification date; or

(B) more than 15 days prior to the date all reports or information necessary to the assignment of an allowable are received in the appropriate commission office.

(2) If a report or item of information necessary to the assignment of an allowable is not filed on time, there shall be a one-day allowable reduction for each day the report or information is late.

(b) Changes in gas well allowables.

(1) Changes in allowable of gas wells currently assigned an allowable will be effective on the date of the test or date of the change affecting the well's allowable (when the operator submits special tests or information), provided this is not more than 15 days prior to the date the special test or information is received in the appropriate Commission office.

(2) With respect to a multicompleted well, the allowable of the second and succeeding zones will be made effective no earlier than the date the last report or item necessary for the assignment of an allowable is received in the appropriate Commission office.

(3) When a well is recompleted as a gas well in a different field, any overproduction that has occurred in the old field must be made up before an allowable will be assigned in the new field.

(4) The maximum daily allowable for a horizontal drainhole gas well or a gas well in a designated unconventional fracture treated (UFT) field is set forth in §3.86(d)(4) and (5) of this title (relating to Horizontal Drainhole Wells).

(c) Requirements for gas wells in a field for which an allocation formula has been adopted.

(1) If acreage is a factor in the allocation formula, a certified plat showing the acreage assigned to the well for proration purposes shall be submitted. The plat must be accompanied by a statement that all of the acreage claimed can reasonably be considered productive of gas and that the distance limitations of the field rules have not been exceeded. If all of the acreage claimed is not contained in a single lease, a certificate of pooling authority must be submitted, on the appropriate commission form. If the distance limitations of the field rules are shown to have been exceeded, the plat must show the number of acres within and beyond the distance limitations. An operator may request an exception to the distance limitations which may be administratively approved by the commission or a commission designee if all the acreage can be considered productive. If approval of the request is declined or protest is received, the request may be set for hearing. If all of the acreage cannot be considered productive, the plat must also show the productive limit of the acreage. If a plat shows acreage in the unit in excess of the maximum number of acres permitted by the field rules, it will not be accepted.

(2) If bottom-hole or reservoir pressure is a factor in the allocation formula, it shall be submitted on the appropriate commission form and shall be measured at, or corrected to, the proper datum plane.

(3) If any other information, data or parameter is a factor in the allocation formula, it must be submitted on the appropriate commission form.

(d) Determining prorated reservoir allowable and lawful market demand.

(1) On or before the 25th day of each month, the commission will determine the lawful market demand for gas to be produced from each reservoir during the upcoming allowable month. The monthly reservoir allowable shall be equal to the lawful market demand for that reservoir. The lawful reservoir market demand for prorated reservoirs shall be equal to the adjusted reservoir market demand forecast adjusted by a forecast correction adjustment, and a commission adjustment (i.e., lawful reservoir market demand = adjusted reservoir market demand forecast + forecast correction adjustment + commission adjustment).

(A) Allowable month--The month during which allowables determined pursuant to this section will be effective.

(B) Adjusted reservoir market demand forecast--The sum of all operator reservoir market demand forecasts for a reservoir after any necessary downward adjustments have been made to individual operator reservoir market demand forecasts and optional operator forecasts so that no such forecast will exceed the total capability of the operator's wells for the reservoir during the allowable month.

(C) Operator reservoir market demand forecast--The sum of the operator's well forecasts for a reservoir determined by the commission pursuant to this subsection.

(i) The commission will determine a forecast for each well that will be active during the allowable month that:

(I) for prorated and limited wells is equal to the well's production during the same allowable month in the prior year; and

(II) for special or administrative special allowable wells is equal to the well's production during the most recently reported production month.

(ii) If the well had no reported production during the same allowable month in the prior year or if a special or administrative special allowable well had no reported production in the most recently reported production month, the forecast shall be equal to:

(I) the well's highest reported monthly production during any of the three most recently reported production months; or, if no production has been reported for those months;

(II) the well's capability.

(iii) Alternatively, the operator reservoir market demand forecast may be determined by an optional operator forecast.

(D) Optional operator forecast--The commission designated operator may file an optional market demand forecast for all of the operator's wells in the reservoir that is equal to the anticipated market demand for the production from the operator's wells in the field during the allowable month. The optional operator forecast for the operator's wells in the reservoir can be no greater than the total capability of the operator's wells or less than zero. An optional operator forecast must be filed by the 10th day of the month preceding the allowable month.

(E) Forecast correction adjustment--

(i) The February 1994 forecast correction adjustment shall be the reservoir market demand for November 1993 for all wells in a reservoir that are not administrative special allowable wells for February 1994, subtracted from the production reported for November 1993 for those wells;

(ii) The March 1994 forecast correction adjustment shall be the reservoir market demand for December 1993 for all wells in a reservoir that are not administrative special allowable wells for March 1994, subtracted from the production reported for December 1993 for those wells;

(iii) The April 1994 forecast correction adjustment shall be the reservoir market demand for January 1994 for all wells in a reservoir that are not administrative special allowable wells for April 1994, subtracted from the production reported for January 1994 for those wells;

(iv) For May 1994 and subsequent months, the forecast correction adjustment shall be equal to the total reservoir production from the most recent reported month, minus (total adjusted reservoir market demand forecast for the production month + supplemental change adjustment for that month + commission adjustment for that month), minus (production from all special and administrative special allowable wells minus allowable assigned to those special wells for that month).

(F) Supplemental change adjustment--Any adjustment to the reservoir allowable that is necessary to account for an automatic allowable revision in a prior month, a change of well or well test status during a prior month, the provisions of a final order modifying field or well production status, or any other ministerial change.

(G) Commission adjustment--Any other adjustments to the adjusted reservoir market demand forecast that the commission determines are necessary.

(2) The commission may reject or modify any optional operator forecast if it determines that the forecast is inaccurate or being used to manipulate the allocation of gas rather than to determine the reasonable market demand.

(e) Well capability.

(1) No gas well shall be given an initial allowable in excess of its capability.

(A) Except as provided in subparagraphs (B) and (C) of this paragraph, a well's capability is defined as the lesser of:

(i) the well's latest deliverability test on file with the commission; or

(ii) the well's highest monthly production during any of the three most recently reported production months.

(B) If a well is a special or an administrative special allowable well, its capability is defined as the lesser of:

(i) the well's latest deliverability test on file with the commission; or

(ii) the well's most recently reported monthly production.

(C) If a well is new to a reservoir and has been active for less than six months, its capability shall be defined as the well's latest deliverability test on file with the commission.

(2) An operator may submit a substitute capability determination for any well in a prorated field that represents the maximum monthly production capability of the well under normal operating conditions for a specific six-month period.

(A) The determination may be made on the basis of a well test or other acceptable information by a registered professional engineer who certifies that the determination was made by the engineer or under the supervision of the engineer, and that the capability has been determined in accordance with generally accepted engineering practices. Alternatively, the substitute capability determination may be made by an independent tester on the basis of a well test conducted in accordance with §3.28(c) of this title (relating to Potential and Deliverability of Gas Wells To Be Ascertained and Reported) (Statewide Rule 28). The request for a substitute capability must be submitted on the appropriate form.

(B) The commission or a commission designee may reject any substitute capability determination for good cause.

(C) The capability determined pursuant to this paragraph shall be used as the well's capability for a period of six months from the effective date of the determination unless:

(i) the operator files a written request that the substitute capability determination be cancelled. If such a request is submitted, the substitute capability may be cancelled by the commission or commission designee; or

(ii) an affected person files a protest alleging, with specificity, the inaccuracy or invalidity of the determination. If a protest is filed, the commission may set the matter for hearing. A protested substitute capability determination shall be effective on the intended effective date, unless the commission orders otherwise. If the commission determines that the protested substitute capability was incorrect, appropriate allowable or status adjustments will be made for the affected well.

(f) Fields operating under statewide rules. A statewide prorated field is any gas field in which no special field rules have been adopted and in which at least one well in the field has a current reported deliverability test of greater than 250 Mcf a day. Daily allowable production of gas from individual wells in a statewide prorated field shall be determined by allocating the allowable production among the individual wells in the proportion that each well's deliverability (based on the latest deliverability test of record) bears to the summation of the most recent reported deliverability tests of all wells producing from the same field. Allocated allowables shall be subject to the well capability provisions of this section.

(g) Definitions of prorated and nonprorated wells and fields.

(1) A prorated well is a well for which an allowable is determined by an allocation formula.

(2) A nonprorated well is a well for which an allowable is not determined by an allocation formula.

(3) A prorated field is a field that has two or more wells one of which is a prorated well.

(4) A nonprorated field is any field that is not a prorated field.

(5) Statewide Exempt Fields:

(A) A statewide exempt field is any gas field in which no special field rules have been adopted and in which no well in the field has a current reported deliverability test of greater than 250 Mcf per day. Wells in statewide exempt fields shall be assigned allowables equal to their capacity to produce but in no event greater than 250 Mcf per day.

(B) In fields where special field rules exist and no well has a current deliverability test of greater than 250 Mcf per day, an operator may request statewide exempt field status. The request may be granted administratively by the commission or commission designee if the applicant provides the commission with a declaration, signed by all operators, subject to the false filing penalties provided for in the Texas Natural Resources Code, §91.143, stating all operators in the field agree to exempt status. If declarations are not provided from all operators in the field or if the commission or commission designee declines to grant any request administratively, the applicant may request a hearing. If a notice of intent to appear in protest of the application has not been filed by five days before the date of the hearing, then there shall be a presumption that each well's first purchaser has a market for 100% of the well's deliverability as determined by the most recent deliverability tests on file with the Commission and that granting exempt status to the field will not harm correlative rights or cause waste and exempt status will be granted. Wells in exempt fields with special rules shall be assigned allowables equal to their capability to produce but in no event greater than 250 Mcf per day. If 250 Mcf per day is exceeded by any well, the field will be changed to the existing special field rule allocation. Reinstatement of allocation formula may be initiated by the commission designee, or by one of the operators in the field.

(6) A limited well is a nonprorated well in a prorated field (other than a special or administrative special allowable well) with an allowable set below the maximum allowable it would receive under the allocation formula. A limited well shall be assigned an allowable at the rate that the well is capable of producing as determined by subsection (e) of this section.

(7) A special allowable well is a nonprorated well granted a fixed allowable by the commission after notice and hearing.

(8) An administrative special allowable well is a nonprorated well that has been granted an allowable pursuant to subsection (k) of this section.

(9) The maximum allowable for a well is the largest allowable that can be assigned under applicable rules. For a limited well, the maximum allowable is the allowable the well would receive under the allocation formula. For a special allowable well, the maximum allowable is the allowable assigned pursuant to paragraph (7) of this subsection. For administrative special allowable wells, the maximum allowable is 100 Mcf/day for wells qualifying as administrative special wells under subsection (k)(1) of this section and is the allowable the well would receive under the allocation formula for wells qualifying as administrative special allowable wells under subsection (k)(2) of this section. Additionally, for administrative special allowable wells in prorated gas fields without special field rules, the maximum allowable is 250 Mcf a day. For a well in a one well field, the maximum allowable is the well's deliverability based on the latest deliverability test of record. For an associated gas well, the maximum allowable is the gas well allowable calculated by §3.49(b)(1) or (2) of this title (relating to Gas-Oil Ratio) (Statewide Rule 49).

(h) Allowable adjustments and balancing provisions for nonprorated wells.

(1) A nonprorated well shall not be allowed to accumulate underproduction. However, a limited well shall be entitled to accumulate underage up to the well's capability each month.

(2) If the most recent production figures reported to the commission show a nonprorated well to be overproduced, the alllowable will be revised to cover overproduction that is in excess of the well's accumulated underproduction, up to the maximum allowable. A nonprorated well with accumulated overproduction will be assigned a supplemental allowable that will balance the accumulated overproduction or a supplemental allowable equal to the well's maximum allowable, whichever is smaller.

(3) The allowable for wells in nonprorated fields, except for special and administrative special allowable wells, shall be limited to the lesser of:

(A) the well's maximum allowable;

(B) the well's capability as determined by subsection (e) of this section.

(4) The initial allowable for special and administrative special allowable wells shall be the least of the well's:

(A) capability;

(B) its amount of production during the most recently reported production month; or

(C) the amount provided for by the allocation formula.

(i) Balancing provisions for overproduction and underproduction of gas for wells completed in prorated gas fields.

(1) Balancing provisions for prorated fields. Except as provided in subsection (h) of this section or as necessary to prevent waste or protect correlative rights, balancing provisions will be applied for wells completed in prorated gas fields.

(2) Balancing periods. For the purpose of computing and balancing overproduction and underproduction in prorated gas fields, the dates 7 a.m., March 1, and 7 a.m., September 1, are to be known as balancing dates; and the six-month periods beginning 7 a.m., March 1, and ending 7 a.m., September 1, and beginning 7 a.m., September 1, and ending 7 a.m., March 1, will be considered as separate entities and will be known as "balancing periods."

(3) Balancing provision for 49(b) fields. The balancing provisions may be applied by commission action after notice and hearing to fields where the well allowables are determined by §3.49(b) of this title (relating to Gas-Oil Ratio) (Statewide Rule 49(b)).

(4) Underproduction.

(A) If during the balancing period a prorated gas well or a limited well does not produce as much gas as is allocated to it by the commission, the operator of the well shall be permitted to carry such underproduction forward to the next succeeding balancing period as future allowable credit to be produced during that period.

(B) The amount of underproduction to be carried forward into any new balancing period as allowed production during such new balancing period shall consist of the actual underproduction that accrued in the balancing period immediately preceding such new balancing period; and the accumulative well status as to underproduction, will be adjusted on each balancing date accordingly. An operator may request that underproduction not balanced during a second balancing period be carried forward to subsequent balancing periods. The operator's request must include evidence of increased market demand that will allow underproduction to be produced in the subsequent balancing period. The request may be granted administratively by the commission or a commission designee if the request was filed no later than the last day of the balancing period following the date the underproduction is canceled, the operator has given at least 21 days notice to all other operators in the field and the first purchaser of gas from the subject well, and no protest to the request has been filed. The request may also be approved administratively if the operator provides written waivers of objection from all to whom notice would be given as an alternative to notice and absence of protest. If the commission or a commission designee declines to grant administratively the request, the operator may request a hearing.

(5) Overproduction.

(A) Subject to the following prescribed conditions, the operator of a gas well, may produce the well in excess of the monthly allowable allocated to the well. No well shall in any one month be produced at a rate in excess of its underproduction plus twice its monthly allowable without obtaining approval from the commission prior to the due date for the production report for the overproduced month. A well which is balanced or overproduced may not in any one month produce an amount in excess of twice its monthly allowable without obtaining approval from the commission prior to the due date for the production report for the overproduced month. A well which is balanced or overproduced will not be granted such authority for more than two months in any six month balancing period.

(B) A well overproduced as of a balancing date, which was also overproduced on the balancing date immediately preceding and remained overproduced for the entire period between the two balancing dates, shall be shut-in until the overproduction, existent as of the later of such two balancing dates, is made up. Upon request by an operator, the commission may grant authority to produce such a well at a fractional part of its monthly allowable (reduced rate) until its production and allowable are in balance. The commission or a commission designee may determine the permissible rate.

(C) If a protest is received or the commission declines to approve a request to produce at a reduced rate, the operator of a well which under the provisions of subparagraph (B) of this paragraph is required to be shut-in, may request a hearing before the commission to determine whether shutting-in the well would damage it. Notice of the hearing will be given to all operators in the field and the first purchaser of the subject well. If, after consideration of the evidence submitted at the hearing, the commission finds that the well would be damaged if shut-in, the commission may allow the overproduction charged against it to be made up at a lesser rate than it would be made up if the well were shut-in. The commission or a commission designee may determine the permissible rate pending the result of the hearing.

(D) Except where a well is shut-in to make up overproduction or is producing at a reduced rate, overproduction existent as of any balancing date shall be made up at any time during the next period; i.e., a specified fractional part of the overproduction need not be made up during each month of that balancing period, so long as all of such overproduction is made up during that balancing period.

(j) Suspension of allocation formula.

(1) The commission or a commission designee may administratively suspend the allocation formula for a particular gas field if:

(A) each operator from that field has a market, for 100% of the deliverability, as determined by the deliverability tests on file with the commission, for its respective wells; and

(B) all operators in the field consent to suspension of the formula.

(2) Suspension of the allocation formula may be initiated by the commission or a commission designee, or by one of the operators in the field. The commission or a commission designee will determine which fields are appropriate for suspension utilizing the criteria of paragraph (1) of this subsection. The allocation formula may be administratively suspended if the applicant provides the commission with a declaration, subject to the false filing penalties provided for in the Natural Resources Code, §91.143, from all operators in the field stating that they have a market for 100% of the deliverability of their wells. If the commission or a commission designee declines to administratively suspend the allocation formula, the applicant may request a hearing as provided for in paragraph (4) of this subsection.

(3) Reinstatement of the allocation formula may be initiated by the commission, commission designee, or by one of the operators in the field.

(A) If, for any month, the market for gas production from a well in a field with a suspended allocation formula is less than 100% of the well's deliverability as determined by the deliverability tests on file with the commission, the operator of the field must inform the commission or a commission designee; upon such notification, the commission or commission designee will, with prior notice to the operators in the field, reinstate the allocation formula.

(B) The allocation formula will be reinstated at the request of an operator from a field with a suspended allocation formula or at any time the commission deems reinstatement necessary to protect correlative rights or prevent waste.

(4) If the commission or a commission designee reinstates the allocation formula or denies a request to suspend or reinstate the allocation formula in a particular field, the applicant may request a hearing. In addition to the criteria set forth in paragraph (1) of this subsection, the commission will consider whether suspension or reinstatement is necessary to prevent waste or protect correlative rights. An applicant may also request a hearing when unable to obtain written consent from all operators in a field pursuant to subparagraph (1)(B) of this subsection.

(5) Suspension of the allocation formula will balance the field's production status at zero, and provide for a 100% capacity allowable.

(k) Administrative Special Allowable.

(1) A well which has a deliverability, capability, and six consecutive months of production of 100 Mcf per day or less, and the well is not producing in a 49(b) field, will be assigned an administrative special allowable pursuant to subsection (h) of this section. Additionally, a well which has a deliverability, capability, and six consecutive months of production of 250 Mcf a day or less, and the well is producing in a prorated field without special field rules, will be assigned an administrative special allowable pursuant to subsection (h) of this section.

(2) A well, other than an administrative special allowable well defined in paragraph (1) of this subsection, in a prorated field whose average monthly production during the last six consecutive months falls below the cutoff percentage (determined by the commission at the monthly statewide hearing) of the well's top allowable averaged over that six-month period, will be assigned an administrative special allowable pursuant to subsection (h) of this section. The initial cutoff percentage is 70% and will remain at 70% until changed in accordance with this subparagraph. Administrative special allowable wells under this subsection will remain administrative special allowable wells until:

(A) they overproduce the top allowable available under the applicable allocation formula; or

(B) they receive a substitute capability pursuant to subsection (e) of this section; or

(C) the commission resets the cutoff percentage below the well's average production level for the last six consecutive months.

Source Note: The provisions of this §3.31 adopted to be effective September 1, 1986, 11 TexReg 3680; amended to be effective July 1, 1992, 17 TexReg 3236; amended to be effective September 20, 1993, 18 TexReg 5977; amended to be effective January 11, 1994, 19 TexReg 71; amended to be effective May 19, 1997, 22 TexReg 4065; amended to be effective October 20, 1997, 22 TexReg 10311; amended to be effective February 1, 2016, 41 TexReg 785