Part 1. RAILROAD COMMISSION OF TEXAS

Chapter 3. OIL AND GAS DIVISION

16 TAC §3.26

The Railroad Commission of Texas adopts amendments to §3.26, regarding separating devices, tanks, and surface commingling of oil, without changes to the version published in the February 25, 2000, issue of the Texas Register (25 TexReg 1484). The adopted amendments reduce the regulatory burden on oil and gas wells and reduce operating costs for industry by reducing the frequency of well testing of commingled wells while insuring the protection of the correlative rights of the working and royalty interest owners. Reduced operating costs may enable operators to continue producing hydrocarbons that otherwise would not be produced due to unfavorable economic conditions.

The adopted amendments to subsection (b)(3)(A) eliminate the currently-prescribed three intervals of testing with a requirement for semi-annual testing. The adopted amendments to subsection (b)(3)(B) eliminate the requirement that operators obtain the written consent of all royalty and working interest owners before implementing less frequent testing. Instead, under the adopted amendments to subsection (b)(3)(B) operators may be permitted to utilize annual testing upon written application demonstrating to the Commission that annual testing will not harm the correlative rights of the working or royalty interest owners of the commingled wells.

The Commission simultaneously readopts §3.26, with the adopted amendments, in accordance with Texas Government Code, §2001.039. The agency's reasons for adopting this rule continue to exist. The notice of proposed review was filed with the Texas Register concurrently with the proposed amendments and published in the February 25, 2000, issue of the Texas Register (25 TexReg 1732).

The Commission received no comments on the proposal.

The Commission adopts the amendments pursuant to Texas Natural Resources Code, §§81.051, 81.052, 85.042, 85.046, 85.053, 85.054, 85.201, 85.202, 86.011, 86.012, 86.041, and 86.042, which authorize the Commission to adopt rules for the following purposes: to govern and regulate persons and their operations under the jurisdiction of the Commission; to distribute, prorate and apportion allowable production; to adjust correlative rights and opportunities; to determine the daily allowable production for each well; to effectuate the provisions and purposes of the Natural Resources Code; and to conserve and prevent waste of oil and gas.

Texas Natural Resources Code, §§81.051, 81.052, 85.042, 85.046, 85.053, 85.054, 85.201, 85.202, 86.011, 86.012, 86.041, and 86.042, are affected by the adopted amendments.

Issued in Austin, Texas on April 11, 2000.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 11, 2000.

TRD-200002592

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Effective date: May 1, 2000

Proposal publication date: February 25, 2000

For further information, please call: (512) 475-1295

16 TAC §3.106

The Railroad Commission of Texas adopts new §3.106, relating to sour gas pipeline facility construction permits, with changes to the version published in the February 25, 2000, issue of the Texas Register (25 TexReg 1486). The commission had previously published a proposed version of this rule, the product of more than two years' of drafting, discussion, and revision, in the August 13, 1999, issue of the Texas Register ; that proposal generated numerous comments and suggestions for changes, many of which the commission has incorporated into the version of §3.106 published on February 25, 2000. The new section implements House Bill 3194, 75th Legislature, Regular Session, which enacted Texas Civil Statutes, Article 6053-4 (now codified at Texas Utilities Code, §§121.451 - 121.454), which requires an operator to obtain a commission permit before beginning construction of a sour gas pipeline facility.

The commission received comments from two associations, the Texas Oil and Gas Association (TxOGA) and the Association of Texas Intrastate Natural Gas Pipelines (ATINGP). TxOGA's comments did not specifically express either support or opposition to new §3.106 while ATINGP's comments stated general support for the new rule. The specific points of each group's comments and the commission's responses are discussed in subsequent paragraphs with the summary of the factual basis for new §3.106 as adopted.

New §3.106 establishes procedures for the required permit for construction of a sour gas pipeline facility. The new rule defines terms; requires a permit to construct a sour gas pipeline facility and identifies those sour gas pipelines which will be exempted from the new rule; explains the permit application process; states those items which will be required for approval of the permit; establishes guidelines for filing protests; provides for hearings in certain circumstances; and establishes deadlines for processing applications.

Existing rule §3.36 of this title, relating to oil, gas, or geothermal resource operation in hydrogen sulfide areas, has been in effect since prior to the creation of the Texas Administrative Code on January 1, 1976, and has been adequate to protect human health and the environment. However, the legislature, through its enactment of Texas Utilities Code, §§121.451 - 121.454, has directed the commission to issue sour gas pipeline facility construction permits. Regardless of the merits of rule §3.36, the commission is compelled to undertake the permitting activities prescribed by Texas Utilities Code, §§121.451 - 121.454. The commission keenly appreciates concerns about unneeded regulation; nevertheless, the commission believes that this rule is necessary and appropriate to ensure that operators and the public are informed about the commission's interpretation of Texas Utilities Code, §§121.451 - 121.454, particularly in light of the controversies attendant to this rulemaking.

For example, there was some concern initially that Texas Utilities Code, §§121.451 - 121.454, would subject all pipelines in the state, not just those subject to the federal pipeline safety program, to pipeline safety standards. The commission does not interpret the statute to impose pipeline safety regulations in situations where they were not previously applicable. Similarly, there was a great deal of controversy as to whether this rule would or should mandate submission of a complete contingency plan, if required by §3.36 of this title, prior to construction permit issuance. The commission believes it is not only appropriate but necessary to provide both industry and the public with this rule to ensure that both groups are adequately informed about the commission's interpretation of and the procedures it will follow in applying Texas Utilities Code, §§121.451 - 121.454, facilitating fair and uniform administration of that statute.

The commission acknowledges that this rule could, in some cases, delay the commencement of pipeline construction and, ultimately, the production and transportation of natural gas and oil containing some amount of sour gas. Such delays might conceivably have an impact on the ad valorem taxes that local governments might otherwise be able to collect; and might impose additional economic costs on operators because of the loss of production income during the pendency of the permitting process and, if necessary, a hearing. However, the commission has attempted to balance the impacts on local governments and operators with the obligations imposed on the commission by the legislature to ensure that affected persons receive timely notice of proposed construction of sour gas pipeline facilities and a meaningful opportunity to participate in the commission's consideration of applications for these projects, i.e. , before construction commences. The commission recognizes the legitimate desire on the part of industry to expedite the hearing process to avoid delays in production operations. The commission has made and will continue to make every effort to ensure that permit applications are processed as expeditiously as possible while still meeting the mandates of Texas Utilities Code, §§121.451 - 121.454. As of the end of July 1999, the commission had received 22 applications for sour gas pipeline facility permits. Of these, three were withdrawn, five took from four to six weeks to process, eight took from 10 to 12 weeks to process, five took from 16 to 18 weeks to process, and one took 32 weeks to process. Longer processing times generally were associated with permit applications that were incomplete when filed.

The commission has declined to limit the definition of the term "affected person" in §3.106(a)(1) to include the owner or occupant of property as of the date of publication of notice, not the final day to file protests, in order to avoid attempts to gain standing through a quick purchase of property following public notice. The commission does not believe such limitations are necessary. Instances in which an individual would acquire property for the sole purpose of becoming an affected person are likely to be rare. The commission believes it appropriate to ensure that a person who has a contingent right to ownership or occupancy "such as a contract to buy a piece of property" as of the date of publication which is finalized prior to the protest deadline has the right to protest an application.

To avoid confusion with particular terms and requirements in §3.36 of this title, the commission has used the term "area of influence" in new §3.106, defining it in subsection (a)(4), rather than the term "area of exposure," which is used in §3.36. In addition, the commission has included in subsection (a)(12) a definition of the term "100 ppm radius" as the substitute for the term "radius or radii of exposure," the more broadly defined term found in §3.36.

The commission has also crafted the definition of "construction of a facility" in subsection (a)(5) to exclude repair, maintenance, and enhancement activities that do not result in an increase in the area of influence of a sour gas pipeline facility, so that operators may avoid having to repermit a pipeline whenever an inconsequential equipment change is made.

"Nominal pipe size" is an industry term that might not need to be defined in the rule to have meaning for the industry; however, industry convention is that for pipe sizes 14 inches and greater, the nominal pipe size is the approximate outer diameter; for pipe sizes of less than 14 inches, it is the approximate inner diameter. The commission believes that the term should be defined for the convenience of members of the public who are unfamiliar with both industry terminology and industry convention in the use of this term. Therefore, for clarity, the definition for "nominal pipe size" in subsection (a)(7) is stated in terms of inner diameter.

The definition of the term "sour gas pipeline facility" in subsection (a)(10) garnered comments from TxOGA and ATINGP, both of which urged the addition of the phrase "gas having" between "contains" and "a concentration." Both comments stated that without this clarifying wording, the definition would apply to a crude oil pipeline if hydrogen sulfide would be liberated in sufficient amounts in the event of a spill. Both comments declare this to be contrary to the intent of House Bill 3194. This same view was urged initially in response to the first publication of this proposed rule in August 1999, and the commission still declines to make the suggested change. Texas Utilities Code, §121.451(4), defines "sour gas pipeline facility" to mean "a pipeline facility that contains a concentration of 100 parts per million or more of hydrogen sulfide." The commission interprets the statute as being indifferent to whether the pipeline facility contains natural gas or crude oil and focused on those pipeline facilities containing a concentration of hydrogen sulfide of 100 parts per million or more. The rule applies to an oil pipeline if hydrogen sulfide will be liberated in sufficient amounts upon release.

ATINGP"s comment objected to the definition on the additional basis that it is inconsistent with §3.69(23) (SWR 79) of this title, relating to definitions, which defines "sour gas" to mean "any natural gas containing more than 1 1/2 grains of hydrogen sulphide per 100 cubic feet or more than 30 grains of total sulphur per 100 cubic feet, or gas which in its natural state is found by the commission to be unfit for use in generating light or fuel for domestic purposes." Even if the definitions are inconsistent, that does not render the definition of "sour gas pipeline facility" in new §3.106 improper or incorrect; it is based on the legislature's definition of that term in Texas Utilities Code, §121.451(4), and is used to identify those facilities for which a construction permit must be obtained.

The scope of the definition of "sour gas pipeline facility" in subsection (a)(10) is further qualified by the requirement that it be located outside the tract of production. This, along with the definition of "tract of production" in subsection (a)(11), evidences the commission's intention to limit sour gas pipeline facility construction permits to that portion of the pipeline leaving the lease from which oil, gas, or other minerals are produced.

Subsection (b) restates the statutory prohibition on constructing sour gas pipeline facilities without first obtaining a permit, as set out in Texas Utilities Code, §121.453; the exceptions follow the statutory provisions found at Texas Utilities Code, §121.452. Subsection (b)(1)(C) provides that all pipeline preconstruction notices be routed through the commission's Gas Services Division. Preconstruction notices for all pipelines subject to the commission's pipeline safety program go through the Pipeline and LP-Gas Safety Section of the Gas Services Division. The commission believes that using consistent procedures for similar notices reduces unnecessary confusion for both applicants and commission staff, and decreases potential for lost or misplaced notices.

Subsection (c) covers the commission's administrative handling of filed applications. Persons filing a notice of intent to file an application may request and be assigned a docket number; this allows an applicant to publish the docket number of the filing in the notice.

Subsection (d) prescribes the contents of a complete application for a sour gas pipeline facility; the most difficult provision was the requirement in the original proposal, in subsection (d)(4), of filing a contingency plan if one is required under §3.36. Pipelines routes are frequently altered during construction to avoid obstructions and sensitive areas such as archaeological sites. The portion of a contingency plan that denotes the pipeline route cannot be effectively completed until construction has been accomplished because of the possibility of route changes. In addition, most contingency plans require a list of names and phone numbers of residents within the area of influence of a release. It creates unnecessary and duplicative effort on the part of the applicant to provide this list of names and phone numbers of residents with the application because the list will have to be updated after completion of pipeline construction and before transportation of sour gas commences.

Similarly, the commission recognizes that requiring the filing of a plat denoting all buildings within the area of influence prior to issuance of a permit under this rule places on applicants a particularly significant burden associated with preparing such a plat if the final pipeline route is not known. Because having accurate information about the nature of the buildings located within the area of influence (for example, schools, nursing homes, and hospitals) is critical to the commission's determination of the adequacy of a contingency plan, the commission has come up with other methods for providing this information that would not be as burdensome for the applicant.

Balancing the need to accommodate some pipeline rerouting during construction with the need for information about the area of influence, specifically the list of names, telephone numbers, and addresses of residents within the area of influence, the commission has included a definition of "preliminary contingency plan" in subsection (a)(9) of new §3.106, and has written subsection (d), regarding elements of a complete application, to allow applicants to file a preliminary contingency plan as an alternative to filing a complete contingency plan. As defined, a preliminary contingency plan includes all elements required for a contingency plan under §3.36, with three exceptions.

First, the plan need not include the names, addresses, and phone numbers of all residents within the area of influence, even if otherwise required, provided the preliminary plan includes a detailed explanation of the method by which the names, addresses and phone numbers of such residents will be compiled. Second, the preliminary plan need not include the final pipeline route provided that the area of influence as noticed in public notice encompasses the total area of influence associated with all possible pipeline routes proposed by the applicant. In this way, individuals who could potentially be affected persons in the event of pipeline rerouting would have notice of such possibility. Prior to commencement of pipeline operations, the final contingency plan, including the final route and list of names, addresses, and phone numbers of residents, if required, must be submitted as required under §3.36. Third, the requirement for filing a plat detailing the area of influence may be met by filing one of three things: the detailed plat required by §3.36(c)(9)(H); a plat on which the information required by §3.36(c)(9)(H) is provided by identifying residential, business, and industrial areas with an estimate of the number of people that may be within any such areas; or one or more aerial photographs covering the area and providing the information required under §3.36(c)(9)(H).

New §3.106, defines "affected persons" in subsection (a)(1) to include all persons who could own or occupy property located within the area of influence encompassed by all contemplated pipeline routes if the final route is not known at the time of application and notice. In addition, subsection (g), relating to persons with standing to protest an application, provides that the owner or occupant of real property encompassed by the area of influence as denoted in the application has standing to protest.

The "preliminary contingency plan" requires applicants to include the names, addresses, and telephone numbers for emergency response and support personnel (see §3.36(c)(9)(G)) as well as the names and telephone numbers of the responsible parties for each of the possibly occupied public areas (see §3.36(c)(9)(J)). The commission does not find a substantial burden associated with compiling these phone lists and updating them immediately prior to commencement of operations.

Both TxOGA and ATINGP commented that the filing of a copy of the applicant's Application for Permit to Operate a Pipeline, Form T-4, be made optional so that an applicant whose pipeline route has not been finalized may still proceed with the application for a sour gas pipeline facility construction permit. The commission declines to make this change for several reasons: first, the information reported on the Form T-4 determines the status of the proposed pipeline with respect to the commission's pipeline safety jurisdiction; second, the pipeline route information on the map attachment has an accuracy of plus or minus 1,000 feet, so it provides only a general route; and third, the applicant may file an amended map, if necessary, prior to final commission action on the sour gas pipeline facility construction permit application if the applicant wants the order to include approval of the Form T-4.

With respect to notice requirements, set out in subsection (e), the commission determined that while Texas Utilities Code, §§121.451 - 121.454, allow issuance of a permit without a hearing, there is no provision for waivers of notice. In the absence of published notice, there is no mechanism for a potentially affected person who did not receive individual notice or waive notice to become informed about a proposed sour gas pipeline facility. Further, individual notice to affected persons does not meet the statutory requirement of newspaper publication of notice of a proposed sour gas pipeline facility; therefore, the commission's rule tracks the directives found in Texas Utilities Code, §121.453(b), which requires notice to the county clerk and one publication in a newspaper of general circulation in each county containing part of the proposed sour gas pipeline facility.

In response to a comment from ATINGP, the commission made clarifying changes in subsection (e)(1); to ensure that notice is given properly for those permit applications in which the area of influence of a proposed sour gas pipeline facility may extend across a county line, even if the pipeline route itself does not, the commission has substituted "area of influence" for "proposed route." Subsection (e) now provides that for each county that contains all or part of the area of influence of a proposed sour gas pipeline facility, an applicant must notify the county clerk and must publish notice in a newspaper of general circulation. Proof of notice to the county clerk may be made by return receipt filed at the commission; proof of publication must be made by filing with the commission the full page or pages of the newspaper containing the published notice.

To alleviate concerns that commission staff will delay its review of an application until it is "complete," this version of new §3.106 deletes proof of publication as an element of a complete application, and adds a new subsection (e)(2) that requires an applicant to provide proof of publication before the commission may take final action on an application.

Subsection (f) addresses the contents and format of the published notice. The notice must include a description of the geographic location of the proposed sour gas pipeline facility and the area of influence, to the extent that it is not clear from the plat required to be published as part of the notice. The rule also prescribes the text of the notice and provides graphic examples of acceptable plats. The commission has made editorial clarifying changes to subsection (f)(3). The standard for notice is that it be sufficient for a person to reasonably ascertain whether an owned or occupied property is within the area of influence.

Subsection (g) provides that affected persons have standing to file a protest to an application. In the event the final proposed pipeline route is not known at the time of application, any person who owns or occupies real property located within the area of influence identified in the application is considered to have standing to file a protest to an application. All protests must be in writing and filed at the commission no later than the 30th day after the notice is published in a newspaper in the county in which the person filing the protest owns or occupies real property; must state the name, address, and telephone number of every person on whose behalf the protest is being filed; and include a statement of the facts on which the person filing the protest relies to conclude that each person on whose behalf the protest is being filed is an affected person. These requirements are intended to ensure that affected persons timely file protests with the commission and provide sufficient information to enable the commission staff to evaluate the factual basis of the protest.

Subsection (h) describes the commission's review process. To meet the need for timely information, the commission staff will provide notice of application completeness or deficiencies in written form by mail, unless the applicant submits with the application a written request that notices of application completeness or deficiencies be provided by electronic mail to a specified electronic mail address, in which case such notices shall be provided by electronic mail. The commission believes that these alternatives achieve the balance between providing sufficiently timely information to applicants and allowing the commission to keep track of communications between staff and applicants regarding a specific permit application.

Subsection (h)(5) sets out and defines the conditions required for the commission's designee to recommend that a permit be "conditionally" granted or denied. This provision allows the commission to grant a permit subject to any and all conditions required to ensure compliance with applicable laws and regulations. In addition, the commission has defined certain key terms in new §3.106 in order to better distinguish the requirements of this rule from the more general provisions of §3.36.

Subsection (i) specifies that the commission will convene a hearing to consider an application for a sour gas pipeline construction permit if a protest is timely filed by an affected person; a request is timely filed by the applicant; or the commission so elects on its own motion. In the event that a hearing is to be held, the Office of General Counsel will assign an examiner to conduct a hearing in accordance with the procedural requirements of the Administrative Procedure Act and the commission's general rules of practice and procedure. The statute requires that the commission convene a hearing not later than the 60th day after a protest is filed; the commission has elected to use the same timetable for convening a hearing based on the applicant's request or the commission's own motion. The 60-day time period for convening a hearing does not begin to run until such time as notice of a complete application is issued unless the hearing is held because the applicant has requested a hearing on the application as it exists, in which case the hearing will be held within 60 days of receipt of a request for hearing. Nevertheless, in any hearing convened to consider an application, the applicant has the burden of showing that the materials to be used in and method of construction and operation comply with the applicable rules and safety standards adopted by the commission.

In subsection (j), the commission attempted to balance the industry's desire to tighten the time lines for speedy completion of those applications in which no hearing is held with the commission's need for sufficient flexibility to address staffing contingencies or to allow adequate review by personnel responsible for presenting the application to the commission. To meet these concerns, subsection (j)(4) of new §3.106 provides that the commission's order shall be issued as soon as practicable but not later than the 60th day after staff prepares its recommendation.

TxOGA noted that the last sentence of subsection (j)(1) in proposed new §3.106 appeared to be redundant and should be deleted. The commission agrees and has made this change.

The commission adopts the new section under Texas Utilities Code, §§121.201 - 121.205, and Texas Natural Resources Code, §§117.001 - 117.101, which authorize the commission to adopt safety standards and practices applicable to the transportation of gas and hazardous liquids and all gas and hazardous liquid pipeline facilities within Texas to the maximum degree permissible under, and to take any other requisite action in accordance with, 49 U.S.C. §60101, et seq . (West 1998); Texas Natural Resources Code, §81.051, which gives the commission jurisdiction over all oil and gas wells and pipelines in Texas, over persons owning or engaged in drilling or operating oil or gas wells in Texas, and over persons owning or operating pipelines in Texas, and §81.052, which authorizes the commission to adopt all necessary rules for governing and regulating persons and their operations under the jurisdiction of the commission; and Texas Utilities Code, §§121.451 - 121.454, which codifies the provisions of Texas Civil Statutes, Articles 6053-4, enacted by House Bill 3194, 75th Legislature, Regular Session, 1997.

Texas Utilities Code, §§121.201 - 121.205 and 121.451 - 121.454, and Texas Natural Resources Code, §§81.051 - 81.052 and 117.001 - 117.101, are affected by the new section.

Issued in Austin, Texas, on April 11, 2000.

§3.106. Sour Gas Pipeline Facility Construction Permit.

(a)

Definitions. The following words and terms when used in this section shall have the following meanings, unless the context clearly indicates otherwise.

(1)

Affected person -- The owner or occupant of real property located in the area of influence of the proposed route of a sour gas pipeline facility. If the final proposed route of the pipeline is unknown at the time of application, then an affected person is any person who owns or occupies real property located within the area of influence associated with any possible pipeline route identified by the applicant. For purposes of this definition, the owner shall be the owner of record as of the final day to protest an application. The occupant shall be the occupant as of the final day to protest an application.

(2)

Applicant -- A person who has filed an application for a permit to construct a sour gas pipeline facility, or a representative of that person.

(3)

Application -- Application for a Permit to Construct a Sour Gas Pipeline Facility, and all required attachments.

(4)

Area of influence -- Area along a sour gas pipeline facility represented by all possible areas of exposure using the 100 ppm radius.

(5)

Construction of a facility -- Any activity conducted during the initial construction of a pipeline including the removal of earth, vegetation, or obstructions along the proposed pipeline right-of-way. The term does not include:

(A)

surveying or acquiring the right-of-way;

(B)

clearing the right-of-way with the consent of the owner;

(C)

repairing or maintaining an existing sour gas pipeline facility; or

(D)

installing valves or meters or other devices or fabrications on an existing pipeline if such devices or fabrication do not result in an increase in the area of influence.

(6)

Extension of a sour gas pipeline facility -- An addition to an operating sour gas pipeline facility regardless of ownership of the addition.

(7)

Nominal pipe size -- The industry convention for naming pipe. Six inch nominal size pipe corresponds to pipe with an approximate inner diameter of six inches. The actual inner diameter varies based on the wall thickness of the pipe.

(8)

Person -- An individual, partnership, firm, corporation, joint venture, trust, association, or any other business entity, a state agency or institution, county, municipality, school district, or other governmental subdivision.

(9)

Preliminary contingency plan -- A contingency plan containing all of the elements required for a contingency plan under §3.36 of this title (relating to oil, gas, or geothermal resource operation in hydrogen sulfide areas), except that:

(A)

the plan need not contain the list of names and telephone numbers of residents within the area of influence if required under §3.36(c)(9)(I) of this section. In lieu of this list of names and telephone numbers, the plan shall contain a detailed explanation of the manner in which the names and telephone numbers of residents within the area of influence will be compiled prior to commencement of operations;

(B)

the plat detailing the area of influence may be:

(i)

the detailed plat required under §3.36(c)(9)(H);

(ii)

a plat containing the information required under §3.36(c)(9)(H), that identifies residential, business, and industrial areas with an estimate of the number of people that may be within any such areas; or

(iii)

one or more aerial photographs covering the area and providing the information required under §3.36(c)(9)(H); and

(C)

a fixed pipeline route need not be specified in the preliminary plan provided the preliminary plan identifies the boundaries of the area within which the pipeline will be constructed and provided that all public notices of the application required under this section note such boundaries and identify the potential area of influence as the total area encompassed by the area of influence associated with all possible pipeline routes.

(10)

Sour gas pipeline facility -- A pipeline and ancillary equipment that:

(A)

contains a concentration of 100 parts per million or more of hydrogen sulfide;

(B)

is located outside the tract of production; and

(C)

is subject to the requirements of §3.36 of this title.

(11)

Tract of production -- The surface area which overlies the area encompassed by a mineral lease or unit from which oil, gas, or other minerals are produced if such area is treated by the Oil and Gas Division of the commission as a single tract.

(12)

100 ppm radius -- The 100 parts per million radius of exposure as calculated in §3.36(c)(1)-(3) of this title (relating to oil, gas, or geothermal resource operation in hydrogen sulfide areas) for the sour gas pipeline facility.

(b)

Permit Required; Exceptions. No person may commence construction of a facility within this State without a permit if the facility is initially used as a sour gas pipeline facility except for the following:

(1)

an extension of an existing sour gas pipeline facility that at the time of construction of the extension is in compliance with §3.36 of this title (relating to oil, gas, or geothermal resource operation in a hydrogen sulfide area) if:

(A)

the extension is not longer than five miles;

(B)

the nominal pipe size is not larger than six inches; and

(C)

the operator causes to be delivered to the Pipeline and LP-Gas Safety Section, Gas Services Division, written notice of construction of the extension not later than 24 hours before the start of construction;

(2)

a new gathering system that operates at a working pressure of less than 50 pounds per square inch gauge;

(3)

an extension of a gathering system which operates at a working pressure of less than 50 pounds per square inch gauge;

(4)

an interstate gas pipeline facility, as defined by 49 U.S.C. §60101, that is used for the transportation of sour gas; or

(5)

replacement of all or part of a sour gas pipeline facility if the area of influence of the replaced portion of the facility does not increase so as to include a public area, as defined in §3.36(b)(5) of this title, not included in the area of influence of the portion of the replaced sour gas pipeline facility.

(c)

Filing and Assignment of Docket Number. Upon filing of an application with the Oil and Gas Division, staff will assign a docket number to the application and will notify the applicant of the assigned docket number. Staff will also assign and provide a docket number to a person who submits a notice of intent to file an application.

(d)

Application. A complete application consists of:

(1)

a properly completed application Form PS-79, with the original signature, in ink, of the applicant;

(2)

if applicant desires notification under subsection (h)(1) by electronic mail, a written request for electronic mail notification and the applicant's electronic mail address;

(3)

a plat which meets the requirements of subsection (f)(4) of this section and identifies the boundaries of surveys and blocks or sections as appropriate within the area of influence;

(4)

a copy of the applicant's Application for Permit to Operate a Pipeline, Form T-4, if applicable, including all attachments; and

(5)

a copy of the completed application for a Statewide Rule 36 Certificate of Compliance, Form H-9, including any attachment required under §3.36 of this title. A preliminary contingency plan may be filed in lieu of a contingency plan if required under §3.36 of this title.

(e)

Notice.

(1)

For each county that contains all or part of the area of influence of a proposed sour gas pipeline facility, the applicant shall:

(A)

cause to be delivered to the county clerk no later than the first date of publication in that county a copy of the items described in subsection (d)(1)-(3) of this section;

(B)

publish notice of its application in a newspaper of general circulation in each county that contains all or a portion of the area of influence of the proposed sour gas pipeline facility. Such notice shall meet the requirements of subsection (f) of this section and be published in a section of the newspaper containing news items of state or local interest.

(2)

Final action may not be taken on any application under this section until proof of notice, evidenced as follows, is provided:

(A)

a return receipt from each county clerk with whom an application form and plat is required to be filed pursuant to paragraph (1) of this subsection; and

(B)

the full page or pages of the newspaper containing the published notice required under paragraph (2) of this subsection including the name of the paper, the date the notice was published, and the page number.

(f)

The published notice of application shall be at least three inches by five inches in size, exclusive of the plat, and shall contain the following:

(1)

the name, business address, and telephone number of the applicant and of the applicant's authorized representative, if any;

(2)

a description of the geographic location of the sour gas pipeline facility and the area of influence, to the extent not clearly identified in the plat required to be published in subsection (f)(4) of this section;

(3)

the following statement, completed as appropriate: "This proposed pipeline facility will transport sour gas that contains 100 parts per million, or more, of hydrogen sulfide. A copy of application forms and a map showing the location of the pipeline is available for public inspection at the offices of the (insert County name) County Clerk, located at the following address: (insert address of County Clerk). Any owner or occupant of land located within the area of influence of the proposed sour gas pipeline facility desiring to protest this application can do so by mailing or otherwise delivering a letter referring to the application (by docket number if available) and stating their desire to protest to: Docket Services, Office of General Counsel, Railroad Commission of Texas, P.O. Box 12967, Austin, Texas 78711-2967. Protests shall be in writing and received by Docket Services not later than (specify 30th day after the first date notice of the application is to be published). The letter shall include the name, address, and telephone number of every person on whose behalf the protest is filed and shall state the reasons each such person believes that he or she is the owner or occupant of property within the area of influence of the proposed pipeline facility. It is recommended that a copy of this notice be included with the letter."; and

(4)

a plat identifying:

(A)

the location of the pipeline facility;

(B)

area of influence;

(C)

north arrow;

(D)

scale;

(E)

geographic subdivisions appropriate for the scale; and

(F)

by inset or otherwise, landmarks or other features such as roads and highways in relation to the proposed route of the sour gas pipeline facility. These landmarks or other features shall be of sufficient detail to allow a person to reasonably ascertain whether an owned or occupied property that is within the area of influence of the proposed sour gas pipeline facility. Examples of acceptable plats are included in this subsection.

Figure 1: 16 TAC §3.106(f)(4)(F)

Figure 2: 16 TAC §3.106(f)(4)(F)

(g)

Protests. Affected persons have standing to file a protest to an application. In the event the final proposed pipeline route is not known at the time of application, any person who owns or occupies real property located within the area of influence identified in the application shall have standing to file a protest to an application. All such protests shall:

(1)

be in writing and filed at the commission no later than the 30th day after the notice is published in a newspaper in the county in which the person filing the protest owns or occupies real property;

(2)

state the name, address, and telephone number of every person on whose behalf the protest is being filed; and

(3)

include a statement of the facts on which the person filing the protest relies to conclude that each person on whose behalf the protest is being filed is an affected person, as defined in subsection (a)(1) of this section.

(h)

Division Review.

(1)

Within 14 days of receipt of the application, the commission's designee will provide notice to the applicant that the application is either complete and accepted for filing, or incomplete and specify the additional information required for acceptance. Such notice shall be provided in writing by mail or by electronic mail if the applicant submits with the application a written request that communications regarding application completeness or deficiencies be communicated by electronic mail and provides an accurate electronic mail address. The application shall be completed within 30 days of notification that the application is incomplete or such longer time as may be requested by the applicant, in writing, and approved by the commission's designee. If the application is not completed within the specified time period, the commission's designee shall send notice of intent to deny the application to the applicant. Within ten days of issuance of a notice of intent to deny the application for failure to complete the application, the applicant may request a hearing on the application as it exists at that time. If a request for hearing is not filed within ten days of issuance of a notice of intent to deny the application for failure to complete the application, the application shall be dismissed without prejudice by the commission's designee.

(2)

The commission's designee shall make a written recommendation as to whether the materials to be used in and method of construction and operation of a proposed sour gas pipeline facility comply with the rules and safety standards of the commission if the application is not protested, by the latter of the 14th day after the end of the 30-day protest period or the 14th day after the day notice of a complete application is issued.

(3)

If, pursuant to subsection (i) of this section, a hearing is held, the staff may introduce evidence relating to the materials to be used in and method of construction and operation of a proposed sour gas pipeline facility.

(4)

In determining whether or not the materials to be used in and method of construction and operation of a proposed sour gas pipeline facility comply with the rules and safety standards of the commission, relevant provisions of §3.36 and §3.65 of this title (relating to oil, gas, or geothermal resource operation in hydrogen sulfide areas, and pipeline permits required, respectively) shall be considered. If applicable, §§7.70 - 7.73 of this title (relating to natural gas pipeline safety rules) and §§7.80 - 7.87 of this title (relating to hazardous liquids pipeline safety rules) shall also be considered.

(5)

If no affected person files a protest with the commission by the 30th day after the date notice of application was published, the commission's designee shall either make a written recommendation that the permit be issued, that the permit be granted subject to specific conditions required to ensure compliance with applicable laws and regulations, or that the permit be denied. If the commission's designee recommends that the permit be conditionally granted or be denied, the reasons for such recommendation shall be explained. If the commission's designee recommends that the application be conditionally granted or be denied, the applicant shall have a right to a hearing upon written request received no later than 15 days after the date of issuance of notice of conditional grant or denial.

(i)

Hearing.

(1)

A hearing shall be convened to consider an application for a sour gas pipeline construction permit if:

(A)

a protest is timely filed by an affected person;

(B)

a request is timely filed by the applicant; or

(C)

the commission so elects on its own motion.

(2)

The Office of General Counsel shall assign an examiner who shall conduct a hearing in accordance with the procedural requirements of Texas Government Code, Chapter 2001 (the Administrative Procedure Act), and Chapter 1 of this title (relating to the general rules of practice and procedure).

(3)

The commission shall convene a hearing not later than the 60th day after a protest is filed, the applicant submits a request for hearing, or the commission gives notice of intent to convene a hearing on its own motion. If the application is not complete as of the date the request for hearing is filed or notice of hearing issued, the 60-day time period for convening a hearing shall not begin to run until such time as notice of a complete application is issued unless the hearing is held pursuant to the provisions of subsection (h)(1). If the hearing is held pursuant to the provisions of subsection (h)(1), the hearing will be held within 60 days of receipt of a request for hearing.

(4)

In any hearing convened to consider an application, the applicant has the burden of showing that the materials to be used in and method of construction and operation comply with the applicable rules and safety standards adopted by the commission.

(j)

Order.

(1)

An order approving an application shall include a finding that the materials to be used in and method of construction and operation of the facility comply with the applicable rules and safety standards adopted by the commission. If an application meets all the requirements of §3.65 of this title, relating to pipeline permits required, including the requirements of §3.36 of this title, relating to oil, gas, or geothermal resource operation in hydrogen sulfide areas, the order may approve the certificate of compliance (Form H-9) or grant the pipeline permit or both.

(2)

An order denying an application shall state the reason or reasons for the denial.

(3)

In the case of an application for which a hearing is conducted, the commission will render a decision not later than the 60th day after the date on which the hearing is finally closed.

(4)

If no hearing is held on an application, the commission will render a decision as soon as practicable but not later than the 60th day after the staff prepares its written recommendation in accordance with subsection (h)(2) and (4).

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on April 11, 2000.

TRD-200002591

Mary Ross McDonald

Deputy General Counsel

Railroad Commission of Texas

Effective date: May 1, 2000

Proposal publication date: February 25, 2000

For further information, please call: (512) 475-1295