New Mexico Administrative Code
Title 19 - NATURAL RESOURCES AND WILDLIFE
Chapter 15 - OIL AND GAS
Part 21 - GAS PRORATION AND ALLOCATION
Section 19.15.21.12 - GAS PRORATION RULES

(1) Standard gas proration unit size and well spacing.

(2) Nonstandard gas proration units.

(1) Gas purchasers or gas transporters shall nominate. Each gas purchaser or each gas transporter shall file with the division its nomination for the amount of gas that it in good faith desires to purchase or expects to transport during the ensuing allocation period from each gas pool 19.15.21 NMAC regulates. The purchaser may delegate the nomination responsibility to the transporter, operator or broker by notifying the division's Santa Fe office. The purchaser shall submit the nomination for each pool to the division's Santa Fe office on form C-121-A by the first day of the month during which the division will consider at its allocation hearing the nominations for the succeeding allocation period. The division shall consider at its allocation hearing the nominations received, actual production and other factors the division deems applicable in determining the amount of gas that may be produced without waste during the ensuing allocation period.

(2) The director may suspend Subsection B of 19.15.21.12 NMAC whenever it appears that the nominations are of little or no value.

(3) Schedule. The division shall issue a gas proration schedule for each allocation period showing the monthly allowable for each GPU that the operator may produce during each month of the ensuing allocation period, each GPUs' current classification and other information as is necessary to show the allowable production status of each GPU on the schedule. The division may issue supplemental proration schedules during an allocation period as necessary to show changes in GPU classification, adjustments to allowables due to changes in market conditions or to reflect other changes the division deems necessary.

(4) Proration of all gas wells within a pool. The division shall include in the proration schedule the gas wells, in the gas pools 19.15.21 NMAC regulates, delivering to a gas transporter, and shall include in the proration schedule wells that the division finds are being unreasonably discriminated against through denial of access to a gas transportation facility, which are reasonably capable of handling the type of gas the wells produce.

(1) Filing of form C-102 and form C-104 required. The division shall not assign a GPU an allowable before receipt of form C-102 and the approval date of form C-104.

(2) How allowables are calculated. The total allowable to be allocated to each gas pool for each allocation period shall equal the estimated market demand as the division determines, plus any adjustments the director deems necessary to equate the total pool allowable to the estimated market demand. The director may make adjustments the director deems necessary to compensate for overproduction, underproduction and other circumstances that may necessitate the adjustment to equate the pool allowable to the anticipated market demand. The director shall establish estimated market demand for each pool from any information the director requires and can consist of nominations from purchasers, transporters or other parties having knowledge of market demand for gas from the pools, actual past production figures, seasonal trends or any other factors the director deems necessary to establish estimated market demand. The director is not required to use all the information requested and can establish market demand by any method the director approves. The division shall assign a monthly allowable to each GPU entitled to an allowable for the ensuing allocation period by allocating the pool allowable among all such GPUs in that pool according to the procedure set forth in 19.15.21 NMAC. Should market conditions indicate a change is necessary, the director may adjust allowables up or down during the six-month allocation period using a maximum of 10 percent as a guideline.

(3) Marginal GPU allowable. The monthly allowable the division assigns to each marginal GPU shall equal the marginal GPU's average monthly production from its latest classification period.

(4) Non-marginal GPU allowable. The division shall determine non-marginal GPU allowables in conformance with the applicable special pool orders.

(5) New connects assignment of allowables. Allowables to newly completed gas wells shall commence, in pools where acreage is the only proration factor, on the date of first delivery of gas to a gas transporter as demonstrated by an affidavit the transporter furnishes to the appropriate division district office or the approval date of form C-102 and form C-104, whichever is later.

(6) Gas charged against GPU's allowable. Except as provided in the special pool orders, the operator shall charge the volume of produced gas sold or beneficially used other than lease fuel from each GPU against the GPU's allowable; however, the operator shall not charge the gas it uses in maintaining the well's producing ability against the allowable.

(7) Change in acreage. If an operator requests to change the acreage assigned to a GPU, the operator shall file form C-102 with the appropriate division district office. The revised allowable, as the division determines, assigned to the GPU shall be effective on the first day of the month following the division's receipt of the notification.

(8) Minimum allowables. After notice and hearing, the division may assign minimum allowables for prorated gas pools to avoid waste, encourage efficient operations and to prevent wells' premature abandonment. (See special pool orders for minimum allowable amount.) In determining the volume of minimum allowable for a well with a standard proration unit, the division shall take into account economic and engineering factors such as drilling and operating costs, anticipated revenues, taxes and any similar data that establish that the ultimate recovery of hydrocarbons will increase from the pool because of the adoption of a minimum allowable for the pool. Once adopted, the division shall proportionally adjust minimum allowable for wells with nonstandard proration units.

(9) Deliverability tests. In pools where acreage and deliverability are proration factors, an operator shall test wells on non-marginal GPUs in accordance with division rules and the division shall use the test results in calculating deliverabilities for the succeeding proration period. The operator shall test wells on GPUs reclassified to non-marginal within 90 days of the order and thereafter in accordance with the appropriate testing schedule for the pool. Wells on marginal GPUs are exempt from deliverability testing.

(1) Underproduction. A non-marginal GPU that has an underproduced status as of the end of a gas proration period may carry the underproduction forward in the next gas proration period and may produce the underproduction in addition to the allowable assigned during the succeeding period. The division shall cancel an underproduction carried forward into a gas proration period and remaining unproduced at the end of the gas proration period.

(2) Balancing underproduction. Production during any one month of a gas proration period greater than the allowable the division assigned to a GPU for such a month shall be applied against the underproduction carried into such a period in determining the amount of allowable, if any, to be canceled.

(3) Overproduction. A GPU that has an overproduced status as of the end of a gas proration period shall carry the overproduction forward into the next gas proration period. The overproduction shall be made up by underproduction during the succeeding gas proration period. The division shall shut-in a GPU that has not made up the overproduction carried into a gas proration period by the end of the period until the overproduction is made up.

(4) Exception to shut in for overproduction. The director may permit a GPU that is subject to shut-in pursuant to Paragraph (3) of Subsection D of 19.15.21.12 NMAC to produce up to 250 MCF of gas per month upon the operator's proper showing to the director that complete shut-in would cause undue hardship, provided however, the director may rescind permission for a GPU produced greater than the monthly rate the director.

(5) Balancing overproduction. Allowable assigned to a GPU during a one month of a gas proration period greater than the production for the same month shall be applied against the overproduction chargeable to the GPU in determining the overproduction that must be made up pursuant to the provisions of Paragraph (3) of Subsection D of 19.15.21.12 NMAC above.

(6) Exception to balancing overproduction. The director may allow the operator to make up overproduction at a lesser rate than permitted under Paragraph (3) of Subsection D of 19.15.21.12 NMAC upon the operator's showing at public hearing that the lesser rate is necessary to avoid material damage to the well.

(7) Hardship gas wells. If a GPU containing a hardship gas well is overproduced, the operator shall take the necessary steps to reduce production in order to reduce the overproduction. An overproduction existing at the time of a well's designation as a hardship gas well or accruing to the GPU after the designation shall be carried forward until it is made up by underproduction. The division shall not permit a GPU containing a hardship gas well, which GPU is overproduced, to produce at a rate higher than the minimum producing rate the division authorized.

(8) Moratorium on shut-ins. The director may grant a pool-wide moratorium of up to three months as to the shutting in of gas wells in a pool during periods of high demand emergency upon the operator's proper showing that the emergency exists, and that a significant number of the wells in the pool are subject to shut-in pursuant to the provisions of Paragraph (3) of Subsection D of 19.15.21.12 NMAC. The director shall not grant a moratorium beyond three months except after notice and hearing.

(9) The director may reinstate allowable to wells that suffered cancellation of allowable under Paragraph (1) of Subsection D of 19.15.21.12 NMAC or Paragraph (3) of Subsection E of 19.15.21.12 NMAC or loss of allowable due to reclassification of a well under Paragraph (2) of Subsection E of 19.15.21.12 NMAC if the cancellation or loss of allowable was caused by non-access or limited access to the average market demand in the pool rather than inability of the well to produce. Upon petition, with a showing of circumstances that prevented production of the non-marginal allowable, and evidence that the well was capable of producing at allowable rates during the period for which reinstatement is requested, the allowable may be reinstated in such amounts needed to avoid curtailment or shut-in of the well for excessive overproduction. The division may approve the petition administratively or docket the petition for hearing within 30 days after receipt in the division's Santa Fe office.

(1) Reclassification by the director. The director may reclassify a marginal or non-marginal GPU anytime the GPUs producing ability justifies reclassification. The director may suspend the reclassification of GPUs on the director's own initiative, or upon an affected interest owner's proper showing, if it appears that the suspension is necessary to permit underproduced GPUs, which would otherwise be reclassified, a proper opportunity to make up the underproduction.

(2) Reclassification to marginal. The director may reclassify a non-marginal GPU as marginal in either of the following ways.

(3) Cancellation of underproduction for marginal GPU. The division shall not permit a GPU that is classified as marginal to accumulate underproduction, and shall cancel an underproduction accrued to a GPU before its classification as marginal.

(4) Reclassification to non-marginal. If, at the end of a classification period, a marginal GPU has produced more gas during the proration period to that time than its shadow allowable for that same period, the division shall reclassify the GPU as a non-marginal GPU.

(5) Reinstatement of status. The division shall reinstate to a GPU reclassified to non-marginal under the provisions of Paragraph (4) of Subsection E of 19.15.21.12 NMAC all underproduction that accrued or would have accrued as a non-marginal GPU from the current proration period. The division may reinstate underproduction from the prior proration period after notice and hearing. Uncompensated-for overproduction accruing to the GPU while marginal shall be chargeable upon reclassification to non-marginal.

(1) reports for a month shall include not less than 24 or more than 32 reported days;

(2) reported days may include as many as the last seven days of the previous month but no days of the succeeding month; and

(3) the total of the monthly reports for a year shall include not less than 360 or more than 368 reported days.