SECTION 165:10-17-11. Maximum permitted rates of production for unallocated gas wells

(a)   Scope.

(1)   This Section shall apply to each gas well in unallocated status except as otherwise provided by Commission order. The Commission may establish different production rates by:

(A)   Location exception order.

(B)   Establishment of pool rules for the common source of supply.

(C)   Other order adjusting gas production from the well.

(2)   For purposes of this Section, the term "well" shall include any drilling and spacing unit with multiple unallocated gas wells, which do not receive separate maximum permitted rates of production by Commission order.

(3)   For the purposes of this Section, the term "allowable formula" shall mean the formula used by the Commission for the determination of the daily rates for capable and minimum wells.

(4)   For purposes of this Section, the term "capable well" shall refer to those unallocated gas wells having a wellhead absolute flow potential of 2000 mcf/d or greater. All other wells are minimum wells.

(5)   For purposes of this Section, the term "daily natural flow" means the wellhead absolute open flow potential determined in the manner described in OAC 165:10-17-6 and OAC 165:10-17-7.

(b)   Commission authority and responsibility. Production shall be governed by the provisions of 52 O.S. Section 29. Pursuant to said statute, the Commission has the power and authority to adjust allowables to meet reasonable market demand. The Commission, upon its own application, after notice and hearing, shall establish allowables which may be greater or lesser than those set forth in 52 O.S. Section 29.

(c)   Procedure.

(1)   Allowables for wells other than those provided in subsections (a), (e), (f), and (g) of this Section shall be determined pursuant to a proration hearing held at least annually. The Commission may hold additional proration hearings at shorter intervals if necessary. At least 15 days prior to scheduled annual hearings, the Commission shall publish in a newspaper of general circulation in Oklahoma County, the proposed allowable formula for the next proration period. The annual proration hearings shall be held at least 30 days prior to the proration period for which the allowable is being determined. Such hearing shall be for the purpose of gathering comments and hearing testimony from all interested parties concerning the determination of reasonable market demand for the next proration period. As a guideline, but not to the exclusion of any other information that the Commission deems pertinent, the following may be considered by the Commission in determining reasonable market demand and corresponding allowables:

(A)   Production from prior years.

(B)   Production from the most recent proration period.

(C)   Wellhead open flow potentials.

(D)   New wells, recompletions, temporarily abandoned wells and plugged wells.

(E)   Gas which is available but is not being produced at the present time.

(F)   Changes in existing gas markets, forecasts, and new markets for Oklahoma gas.

(G)   State-wide gas production and the portion thereof attributable to unallocated gas wells.

(H)   Overproduction and underproduction from the preceding proration period.

(2)   After a proration hearing, the Commission shall publish in a newspaper of general circulation in Oklahoma County, the allowable formula, no later than 15 days prior to the proration period for which the allowable formula is determined.

(d)   Emergency allowables.

(1)   When the Commission determines that an emergency gas supply situation exists, the Commission may establish an emergency allowable. The emergency allowable shall provide for the protection of correlative rights including those relating to minimum wells and penalized wells.

(2)   The Commission may extend or change the emergency allowable for as long as an emergency exists. However, any authorized extension of the emergency allowable shall be by order after notice and hearing.

(e)   Exceptions. Upon application, notice, and hearing, the Commission may establish a different allowable for good cause shown.

(f)   Exclusion for hardship and distressed wells. The allowable established under this Section shall not limit rates established by special order for those wells classified as hardship or distressed wells.

(g)   Discovery gas well.

(1)   For thirty (30) months from the date of first production, a discovery gas well, as defined in this subsection, subject to the provisions of this Section, shall have a production allowable which shall be the greater of one thousand three hundred (1,300) mcf/d or sixty-five percent (65%) of the absolute open flow (AOF) as specified by the Corporation Commission. Such discovery well allowable shall not be available for any discovery gas well wherein two (2) or more separate common sources of supply are commingled and one (1) common source of supply would not qualify a new gas well as a discovery gas well, as defined in this Section.

(2)   Drilling and spacing units which are downspaced after June 1, 1997, shall not qualify for the discovery gas well allowable.

(3)   For purposes of this subsection, "discovery gas well" shall mean a new gas well, which is not an off-pattern well, is the first well completed in a common source of supply within a drilling and spacing unit and is at least one (1) mile from all existing gas wells which are completed in the same common source of supply. In the absence of spacing, a discovery well shall be the first well in the governmental section completed in a common source of supply, provided that the discovery gas well shall not be drilled closer than one thousand three hundred twenty (1,320) feet from the boundaries of the governmental section and is at least one (1) mile from all existing gas wells which are completed in the same common source of supply.

(h)   Exclusion for reservoir dewatering. Allowables shall not apply, regardless of unit size, in the instance of production of gas by reservoir dewatering to extract said gas from reservoirs having initial water saturations at or above fifty (50%) percent.

(i)   Minimum compliance.

(1)   The Conservation Division shall monitor well production at least annually. The allowable for a well shall be based on the product of the number of days in the proration period, multiplied by the applicable allowable formula, provided that said product shall be reduced for overproduction as provided by this Section or by any penalty or limitation on production imposed by applicable Commission order.

(2)   Any overproduction existing at the end of the calendar year shall be applied against the allowable for the next calendar year. Furthermore, the overproduced well shall be required to make up overproduction within the first six months of the next calendar year. If the overproduction is not made up within that time period, the flow rate shall not exceed ten percent of the then current allowable until the overproduction is made up.

[Source: Amended at 10 Ok Reg 1579, eff 5-13-93; Amended at 14 Ok Reg 2198, eff 7-1-97; Amended at 15 Ok Reg 2171, eff 7-1-98; Amended at 19 Ok Reg 1947, eff 7-1-02; Amended at 25 Ok Reg 2187, eff 7-11-08; Amended at 30 Ok Reg 1041, eff 7-1-13]