Current through Reg. 49, No. 12; March 22, 2024
(a) Definitions. The following words and
terms, when used in this section and in §
RSA
3.31 of this title (relating to Gas
Reservoirs and Gas Well Allowable) (Statewide Rule 31) shall have the following
meanings, unless the context clearly indicates otherwise.
(1) Affiliate--A person or entity that owns,
is owned by, or is under common ownership with another person or entity to the
extent of 50% or more or that otherwise controls or is controlled by another
person or entity. Affiliates of a common entity are also affiliates of each
other. A person or entity that purchases gas solely for purposes other than
resale shall not be considered an affiliate, and an interstate pipeline, as
defined in the Natural Gas Policy Act of 1978, §2(15) (15 United States
Code §3301 et seq.), shall not be
considered an affiliate of an intrastate pipeline.
(2) Commission designee--A Railroad
Commission employee authorized to act for the commission. Any authority given
to a commission designee is also retained by the commission. Any action taken
by the commission designee is subject to review by the commission.
(3) Downstream purchaser--One that purchases
natural gas for resale and is not a first purchaser.
(4) First purchaser or initial purchaser--The
first purchaser of natural gas produced from a well. A first purchaser and any
affiliate of the purchaser that transports any natural gas it purchases from a
well by use of the same pipeline system used by the first purchaser of which it
is an affiliate shall be treated as a single first purchaser for purposes of
ratability requirements; provided, however, that an affiliate that is
purchasing and accepting deliveries pursuant to a special marketing program
that is in compliance with this section, shall be treated as a separate first
purchaser; and, provided further that the designation of such affiliate as a
separate first purchaser is reviewable by the commission and may be disallowed
upon a showing that the designation was for purposes of circumventing this
section. Any affiliate may file forms in its own name.
(5) Pipeline system--A network of physically
connected pipelines that are operated as a single unit under normal conditions.
(A) A first purchaser's pipeline system is
that portion of a physical segment of a pipeline that the first purchaser
owns.
(B) If a first purchaser does
not own the pipeline it uses to transport its gas, the first purchaser's
pipeline system shall include all the wells from which it purchases that are on
the pipeline system of the transport pipeline.
(C) A first purchaser may not segregate its
purchases from any one field into two or more pipeline systems by transporting
on another pipeline gas that it purchases as a first purchaser if the first
purchaser is also purchasing as a first purchaser from the same field and
transporting on a pipeline that it owns.
(D) A first purchaser may not segregate its
purchases from any one field into two or more pipeline systems by executing gas
exchange agreements.
(E) Any of a
first purchaser's pipeline systems which serve a common customer or common
customers in a common geographic location shall be operated in a manner to
avoid unjust or unreasonable discrimination in takes as between those
systems.
(F) A first purchaser
shall not segregate its physically connected pipelines that are capable of
being operated as a single unit under normal conditions into two or more
pipeline systems or designate a gathering system as a separate system for
purposes of circumventing this section.
(6) Prorated gas field--A reservoir or field
in which an allocation formula is in effect.
(b) General provisions. This section is
promulgated to promote and maintain ratable production of natural gas and to
require production in compliance with priority categories established by the
commission for the purposes of preventing waste, including production in excess
of market demand, protecting correlative rights, preventing discrimination, and
conserving the natural resources of this state. An operator shall not produce
in excess of its ratable share of the market demand as determined by this
section and §
RSA
3.28 and §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31). An operator shall produce
ratably as set out in subsection (e) of this section and shall produce in
compliance with subsection (i) of this section which establishes priority
categories of natural gas. Because production is dictated by pipeline capacity
and market demand, pipelines are an integral part of production regulation. The
requirements imposed on pipelines by this section and §
RSA
3.28 and §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31) are enforced to assist in
the regulation of production and provide the only method by which such
production regulation can be enforced and market demand met as required by
statutory law. A first purchaser shall not discriminate between different wells
from which it purchases in the same field, nor shall it discriminate unjustly
or unreasonably between separate fields. The provisions of this section
requiring ratable production and purchasing of gas apply to purchase and
production from wells from which a first purchaser is purchasing on its
pipeline system.
(c) Designation of
pipeline system. A first purchaser shall, on or before a date designated by the
commission or a commission designee, designate its pipeline system(s) and shall
identify its affiliates that use the same pipeline system, including an
affiliate operating a special marketing program that is in compliance with
subsection (k) of this section. A pipeline system designation must identify the
physical segment of pipeline that constitutes the pipeline system and identify
by Railroad Commission of Texas lease and/or identification number and field
the wells on that pipeline system from which the first purchaser is purchasing.
A change in pipeline system designation is not required to add or delete well
connections. The designation of a pipeline system cannot be changed by a first
purchaser without prior approval by the commission or a commission designee.
Approval of a change in pipeline system designation cannot be given without
prior notice of the requested designation given by the first purchaser to
affected operators of wells on the system(s) for which a change in designation
is sought. A hearing to determine the proper designation of a first purchaser's
pipeline system may be called by the commission, or may be requested by a first
purchaser or by an operator filing a complaint. The burden of proof in the
hearing shall be on the first purchaser.
(d) Operators who use produced gas. Any
person who purchases natural gas at the wellhead, at a common point within a
field or fields or at the outlet of a processing or treating plant must
determine if it is the initial purchaser.
(e) Production guidelines. An operator shall
produce without discrimination between its wells in the same field on the same
first purchaser's pipeline system and without unjust or unreasonable
discrimination between its wells in separate fields on the same first
purchaser's pipeline system. An operator shall apportion a first purchaser's
delivery requests ratably to its wells in each field on the same first
purchaser's pipeline system without discrimination in the same manner as
provided in this section and §
RSA
3.28 and §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31) and shall not produce in
excess of its ratable share of the market demand as its share is determined by
those rules. An operator shall produce in compliance with the priority
categories of gas production established by the commission in subsection (i) of
this section.
(f) Purchases from
different fields.
(1) In making purchases and
accepting deliveries between fields, a first purchaser of natural gas that
purchases and accepts delivery of gas from more than one field on its same
pipeline system must accept from each field a consistent percentage of the
portion of the aggregate deliverability as determined by the deliverability
tests and total gas limits that it is entitled to purchase from all wells from
which it purchases on its pipeline system, unless the purchaser can demonstrate
a just and reasonable basis for discriminating between fields.
(2) Natural gas purchases from a well by a
first purchaser that uses another first purchaser's pipeline system to
transport its gas and sells the gas purchased on that pipeline system solely to
the first purchaser that owns the transport pipeline must be treated as first
purchases of gas by the first purchaser that owns the transport
pipeline.
(g) Purchases
within a field.
(1) In making purchases and
accepting deliveries within fields, a first purchaser of natural gas that
purchases and accepts delivery of gas from different gas wells in the same
priority category (see subsection (i) of this section) in the same field on its
same pipeline system shall purchase and accept from the wells from which it
purchases in the field a consistent percentage of the portion that it is
entitled to purchase of the maximum allowable that a well is entitled to under
the field's allocation formula. If purchases and deliveries from different
wells in the same field become nonratable, the first purchaser shall consider
commission-assigned underproduction and overproduction to establish an
appropriate pattern of purchases or acceptance of deliveries to restore
ratability.
(2) Natural gas
purchases from a well by a first purchaser that uses another first purchaser's
pipeline system to transport its gas and sells the gas purchased on that
pipeline system solely to the first purchaser that owns the transport pipeline
must be treated as first purchases of gas by the first purchaser that owns the
transport pipeline.
(3) Purchases
and deliveries of casinghead gas shall be based on the well's gas limit as
specified in §
RSA 3.49
of this title (relating to Gas-Oil Ratio) (Statewide Rule 49) as provided in
subsection (h) of this section. Overproduction and underproduction of gas is
administered by the provisions of §
RSA
3.31 of this title (relating to Gas
Reservoirs and Gas Well Allowable) (Statewide Rule 31). A first purchaser shall
not reduce purchases from a limited well as described in §3.31(g)(5) until
all prorated gas wells from which it purchases in the field connected to its
same pipeline system are ratably reduced to the assigned allowable of the
limited well. Below that point, purchases from all prorated wells and limited
wells should be reduced ratably by purchasing and accepting delivery of the
same percentage of the portion that it is entitled to purchase of the maximum
allowable established for the well by the field's allocation formula. If
purchases and deliveries from different wells in the same field become
nonratable, the first purchaser shall consider commission-assigned
underproduction and overproduction in establishing an appropriate pattern of
purchases or acceptances of deliveries to restore ratability. When purchases of
gas described in subsection (i)(2) or (5) of this section are to be reduced,
they shall be reduced ratably within each priority category.
(h) Casinghead gas reductions.
When purchases and deliveries of casinghead gas described in subsection (i)(1)
or (3) of this section are to be reduced, each well's share of the reduction
shall be calculated by multiplying the total reduction by the fractional share
that each well's gas limit bears to the arithmetic sum of the aggregate gas
limits of all wells in the field from which the first purchaser has been
purchasing on its same pipeline system. In calculating its reduction of a well,
a first purchaser shall use that portion of the gas limits that it is entitled
to purchase. A well operating under net gas/oil ratio authority shall produce
no more gas than its gas limit as it would be reduced by the previously
mentioned procedure absent the net gas/oil ratio authority.
(i) Priority categories. First purchasers of
gas shall satisfy their pipeline system demand for gas by purchasing and
accepting delivery of gas from the following priority categories in ascending
numerical order. Lower priority category gas is gas from a higher numerical
category. A first purchaser shall not within its pipeline system curtail gas
from a priority category if the purchaser is purchasing and accepting delivery
of lower priority category gas as a first purchaser on its same pipeline
system. A first purchaser's purchases and acceptance of delivery of first,
second, or third priority category gas under an obligation to purchase and
accept delivery from the tailgate of a plant processing gas to extract liquids,
or from a gathering system that purchases from wells and is required by
contract or by its physical connections to sell its gas entirely to the
purchaser, whether or not these purchases are made as a first purchaser, shall
not be curtailed if the first purchaser is purchasing and accepting delivery of
lower priority category gas as a first purchaser on its same pipeline system.
If curtailed, the curtailment must be ratable with like priority category gas
which the first purchaser is purchasing and accepting delivery of from wells on
its same pipeline system.
(1) First priority
shall be given to casinghead gas produced from certified tertiary recovery
projects approved by the commission and secondary recovery projects involving
water injection, gas injection, or pressure maintenance approved by the
commission to prevent waste.
(2)
Second priority shall be given to gas from special allowable wells as defined
in §
RSA
3.31<subdiv>(g)(6)</subdiv> of
this title (relating to Gas Reservoirs and Gas Well Allowable) (Statewide Rule
31) granted special allowable status after the effective date of this section
to prevent physical waste. Wells classified as special allowable wells pursuant
to notice and hearing prior to the effective date of this section shall be
given second priority unless a new determination is made that the special
allowable status is not necessary to prevent physical waste.
(3) Third priority shall be given to the
remainder of casinghead gas so that gas produced in association with oil
production shall not be wastefully vented and oil production shall not be
unnecessarily curtailed. Gas recovered from a landfill or sewage process shall
also be given third priority.
(4)
Fourth priority shall be given to gas from wells classified under §
RSA
3.49<subdiv>(b)</subdiv> of this
title (relating to Gas-Oil Ratio) (Statewide Rule 49), but only to the extent
of one full allowable for multiple 49(b) wells.
(5) Fifth priority shall be given to gas from
administrative special allowable wells as defined in §
RSA
3.31<subdiv>(g)(7)</subdiv> of
this title (relating to Gas Reservoirs and Gas Well Allowable) (Statewide Rule
31) to gas from special allowable wells as described in §3.31(g)(6)
granted that status prior to the effective date of this section (see paragraph
(2) of this subsection) without notice and hearing, and to gas from special
allowable wells granted that status by the commission subsequent to the
effective date of this section after notice and hearing for other reasons than
to prevent physical waste.
(6)
Sixth priority shall be given to the remainder of gas well gas, including
limited wells (see subsection (g) of this section).
(j) Prohibition against discriminating in
favor of purchaser's own production. A first purchaser of natural gas may not
discriminate between or against natural gas of a similar kind or quality in
favor of its own production or production in which it may be directly or
indirectly interested in whole or in part.
(k) Special marketing programs. If a first
purchaser elects to qualify an affiliate as a separate first purchaser, the
first purchaser may designate the affiliate as a special marketing program. The
special marketing program must comply with the following with respect to the
purchase and acceptance of delivery of natural gas.
(1) For purposes of this subsection, an
affiliated first purchaser is the special marketing program purchaser's
affiliate whose pipeline is being used to transport the gas in the special
marketing program.
(2) Each and
every special marketing program offer to purchase gas must be made without
discrimination within a field and without unjust or unreasonable discrimination
between fields to all operators for all wells on the pipeline system of the
affiliated first purchaser from which the affiliated first purchaser has been
purchasing and accepting delivery of gas as a first purchaser. The offer must
also be made for all first, second, and third priority category gas on the
affiliated first purchaser's pipeline system which it has been purchasing and
accepting for delivery under an obligation to purchase and accept delivery from
the tailgate of a plant processing gas to extract liquids or from a gathering
system that purchases from wells and is required by contract or by its physical
connections to sell its gas entirely to the affiliated first purchaser, whether
or not those purchases were made as a first purchaser.
(3) It is unreasonably discriminatory, and
therefore prohibited, for the offer to purchase gas in the special marketing
program, or for any release of gas for sale in the special marketing program to
require release of any claims under any existing contract or require
modification of any existing contract provisions other than a release of the
gas for sale in the special marketing program or a requirement of a
volume-for-volume basis for gas taken in the special marketing program to be
credited against the contract from which gas is released for sale in the
special marketing program, if the credit provision is limited to the period of
actual participation in the special marketing program. Nothing in this
paragraph shall prohibit an operator of any well from offering terms
inconsistent with these provisions. The making of an offer which is not
accepted shall not affect rights under existing contracts.
(4) If a well producing priority category 1,
2, or 3 gas is shut in or curtailed, and waste, as defined in the Texas Natural
Resource Code, Title 3, is found by the commission to exist, neither a special
marketing program purchaser nor its affiliated first purchaser may purchase
lower priority category gas until all the priority Category 1, 2, and 3 gas is
taken and resulting waste is prevented. The commission shall expedite
determination of waste, and may enter an emergency, temporary, or interim order
upon application and affidavit proof that waste is occurring. The application
and affidavit proof must be accompanied by supporting documentation, including
data on well performance, and a statement that the application and affidavit
proof has been served on the first purchaser(s) of the subject well(s) and any
affiliated special marketing program purchaser using the first purchaser(s)
same pipeline system on or before the date the application and affidavit proof
has been mailed or delivered to the commission, with the opportunity for the
first purchaser to respond within five days of service or of commission
receipt, whichever is latest.
(5)
The affiliated first purchaser must continue in compliance with this section to
purchase and accept delivery from the wells for which the offer was made and
not accepted.
(6) With respect to
the purchase of gas from those that accept an offer made pursuant to this
subsection, the special marketing program purchaser must comply with this
section and §
RSA
3.28 and §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31) as a separate first
purchaser.
(7) It is not the
objective of this subsection to abrogate any existing contract rights or
obligations.
(l)
Sellers' complaint procedure. Any operator or nonoperator that is denied by the
first purchaser in violation of this section or §
RSA
3.28 or §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31) the opportunity to produce
a well's ratable share of gas or opportunity for a well to participate in a
special marketing program may file a complaint with the commission and request
the commission to direct the first purchaser to end the discriminatory
practices. A complainant may request a hearing regarding alleged discriminatory
practices or to determine whether a first purchaser is or has, through gas
exchange agreements or through actions of its affiliate(s), denied an operator
a reasonable opportunity to market its gas.
(m) Purchasers' complaint procedure. If after
reasonable notice by the purchaser, an operator fails to comply with a first
purchaser's request to reduce production ratably in compliance with this
section and §
RSA
3.28 and §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31) the purchaser may file a
complaint with the commission and request the commission to direct the operator
to comply with the purchaser's requests to reduce production ratably. The
complainant or the operator may request the commission to take further action,
including setting the issue for hearing.
(n) Hardship exceptions. If the operation of
this section or §
RSA
3.28 or §
RSA
3.31 of this title (relating to Potential and
Deliverability of Gas Wells To Be Ascertained and Reported, and Gas Reservoirs
and Gas Well Allowable) (Statewide Rules 28 and 31) causes undue hardship, the
commission may, after proper notice and hearing, grant an exception or take
appropriate action, including action to prevent waste or protect correlative
rights.
(o) Severability
provisions. If any provision of this section or its application to any person
or circumstance is held invalid, the invalidity shall not affect other
provisions or applications of the section which can be given effect without the
invalid provisions or appreciation, and the provisions of the section are
declared to be severable.