as added by Acts 1999, 76th Leg., ch. 1499, §1.11(a)
). The agency's reasons for adopting the rule continue to exist. The
notice of adopted review has been filed with the
Texas Register
concurrently with the adoption of the amendments to §3.38.
The Commission received one comment on the proposed amendments from an
association, the Texas Oil and Gas Association.
TXOGA's comment raised two points. The first point suggests that minor
modifications in the wording of proposed amendments to subsection (d)(3)(A)
of §3.38 that clarify the current Commission practice and procedure for
approval of applications for unit dissolutions. The Commission agrees and
adopts the alternative wording.
The second point in the comment addressed the need for proposed new subsection
(g)(5). TXOGA expressed concern that the new subsection merely recited current
procedures for filing Commission Form W-1A which are included in the form
itself. The Commission disagrees with this comment and has determined that
including the filing instructions in the rule will ensure that any changes
made in Commission procedures for filing the form will be part of rulemaking
proceedings so that all interested persons -- the general public as well as
industry -- can have notice of proposed changes in agency regulatory policy
and an opportunity to participate, consistent with the notice and comment
procedures in Texas Government Code, Chapter 2001. Additionally, the Commission
finds that stating the current filing procedures in §3.38 will promote
administrative and regulatory efficiency by ensuring that the same information
is available to operators, Commission staff, and the general public.
The Commission adopts the amendments to §3.38 pursuant to
Texas Natural Resources Code, §§81.051 and 81.052, which provide
the Commission with jurisdiction over all persons owning or engaged in drilling
or operating oil or gas wells in Texas and the authority to adopt all necessary
rules for governing and regulating persons and their operations under the
jurisdiction of the Commission.
Texas Natural Resources Code, §§81.051, 81.052, 85.202, and 88.011
are affected by the proposed amendments.
Issued in Austin, Texas, on January 24, 2002.
§3.38.Well Densities.
(a)
Definitions. The following words and terms, when used in
this section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1)
Commission designee--Director of the Oil and Gas Division
or any Commission employee designated in writing by the director or the Commission.
(2)
Drilling unit--The acreage assigned to a well for drilling
purposes.
(3)
Proration unit--The acreage assigned to a well for the
purpose of assigning allowables and allocating allowable production to the
well.
(4)
Substandard acreage--Less acreage than the smallest amount
established for standard or optional drilling units.
(5)
Surplus acreage--Substandard acreage within a lease, pooled
unit, or unitized tract that remains unassigned after the assignment of acreage
to each applied for, permitted, or completed well in a field, in an amount
equaling or exceeding the amount established for standard or optional drilling
units. Surplus acreage is distinguished from the term "tolerance acreage,"in
that tolerance acreage is defined in context with proration regulation, while
surplus acreage is defined by this rule only in context with well density
regulation.
(6)
Tolerance acreage--Acreage within a lease, pooled unit,
or unitized tract that may be assigned to a well for proration purposes pursuant
to special field rules in addition to the amount established for a prescribed
or optional proration unit.
(b)
Density requirements.
(1)
General prohibition. No well shall be drilled on substandard
acreage except as hereinafter provided.
(2)
Standard units.
(A)
The standard drilling unit for all oil, gas, and geothermal
resource fields wherein only spacing rules, either special, country regular,
or statewide, are applicable is hereby prescribed to be the following.
Figure: 16 TAC §3.38(b)(2)(A) (No change.)
(B)
The spacing rules listed in subparagraph (A) of this paragraph
are not exclusive. If any spacing rule not listed in subparagraph (A) of this
subsection is brought to the attention of the commission, it will be given
an appropriate acreage assignment.
(c)
Development to final density. An application to drill a
well for oil, gas, or geothermal resource on a drilling unit composed of surplus
acreage, commonly referred to as the "tolerance well," may be granted as regular
when the operator seeking such permit certifies to the commission in a prescribed
form the necessary data to show that such permit is needed to develop a lease,
pooled unit, or unitized tract to final density, and only in the following
circumstances:
(1)
when the amount of surplus acreage equals or exceeds the
maximum amount provided for tolerance acreage by special or county regular
rules for the field, provided that this paragraph does not apply for a lease,
pooled unit, or unitized tract that is completely developed with optional
units and the special or county regular rules for the field do not have a
tolerance provisions expressly made applicable to optional proration units;
(2)
if the special or county regular rules for the field do
not have a tolerance provision expressly made applicable to optional proration
units, when the amount of surplus acreage equals or exceeds one-half of the
smallest amount established for an optional drilling unit; or
(3)
if the applicable rules for the field do not have a tolerance
provision for the standard drilling or proration unit, when the amount of
surplus acreage equals or exceeds one-half the amount prescribed for the standard
unit.
(d)
Applications involving the voluntary subdivision rule.
(1)
Density exception not required. An exception to the minimum
density provision is not required for the first well in a field on a lease,
pooled unit, or unitized tract composed of substandard acreage, when the leases,
or the drillsite tract of a pooled unit or unitized tract:
(A)
took its present size and shape prior to the date of attachment
of the voluntary subdivision rule (§3.37(g) of this title (relating to
Statewide Spacing Rule)); or
(B)
took its present size and shape after the date of attachment
of the voluntary subdivision rule (§3.37(g) of this title (relating to
Statewide Spacing Rule)) and was not composed of substandard acreage in the
field according to the density rules in effect at the time it took its present
size and shape.
(2)
Density exception required. An exception to the density
provision is required, and may be granted only to prevent waste, for a well
on a lease, pooled unit, or unitized tract that is composed of substandard
acreage and that:
(A)
took its present size and shape after the date of attachment
of the voluntary subdivision rule (§3.37(g) of this title (relating to
the Statewide Spacing Rule)); and
(B)
was composed of substandard acreage in the field according
to the density rules in effect at the time it took its present size and shape.
(3)
Unit dissolution.
(A)
If two or more separate tracts are joined to form a unit
for oil or gas development, the unit is accepted by the Commission, and the
unit has produced hydrocarbons in the preceding twenty (20) years, the unit
may not thereafter be dissolved into the separate tracts with the rules of
the commission applicable to each separate tract if the dissolution results
in any tract composed of substandard acreage for the field from which the
unit produced, unless the Commission approves such dissolution.
(B)
The Commission shall grant approval only after application,
notice, and an opportunity for hearing. The applicant seeking the unit dissolution
shall provide a list of the names and addresses of all current lessees and
unleased mineral interest owners of each tract within the joined or unitized
tract at the time the application is filed. The Commission shall give notice
of the application to all current lessees and unleased mineral interest owners
of each tract within the joined or unitized tract. Additionally, if one or
more wells on the unitized tract has produced from the field within the 12-month
period prior to the application, the applicant shall include on the list all
affected persons described in subsection (h)(1)(A) of this section, and the
Commission shall give notice of the application to these affected persons.
(C)
A Commission designee may grant administrative approval
if the Commission designee determines that granting the application will not
result in the circumvention of the density restrictions of this section or
other Commission rules, and if either:
(i)
written waivers are filed by all affected persons; or
(ii)
no protest is filed within the time set forth in the notice
of application.
(e)
Application involving unitized areas with entity for density
orders. An exception to the minimum density provision is not required for
a well in a unitized area for which the commission has granted an entity for
density order, if the sum of all applied for, permitted, or completed producing
wells in the field within the unitized area, multiplied by the applicable
density provision, does not exceed the total number of acres in the unitized
area. The operator must indicate the docket number of the entity for density
order on the application form.
(f)
Exceptions to density provisions authorized. The Commission,
or Commission designee, in order to prevent waste or, except as provided in
subsection (d)(2) of this section, to prevent the confiscation of property,
may grant exceptions to the density provisions set forth in this section.
Such an exception may be granted only after notice and an opportunity for
hearing.
(g)
Filing requirements.
(1)
Application. An application for permit to drill shall include
the fees required in §3.78 of this title (relating to Fees, Performance
Bonds, and Alternate Forms of Financial Security Required To Be Filed) and
shall be certified by a person acquainted with the facts, stating that all
information in the application is true and complete to the best of that person's
knowledge.
(2)
Plat. When filing an application for an exception to the
density requirements of this section, in addition to the plat requirements
in §3.5 of this title (relating to Application to Drill, Deepen, Reenter,
or Plug Back) (Statewide Rule 5), the applicant shall attach to each copy
of the application a plat that:
(A)
depicts the lease, pooled unit, or unitized tract, showing
thereon the acreage assigned to the drilling unit for the proposed well and
the acreage assigned to all current applied for, permitted, or completed oil,
gas, or oil and gas wells in the same field or reservoir which are located
within the lease, pooled unit, or unitized tract;
(B)
on large leases, pooled units, or unitized tracts, if the
established density is not exceeded as shown on the face of the application,
outlines the acreage assigned to the well for which the permit is sought and
the immediately adjacent wells on the lease, pooled unit, or unitized tract;
(C)
on leases, pooled units, or unitized tracts from which
production is secured from more than one field, outlines the acreage assigned
to the wells in each field that is the subject of the current application;
(D)
corresponds to the listing required under subsection (g)(1)(A)
of this section.
(E)
is certified by a person acquainted with the facts pertinent
to the application that the plat is accurately drawn to scale and correctly
reflects all pertinent and required data.
(3)
Substandard acreage. An application for a permit to drill
on a lease, pooled unit, or unitized tract composed of substandard acreage
must include a certification in a prescribed form indicating the date the
lease, or the drillsite tract of a pooled unit or unitized tract, took its
present size and shape.
(4)
Surplus acreage. An application for permit to drill on
surplus acreage pursuant to subsection (c) of this section must include a
certification in a prescribed form indicating the date the lease, pooled unit,
or unitized tract took its present size and shape.
(5)
Certifications. Certifications required under paragraphs
(3) and (4) of this subsection shall be filed on Form W-1A (revised 5/2001),
Substandard Acreage Certification.
(A)
The operator shall file the Form W-1A with the drilling
permit application and shall indicate the purpose of filing. The operator
shall accurately complete all information required on the form in accordance
with instructions on the form.
(B)
The operator shall list the field or fields for which the
substandard acreage certification applies in the designated area on the form.
If there are more than three fields for which the certification applies, the
operator shall attach additional Forms W-1A and shall number the additional
pages in sequence.
(C)
The operator shall file the original Form W-1A with the
Commission's Austin office and a copy with the appropriate district office,
unless the operator files electronically through the Commission's Electronic
Compliance and Approval Process (ECAP) system.
(D)
The operator or the operator's agent shall certify the
information provided on the Form W-1A is true, complete, and correct by signing
and dating the form, and listing the requested identification and contact
information.
(E)
Failure to timely file the required information on the
appropriate form may result in the dismissal of the application.
(h)
Procedure for obtaining exceptions to the density provisions.
(1)
Filing requirements. If a permit to drill requires an exception
to the applicable density provision, the operator must file, in addition to
the items required by subsection (g) of this section:
(A)
a list of the names and addresses of all affected persons.
For the purpose of giving notice of application, the Commission presumes that
affected persons include the operators and unleased mineral interest owners
of all adjacent offset tracts, and the operators and unleased mineral interest
owners of all tracts nearer to the proposed well than the prescribed minimum
lease-line spacing distance. The Commission designee may determine that such
a person is not affected only upon written request and a showing by the applicant
that:
(i)
competent, convincing geological or engineering data indicate
that drainage of hydrocarbons from the particular tracts subject to the request
will not occur due to production from the proposed well; and
(ii)
notice to the particular operators and unleased mineral
interest owners would be unduly burdensome or expensive;
(B)
engineering and/or geological data, including a written
explanation of each exhibit, showing that the drilling of a well on substandard
acreage is necessary to prevent waste or to prevent the confiscation of property;
(C)
additional data requested by the Commission designee.
(2)
Notice of application. Upon receipt of a complete application,
the Commission will give notice of the application by mail to all affected
persons for whom signed waivers have not been submitted.
(3)
Approval without hearing. If the Commission designee determines,
based on the data submitted, that a permit requiring an exception to the applicable
density provision is justified according to subsection (f) of this section,
then the Commission designee may issue the exception permit administratively
if:
(A)
signed waivers from all affected persons were submitted
with the application; or
(B)
notice of application was given in accordance with paragraph
(2) of this subsection and no protest was filed within 21 days of the notice;
or
(C)
no person appeared to protest the application at a hearing
scheduled pursuant to paragraph (4)(A) of this subsection.
(4)
Hearing on the application.
(A)
If a written protest is filed within 21 days after the
notice of application is given in accordance with paragraph (2) of this subsection,
the application will be set for hearing.
(B)
If the application is not protested and the Commission
designee determines that a permit requiring an exception to the applicable
density provision is not justified according to subsection (f) of this section,
the operator may request a hearing to consider the application.
(i)
Duration. A permit is issued as an exception to the applicable
density provision shall expire two years from the effective date of the permit;
unless drilling operations are commenced in good faith within the two year
period.
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 January 24, 2002.
TRD-200200348
Mary Ross McDonald
Deputy General Counsel
Railroad Commission of Texas
Effective date: February 13, 2002
Proposal publication date: November 23, 2001
For further information, please call: (512) 463-7033