The Texas Railroad Commission (TRC) has fine tuned gas proration rules in an attempt to better allocate markets among wells in prorated Texas fields.
TRC commissioners late this month were scheduled to use the amended rules for the first time to set allowables reflecting demand in February for Texas gas.
Most important among the changes, TRC commissioners expanded the "special allowable wells" definition to include about 7,000 gas wells unable to produce as much gas as allowed by statewide oil and gas Rule 31 provisions in effect since July 1992. Also, TRC staff has been directed to clean up and reset allowable underages accrued because of monthly forecast correction adjustments.
Texas rules allow operators of prorated gas wells to save and accumulate unused monthly allowables, then exceed allowables in later months by the volumes of accumulated underage.
While that system enables state regulators to maintain a rough balance between monthly supply and demand, problems arose because operators of some smaller, less productive wells consistently produced less gas than allowed and accumulated more underage than they could possibly use.
As a result, the TRC was apportioning too much market share to some less productive wells at the expense of bigger wells in the same prorated fields.
Beginning in February, TRC will include any well in a prorated field in the new special well category if it produced 70% of its allowable or less for 12 consecutive months. Top allowables for wells included in the new category will be based on the volume of gas production reported to TRC in the most recent month.
"If they have produced all the gas they could in that month, that should be a very good approximation of what they can do," said David Garlick, director of TRC's oil and gas division.
EFFECTS OF CHANGES
Garlick said commissioners expect about 60% of accumulated underage accrued by Texas gas wells to be eliminated by the rule changes.
Total allowables assigned each month to Texas gas wells could decrease slightly because of the rule changes. But the net effect on statewide gas production is expected to be small because previously unused market shares will be assigned to prorated wells deemed capable of producing the volumes of gas allowed.
The rule changes won't cause production from smaller wells to fall because those wells already were producing all out, TRC reckons.
A prorated well in the new category can lose its special designation if its production reaches the top allowable in its field in any given month. However, most of the 7,000 wells included in the new special category were producing only a small portion of their allowables. So it is unlikely that many will lose the special designations.
Unless a special well begins producing enough gas to lose its designation, Garlick said, TRC won't be concerned about how much gas it is producing.
"For fairness, each well in a prorated field should be allowed that field's top allowable. That's its fair share," he said.
However, because many small wells in prorated fields can't produce enough gas to reach top allowables assigned in their fields, the Texas gas prorationing system effectively allows them to produce at full deliverability.
FOCUS ON FORECASTING
TRC Commissioner Barry Williamson said the commission under current rules will maintain emphasis on use of forecasts to set gas well allowables, a core change in effect since July 1992.
Basing allowables mainly on forecasts protects the mineral rights of producers who wish to hold gas off the market for brief periods, Williamson said. Texas gas proration rules let a producer withhold gas from the market for as long as 1 year without the risk that another producer in the same field will produce the volumes.
Williamson said recent reforms in Texas gas proration rules should improve the dependability of Texas gas supplies and promote the state's image as a reliable source of gas. But with U.S. gas demand approaching record highs, "there isn't a need to prorate many Texas gas reservoirs," he said.
So TRC also has eased requirements producers must meet to be exempt from the proration system. Exemptions previously were based on a review of information provided by affected producers, purchasers, and transporters. Now, only producer filings are required.
In addition, to improve the accuracy of production assignments, the TRC beginning next month will analyze monthly production data reported in the previous 6 months to adjust allowables. Before the recent rule changes, the commission adjusted allowables based on the previous 9 months of production.
