TX NATURAL RESOURCES CODE

TITLE 3. OIL AND GAS

SUBTITLE A. ADMINISTRATION

CHAPTER 86. REGULATION OF NATURAL GAS

SUBCHAPTER D. PRODUCTION OF GAS



§ 86.081. REGULATION OF PRODUCTION.
     (a) For the protection of public and private interests, the commission, on written complaint by an affected party or on its own initiative and after notice and an opportunity for a hearing, shall prorate and regulate the daily gas well production from a common reservoir if the commission finds that action to be necessary to:
          (1) prevent waste; or
          (2) adjust the correlative rights and opportunities of each owner of gas in a common reservoir to produce and use or sell the gas as permitted in this chapter.
     (b) When, as provided in Subsection (b) of Section 85.046 or Subsection (b) of Section 86.012, the commission has permitted production by commingling oil or gas or oil and gas from multiple stratigraphic or lenticular accumulations of oil or gas or oil and gas, the commission may regulate all activities that are under its jurisdiction and associated with such commingled, separate multiple stratigraphic or lenticular accumulations of oil or gas or oil and gas as if the accumulations were a single common reservoir; provided, however, that:
          (i) such commingling shall not cause the allocation of allowable production from a well producing from any separate accumulation or accumulations to be less than that which would result from the commission applying the provisions of Section 86.095 to such accumulation or accumulations; and
          (ii) the allocation of the allowable for such commingled production shall be based on not less than two factors which the Railroad Commission shall take into account as directed by Section 86.089.

Acts 1977, 65th Leg., p. 2534, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 1981, 67th Leg., p. 2580, ch. 688, § 3, eff. June 16, 1981; Acts 1995, 74th Leg., ch. 435, § 3, eff. Aug. 28, 1995; Acts 2005, 79th Leg., ch. 881, § 1, eff. June 17, 2005;

Acts 2005, 79th Leg., ch. 1119, § 1, eff. June 18, 2005.

§ 86.082. EXERCISE OF AUTHORITY TO PREVENT WASTE.
     The commission shall exercise its authority to prevent waste when the presence or imminence of waste is supported by a finding based on the evidence introduced at a hearing after proper notice.

Acts 1977, 65th Leg., p. 2534, ch. 871, art. I, § 1, eff. Sept. 1, 1977.

§ 86.083. EXERCISE OF AUTHORITY TO ADJUST CORRELATIVE RIGHTS AND OPPORTUNITIES.
     The commission shall exercise its
      authority to adjust correlative rights and opportunities of each owner of gas in a common reservoir to produce and use or sell the gas when evidence introduced at a hearing after proper notice will support a finding made by the commission that the aggregate lawful volume of the open flow or daily potential capacity to produce of all gas wells located in a common reservoir is in excess of the daily reasonable market demand for gas from gas wells that may be produced from the common reservoir, to be used as permitted in this chapter.

Acts 1977, 65th Leg., p. 2534, ch. 871, art. I, § 1, eff. Sept. 1, 1977.

§ 86.084. DETERMINATION OF STATUS OF PRODUCTION.
     (a) The commission, on written complaint by an affected party or on its own initiative, may determine the status of gas production from any reservoir in the state.
     (b) If the commission finds that waste exists or is imminent in the production of gas from a reservoir, or that the capacity of the wells to produce gas from a reservoir exceeds the market demand for gas from the reservoir, the commission by proper order shall prorate and regulate the gas production from the reservoir on a reasonable basis.

Acts 1977, 65th Leg., p. 2534, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 2005, 79th Leg., ch. 881, § 2, eff. June 17, 2005.

§ 86.085. DETERMINATION OF DEMAND AND VOLUME.
     On or before the last day of each month, the commission or a person authorized by the commission shall determine:
          (1) the lawful market demand for gas to be produced from each prorated reservoir during the following month; and
          (2) the volume of gas that can be produced without waste from each prorated reservoir and each well in the reservoir during the following month.

Acts 1977, 65th Leg., p. 2534, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 1993, 73rd Leg., ch. 270, § 1, eff. May 24, 1993; Acts 2005, 79th Leg., ch. 881, § 3, eff. June 17, 2005.

§ 86.086. MONTHLY RESERVOIR ALLOWABLE.
     After determining demand for and volume of production from a prorated reservoir as provided in Section 86.085, the commission shall fix the monthly reservoir allowable of gas to be produced from the reservoir at the lawful market demand for the gas or at the volume that can be produced from the reservoir without waste, whichever is the smaller quantity.

Acts 1977, 65th Leg., p. 2535, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 2005, 79th Leg., ch. 881, § 4, eff. June 17, 2005.

§ 86.087. MONTHLY WELL ALLOWABLE.
     The monthly reservoir allowable shall be allocated among all wells entitled to produce gas from a prorated reservoir to give each well its fair share of the gas to be produced from the reservoir, but each well is restricted to the amount of gas that can be produced from it without waste. The volume of gas allocated to each well is the monthly allowable for that well.

Acts 1977, 65th Leg., p. 2535, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 2005, 79th Leg., ch. 881, § 5, eff. June 17, 2005.

§ 86.088. DAILY ALLOWABLE.
     The daily market demand for gas and the daily allowable shall be determined by dividing the monthly demand and the monthly allowable by the number of days in the month.

Acts 1977, 65th Leg., p. 2535, ch. 871, art. I, § 1, eff. Sept. 1, 1977.

§ 86.089. FACTORS IN DETERMINING ALLOWABLE.
     (a) In determining the daily allowable production for each gas well in a prorated reservoir, the commission shall take into account:
          (1) the size of the tract segregated with respect to the surface position and common ownership on which the gas well or wells are located;
          (2) the relation between the daily producing capacity of each gas well and the aggregate daily capacity of all gas wells producing the same kind of gas in the same common reservoir or zone; and
          (3) other factors that are pertinent.
     (b) In determining the daily allowable production for each gas well, the commission shall not take into account the size of the tract on which any gas well or wells are located in excess of the efficient drainage area of the well or wells. The drainage area shall be determined by the commission.
     (c) In ascertaining the drainage area of a well, the commission shall take into account such factors as are reflected in the productive capacity of a gas well, including formation pressure, the permeability and porosity of the producing formation, and the well bore's structural position, together with all other factors taken into account by a reasonably prudent operator in determining the drainage area for a gas well.

Acts 1977, 65th Leg., p. 2535, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 1985, 69th Leg., ch. 745, § 2, eff. June 14, 1985; Acts 2005, 79th Leg., ch. 881, § 6, eff. June 17, 2005.

§ 86.090. AUTHORIZING OVERPRODUCTION AND UNDERPRODUCTION.
     (a) In order to adjust the correlative rights and
      opportunities of each owner to produce, use, and sell gas from a common reservoir from which a portion of the market demand is seasonal or where a portion of the market demand fluctuates from month to month, the commission may permit the wells in the reservoir to be produced in excess of the monthly allowable, in accordance with the conditions and limitations set forth in Subsections (b), (c), (d), and (e) of this section, if no waste would be caused by such production.
     (b) Except as authorized in Subsection (e) of this section, no well may be permitted in any one month to produce in excess of two times its monthly allowable, except if there exists or there is threatened a situation causing an increase in the demand for the gas from the reservoir which cannot be satisfied otherwise from the reservoir, then the commission may allow a well to be produced in excess of two times its monthly allowable.
     (c) Except as authorized in Subsection (e) of this section, no well may ever be allowed to produce in excess of twice its allowable for more than two months in any period of six months beginning on the first day of March and September of each year. If a well has produced twice its allowable or more during a period of six months beginning on the first day of March or September, it shall be shut in or, by appropriate commission order, have its production restricted to a fractional part of its monthly allowable until its production and allowable are in balance.
     (d) On the first day of March and September of each year, the commission shall restrict production from all wells that are then overproduced to the fractional part of their monthly allowable that will bring the accumulated allowables and the accumulated monthly production in balance during the next six months. If the overproduction is not balanced during that six-month period, the overproduced well shall be shut in or, by appropriate commission order, have its production restricted to a fractional part of its monthly allowable until its production and allowable are in balance.
     (e) The commission by appropriate order may permit a gas well to be underproduced for a period of six consecutive months and may allow the accumulated underproduction to be produced in addition to the regular monthly allowable during the following six-month period. If the underproduction is not balanced during this six-month period, the remaining accumulated underproduction may, by appropriate commission order, be produced in addition to the regular monthly allowable during subsequent consecutive six-month periods.

Acts 1977, 65th Leg., p. 2535, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 1985, 69th Leg., ch. 745, § 1, eff. June 14, 1985.

§ 86.091. MARGINAL GAS WELL AND LIMITS ON WELL RESTRICTIONS.
     A "marginal gas well," as applied to a well
      classified by the commission as a gas well, means a well that is incapable of producing under normal operating conditions more than 250,000 cubic feet of gas per day. None of the provisions of this chapter shall require the commission to limit the production from a marginal gas well to a quantity less than its actual deliverability if the well:
          (1) has a daily deliverability of 100,000 cubic feet of gas or less; or
          (2) is in a field for which special field rules are not in effect.

Acts 1977, 65th Leg., p. 2536, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 1985, 69th Leg., ch. 745, § 2, eff. June 14, 1985; Acts 1995, 74th Leg., ch. 361, § 1, eff. Aug. 28, 1995;

Acts 1997, 75th Leg., ch. 299, § 1, eff. May 26, 1997.

§ 86.093. EFFECT OF OIL AND GAS STRATUM ON GAS ONLY STRATUM.
     If gas is produced from one stratum and oil and gas are
      produced from another stratum in the same well bore, the commission shall take into account the amount of gas produced from the oil stratum in determining the amount of gas that may be produced from the stratum producing gas only. The commission may subtract the amount of the casinghead gas produced from the dry gas that would be allocated to the well if it produced dry gas and may restrict the dry gas production accordingly.

Acts 1977, 65th Leg., p. 2536, ch. 871, art. I, § 1, eff. Sept. 1, 1977.

§ 86.094. AUTHORITY TO INCREASE TAKE ABOVE ALLOWABLE.
     If unforeseen contingencies increase the demand for gas required by a distributor, transporter, or purchaser to an amount in excess of the total allowable production of the wells in a prorated reservoir to which the person is connected, the distributor, transporter, or purchaser may increase the person's take ratably from all these wells in order to supply the person's demand for gas, provided that notice of the increase and the amount of the increase are given to the commission within five days; and provided further, the commission shall adjust the inequality of withdrawals caused by the increase in fixing the allowable production of the various wells in the common reservoir or zone.

Acts 1977, 65th Leg., p. 2537, ch. 871, art. I, § 1, eff. Sept. 1, 1977. Amended by Acts 2005, 79th Leg., ch. 881, § 7, eff. June 17, 2005.

§ 86.095. ZONING COMMON RESERVOIRS.
     (a) The commission shall zone a common reservoir if, on consideration of the evidence introduced at a hearing, it finds that either the prevention of waste or adjustment of correlative rights and opportunities, or both, as designated in Section 86.081 of this code, may be accomplished more adequately by zoning the common reservoir.
     (b) If the commission zones a common reservoir, each zone shall be regarded as a separate common reservoir in making allocations of daily allowable production as provided in this chapter.
     (c) If the commission zones a common reservoir, the commission:
          (1) shall allocate to each zone its just proportion of the market demand for gas from the common reservoir;
          (2) shall establish appropriate rules applicable to each zone;
          (3) may adjust its orders to the practicable conditions that exist; and
          (4) may enter any reasonable order necessary to effectuate the purposes of this chapter.
     (d) The commission may segregate a sour gas area from a sweet gas area and is not required to restrict the allowable production of the sour gas zone to the same percentages that may be produced from the sweet gas zone.

Acts 1977, 65th Leg., p. 2537, ch. 871, art. I, § 1, eff. Sept. 1, 1977.

§ 86.096. FAILURE TO USE OR SELL ALLOWABLE PRODUCTION.
     If the commission finds that the owner of a gas well
      failed or refused to use or sell the allowable production from his well when the owner was offered a connection or market for the gas at a reasonable price, the well shall be excluded from consideration in allocating the daily allowable production from the reservoir or zone in which it is located until the owner of the well signifies to the commission his desire to use or sell the gas. In all other cases, all gas wells shall be taken into account in allocating the allowable production among wells producing the same type of gas.

Acts 1977, 65th Leg., p. 2537, ch. 871, art. I, § 1, eff. Sept. 1, 1977.

§ 86.097. PRODUCTION OF GAS FROM OIL WELL.
     No person in possession of or operating an oil well may produce from the oil well gas found in a horizon productive of gas only.

Acts 1977, 65th Leg., p. 2537, ch. 871, art. I, § 1, eff. Sept. 1, 1977.