N.M. Admin. Code § 19.15.12.10

Current through Register Vol. 35, No. 21, November 5, 2024

Section 19.15.12.10 - SURFACE COMMINGLING - OIL, GAS OR OIL AND GAS

A. To prevent waste, to promote conservation and to protect correlative rights, the division may grant exceptions to permit the surface commingling of oil or gas in common facilities from two or more pools, two or more leases or combinations of pools and leases provided that:

(1) the division shall approve the method the applicant uses to allocate the production to the various leases or pools to be commingled;

(2) if state, federal or tribal lands are involved, the operator has notified the state land office or BLM, as applicable, of the proposed commingling; and

(3) the operator has met the other applicable requirements in 19.15.12.10 NMAC.

B. Specific requirements and provisions for commingling of leases, pools or leases and pools with identical ownership.

(1) Measurement and allocation methods.

(a) Well test method. If all wells or units to be commingled are marginal and are physically incapable of producing the top proration unit allowable for their respective pools, or if all affected pools are unprorated, the division shall permit commingling without separately measuring the production from each pool or lease. Instead, the operator may determine the production from each well and from each pool or lease from well tests conducted periodically, but no less than annually. The well test method shall not apply to wells or units that can produce an amount of oil equal to the top proration unit allowable for the pool but are restricted because of high gas-oil ratios. The operator of a marginal commingling installation shall notify the division any time a well or unit commingled under 19.15.12.10 NMAC becomes capable of producing the top proration unit allowable for its pool, at which time the division shall require separate measurement.

(b) Metering method. The operator may determine production from each pool or lease by separately metering before commingling.

(c) Subtraction method. If production from all except one of the pools or leases to be commingled is separately measured, the operator may determine the production from the remaining pool or lease by the subtraction method as follows:

(i) for oil, the net production from the unmetered pool or lease shall be the difference between the net pipeline runs with the beginning and ending stock adjustments and the sum of the net production of the metered pools or leases;

(ii) for gas, the net production from the unmetered pool or lease shall be the difference between the volume recorded at the sales meter and the sum of the volumes recorded at the individual pool or lease meters.

(d) Top allowable producers. If a well or unit in a prorated pool to be commingled can physically be produced at top proration unit allowable rates (even if restricted because of high gas-oil ratios), the division may permit commingling only if the operator or a gatherer, transporter or processor meters the production from the unit prior to commingling, or determines it by the subtraction method.

(e) Alternative methods. An operator may determine production from each pool or lease to be commingled by other methods the division has specifically approved prior to commingling. The division shall determine what evidence is necessary to support a request to use an alternative method.

(2) Prior to commingling, the applicant shall notify the division by filing form C-103 in the division's Santa Fe office with the following information set forth in the form or attached to the form:

(a) identification of each of the leases, pools or leases and pools to be commingled;

(b) the method of allocation the applicant will use; if the applicant proposes using the well test method for production from a prorated pool, the notification to the division shall be accompanied by a tabulation of production showing that the average daily production of an affected proration unit over a 60-day period has been below the top proration unit allowable for the subject pool (or for a newly drilled well without a 60-day production history, a tabulation of the available production) or other evidence acceptable to the division to establish that the well or wells on the unit are not capable of producing the top proration unit allowable; if the proposed allocation method is other than an approved method provided in Subsection B of 19.15.12.10 NMAC, the operator shall submit evidence of the method's reliability;

(c) a certification by a licensed attorney or qualified petroleum landman that the ownership in the pools and leases to be commingled is identical as defined in 19.15.12.7 NMAC; and

(d) evidence of notice to the state land office or the BLM, if required.

(3) Approval. The division may authorize commingling without a notice or hearing and the operator may commence commingling upon the division's approval of form C-103, subject to compliance with any conditions of the approval the division noted, provided that the operator shall not commence commingling involving state, federal or tribal leases unless or until approved by the state land office or the BLM, as applicable.

C. Specific requirements and provisions for commingling of leases, pools or leases and pools with diverse ownership.

(1) Measurement and allocation methods. Where there is diversity of ownership between two or more leases, two or more pools or between different pools and leases, the division shall only permit surface commingling of production from the leases and pools if the operator accurately meters production from each of such pools or leases or determines the production by other methods the division has specifically approved prior to commingling.

(2) Meter proving and calibration frequencies.

(a) Oil. The operator shall test each meter used in oil production accounting for accuracy as follows: monthly, if more than 100,000 barrels of oil per month are measured through the meter; quarterly, if between 10,000 and 100,000 barrels of oil per month are measured through the meter; and semi-annually, if less than 10,000 barrels of oil per month are measured through the meter.

(b) Gas. For each gas sales and allocation meter, the operator shall test the metering equipment's accuracy at the point of delivery or allocation following the initial installation and following repair and retested: quarterly, if 100 MCFGPD or more are measured through the meter; and semi-annually, if less than 100 MCFGPD are measured through the meter.

(c) Correction and adjustment. If a meter proving and calibration test reveals inaccuracy in the metering equipment of more than two percent, the operator shall correct the volume measured and adjust the meter to zero error. The operator shall submit a corrected report adjusting the volume of oil or gas measured and showing the calculations made in correcting the volumes. The operator shall correct the volumes back to the time the inaccuracy occurred, if known. If the time is unknown, the operator shall correct the volumes for the last half of the period elapsed since the last calibration date. If a test reveals an inaccuracy of less than two percent, the operator shall adjust the meter, but correction of prior production is not required.

(3) Low production gas wells. For gas wells producing less than 15 MCFGPD, the operator may estimate production as an acceptable alternative to individual well measurement provided that commingling of production from different pools or leases does not take place unless otherwise authorized pursuant to 19.15.12 NMAC.

(4) Approval process.

(a) In general. Where there is diversity of ownership, the division may grant an exception to the requirements of 19.15.12.9 NMAC to permit surface commingling of production from different leases, pools or leases and pools only after notice and an opportunity for hearing as provided in Paragraph (4) of Subsection C of 19.15.12.10 NMAC.

(b) Application. The operator shall submit an application for administrative approval to the division's Santa Fe office on form C-107-B, which shall contain a list of the parties (interest owners) owning an interest in the production to be commingled (including owners of royalty and overriding royalty interests whether or not they have a right or option to take their interests in kind) and a method of allocating production to ensure the protection of correlative rights.

(c) Notice. The applicant shall notify the interest owners in accordance with 19.15.4.12 NMAC. The applicant shall submit a statement attesting that the applicant, on or before the date the applicant submitted the application to the division, notified each of the interest owners by sending them a copy of the application and the attachments to the application, by certified mail, return receipt requested, and advising them that they must file any objection in writing with the division's Santa Fe office within 20 days from the date the division received the application. The division may approve the application administratively, without hearing, upon receipt of written waivers from interest owners, or if no interest owner has filed an objection within the 20-day period. If the division receives an objection, it shall set the application for hearing. The division shall notify the applicant, who shall give formal notice of the hearing to each party who has filed an objection and to such other persons as the division directs.

(d) Hearing ordered by the division. The division may set for hearing an application for administrative approval of surface commingling, and, in such case, the applicant shall give notice of the hearing in the manner the division directs.

(e) Notice by publication. When an applicant is unable to locate all interest owners after exercising reasonable diligence, the applicant shall provide notice by publication and submit proof of publication with the application. Such proof shall consist of a copy of the legal advertisement that was published in a newspaper of general circulation in the county or counties in which the commingled production is located. The advertisement shall include:

(i) the applicant's name, address, telephone number and contact party;

(ii) the location by section, township and range of the leases from which production will be commingled and the location of the commingling facility;

(iii) the source of all commingled production by pool name; and

(iv) a notation that interested parties must file objections or requests for hearing in writing with the division's Santa Fe office within 20 days after publication, or the division may approve the application.

(f) Effect of protest. The division shall include protests and requests for hearing it receives in the case file; provided however, the division shall not consider the protest as evidence. If the protesting party does not appear at the hearing, the division may grant application without receiving additional evidence in support of the application.

(g) Additions. A surface commingling order may authorize, prospectively, the inclusion of additional pools or leases within defined parameters set forth in the order, provided that:

(i) the notice to the interest owners includes a statement that authorization for subsequent additions is being sought and of the parameters for the additions the applicant proposes, and

(ii) the division finds that subsequent additions within defined parameters will not, in reasonable probability, reduce the commingled production's value or otherwise adversely affect the interest owners; a subsequent application to amend an order to add to the commingled production other leases, pools or leases and pools that are within the defined parameters requires notice only to the owners of interests in the production to be added, unless the division otherwise directs.

(h) State, federal or tribal lands. Notwithstanding the issuance of an exception under 19.15.12.10 NMAC, an operator shall not commence commingling involving state, federal or tribal leases unless or until approved by the state land office or the BLM, as applicable.

N.M. Admin. Code § 19.15.12.10

19.15.12.10 NMAC - Rp, 19.15.5.303 NMAC, 12/1/08