SECTION 3.40. Assignment of Acreage to Pooled Development and Proration Units

(a) An operator may pool acreage, in accordance with appropriate contractual authority and applicable field rules, for the purpose of creating a drilling unit or proration unit by filing an original certified plat delineating the pooled unit and a Certificate of Pooling Authority, Form P-12, according to the following requirements:

(1) Each tract in the certified plat shall be identified with an outline and a tract identifier that corresponds to the tract identifier listed on Form P-12.

(2) The operator shall provide information on Form P-12, accurately and according to the instructions on the form.

(A) The operator shall separately list each tract committed to the pooled unit by authority granted to the operator.

(B) For each tract listed on Form P-12, the operator shall state the number of acres contained within the tract. The operator shall indicate by checking the appropriate box on Form P-12 if, within an individual tract, there exists a non-pooled and/or unleased interest.

(C) The operator shall state on Form P-12 the total number of acres in the pooled unit. The total number of acres in the pooled unit shall equal the sum of all acres in each tract listed. The total acreage shown on Form P-12 shall only include tracts in which the operator holds a leased or ownership interest in the minerals or other contractual authority to include the tract in the pooled unit.

(D) If a pooled unit contains more tracts than can be listed on a single Form P-12, the operator shall file as many additional Forms P-12 as necessary to list each pooled tract individually. The additional Forms P-12 shall be numbered in sequence.

(E) The operator shall provide the requested identification and contact information on Form P-12.

(F) The operator shall certify the information on Form P-12 by signing and dating the form.

(3) Failure to timely file the required information on the certified plat or Form P-12 may result in the dismissal of the W-1 application. "Timely" means within three months of the Commission notifying the operator of the need for additional information on the certified plat and/or Form P-12.

(4) The operator shall file Form P-12 and a certified plat in the following instances:

(A) with the drilling permit application when two or more tracts are joined to form a pooled unit for Commission purposes;

(B) with the initial completion report if any information reported on Form P-12 has changed since the filing of the drilling permit application;

(C) to designate a pooled unit formed after a completion report has been filed; or

(D) to designate a change in a pooled unit previously recognized by the Commission. The operator shall file any changes to a pooled unit in accordance with the requirements of §3.38(d)(3) of this title (relating to Well Densities).

(b) If a tract to be pooled has an outstanding interest for which pooling authority does not exist, the tract may be assigned to a unit where authority exists in the remaining undivided interest provided that total gross acreage in the tract is included for allocation purposes, and the certificate filed with the Commission shows that a certain undivided interest is outstanding in the tract. The Commission may not allow an operator to assign only the operator's undivided interest out of a basic tract where a nonpooled interest exists.

(c) The nonpooled undivided interest holder retains the development rights in the basic tract. If the development rights are exercised, the Commission grants authority to develop the basic tract, and the well is completed as a producing well on the basic tract, then the entire interest in the basic tract and any interest pooled with another tract shall be assigned to the well on the basic tract for allocation purposes. Splitting of an undivided interest in a basic tract between two or more wells on two or more tracts is not acceptable.

(d) Multiple assignment of acreage is not permitted, except as provided in subsection (e) of this section. Multiple assignment of acreage is defined as the assignment of the same surface acreage to more than one well in a field. However, this limitation shall not prevent the reformation of development or proration units so long as:

(1) no multiple assignment of acreage occurs; and

(2) such reformation does not violate other conservation regulations.

(e) In unconventional fracture treated (UFT) fields defined in §3.86 of this title (relating to Horizontal Drainhole Wells), multiple assignment of acreage is permissible as follows:

(1) Assignment of acreage to both a horizontal well and a vertical well for drilling and development or for allocation of allowable is permissible. The field density rules apply independently to horizontal wells and vertical wells. Acreage assigned to horizontal wells shall not count against acreage assigned to vertical wells, and acreage assigned to vertical wells shall not count against acreage assigned to horizontal wells.

(A) Acreage assigned to horizontal wells for drilling and development or for allocation of allowable shall be permissible so long as the horizontal well density complies with §3.38 of this title and/or special field rules, as applicable. For the purposes of this section, stacked lateral wells as defined in §3.86(a)(10) of this title are not considered assignment of acreage to multiple horizontal wells.

(B) Acreage assigned to vertical wells for drilling and development or for allocation of allowable shall be permissible so long as the vertical well density complies with §3.38 of this title and/or special field rules, as applicable.

(2) Where ownership of the right to drill or produce from a tract in a UFT field is divided horizontally, acreage may be assigned to more than one well provided that the wells having the same wellbore profile are not completed in the same ownership interval. For purposes of this section "divided horizontally" means that ownership of the right to drill or produce has been separated into depth intervals defined by total vertical depth, depth relative to a specific geological contact, or some other discriminator. A tract may be "divided horizontally" even where one operator has the right to drill or produce multiple intervals on the same tract of land in the same field.

(A) To apply for multiple assignment of acreage under this subsection, the operator's drilling permit application shall indicate the upper and lower limits of the operator's ownership interval. The interval shown on the drilling permit application is measured as the total vertical depth from the surface.

(B) No more than 15 days prior to filing its drilling permit application, the applicant shall identify any well, including any wells permitted but not yet drilled or completed, that is located within one-half mile of the applicant's proposed wellbore between the first and last take points and, upon identification of all applicable wells, send written notice of its application to the P-5 address of record of the Commission-designated operator of the wells determined to fall within the one-half mile radius. The applicant shall attach to the notice a certified plat that clearly depicts the projected path of the wellbore and the one-half mile radius surrounding the wellbore from the first take point to the last take point. Copies of the notice, service list, and certified plat shall be filed with the drilling permit application.

(C) If any person entitled to notice under this subsection did not receive notice, that person may request a hearing. If the Commission determines at a hearing that the applicant did not provide the notice as required by this subsection, the Commission may cancel the permit.

(D) To mitigate the potential for wellbore collisions, the applicant shall provide copies of any directional surveys to the persons entitled to notice under this subsection, upon request, within 15 days of the applicant's receipt of a request.

(E) Where ownership of the right to drill or produce from a tract in a UFT field is divided horizontally, the field density rules for the field will apply separately to each ownership interval, such that proration units on a tract above and below a division of ownership are accounted for separately.

(F) Field rules that allow assignment of acreage to more than one well in UFT fields are superseded by this rule amendment, as of the effective date of this amendment, March 3, 2020. If, prior to the effective date of this amendment, an operator has assigned acreage to more than one well pursuant to previous field rules, such multiple assignment remains valid. After March 3, 2020, multiple assignment of acreage is not permissible unless the applicant complies with the requirements of this subsection. The Commission will not consider any applications for field rules regarding multiple assignment of acreage in UFT fields until two years after March 3, 2020.

(3) Upon request by the Commission, an operator shall provide non-confidential information verifying that the well was completed in the interval indicated on its drilling permit application.

(f) Upon an operator's written request and for good cause shown, the director or the director's delegate may resolve an existing instance of multiple assignment of acreage. If such a request is administratively denied, the operator shall have a right to request a hearing to review the denial.

(g) If an operator does not qualify for multiple assignment of acreage under subsection (e) of this section, acreage cannot be assigned to more than one well unless the operator is granted an exception after a public hearing held after notice to all persons described in paragraph (2) of this subsection.

(1) An operator applying for an exception must show:

(A) an exception is necessary to prevent waste, prevent confiscation, or protect correlative rights; and

(B) the wells are not completed in the same ownership interval.

(2) If an exception is sought for a well in a UFT field, the operator shall file with its application for an exception the names and mailing addresses of persons described in §3.86(k)(2), relating to Horizontal Drainhole Wells. If an exception is sought for any other well, the operator shall file with its application for an exception the names and mailing addresses of all the operators and unleased mineral interest owners of all adjacent offset tracts, and the operators and unleased mineral interest owners of all tracts nearer to the proposed well than the prescribed minimum lease-line spacing distance. In the event the applicant is unable after due diligence to locate the whereabouts of any person to whom notice is required by this subsection, the applicant shall publish notice of this application pursuant to §1.43 of this title (relating to Notice by Publication).

(3) To mitigate the potential for wellbore collisions, the applicant shall provide copies of any directional surveys to the persons entitled to notice under this subsection, upon request, within 15 days of the applicant's receipt of a request.

(h) If an offset, overlying, or underlying operator, or a lessee or unleased mineral interest owner determines that any operator has assigned identical acreage to two or more concurrently producing wells in violation of this section, the operator or owner may file a complaint with the Hearings Division to request that a hearing be set to consider the issues raised in the complaint. If the Commission determines after a hearing on the complaint that acreage has been assigned in violation of this section, the Commission may curtail or cancel the allowable production rate for any affected wells and/or may cancel the Certificate of Compliance (Form P-4) for any affected wells for failure to comply with this section.

(i) An operator shall file Form P-16, Acreage Designation, with each drilling permit application and with each completion report for horizontal wells in any field and for all wells in designated UFT fields as defined in §3.86 of this title. An operator assigning surface acreage to more than one well pursuant to subsection (g) of this section shall file Form P-16, Acreage Designation, with each drilling permit application and with each completion report. The operator may file Form P-16 with each drilling permit application and with each completion report for all other wells. The operator may also file proration unit plats for individual wells in a field.

Source Note: The provisions of this §3.40 adopted to be effective January 1, 1976; amended to be effective January 9, 2002, 27 TexReg 150; amended to be effective February 1, 2016, 41 TexReg 785; amended to be effective March 3, 2020, 45 TexReg 1387