1. (a) Where oil and gas are found in the same stratum and it is impossible to separate one from the other, or when a well has been classified as a gas well and such gas well is not connected to a cycling plant and such well is being produced on a lease and the gas is utilized under Texas Natural Resources Code §§86.181-86.185, the operator shall install a separating device of approved type and sufficient capacity to separate the oil and liquid hydrocarbons from the gas.

   1. (1) The separating device shall be kept in place as long as a necessity for it exists, and, after being installed, such device shall not be removed nor the use thereof discontinued without the consent of the commission.
   2. (2) All oil and any other liquid hydrocarbons as and when produced shall be adequately measured according to the pipeline rules and regulations of the commission before the same leaves the lease from which they are produced, except for gas wells where the full well stream is moved to a plant or central separation facility in accordance with §3.55 of this title (Statewide Rule 55, relating to Reports on Gas Wells Commingling Liquid Hydrocarbons before Metering) and the full well stream is measured, with each completion being separately measured, before the gas leaves the lease.
   3. (3) Sufficient tankage and separator capacity shall be provided by the producer to adequately take daily gauges of all oil and any other liquid hydrocarbons unless LACT equipment, installed and operated in accordance with the latest revision of American Petroleum Institute (API) Manual of Petroleum Measurement Standards, Chapter 6.1 or another method approved by the commission or its delegate, is being used to effect custody transfer.

2. (b) In order to prevent waste, to promote conservation or to protect correlative rights, the commission may approve surface commingling of oil, gas, or oil and gas production from two or more tracts of land producing from the same commission-designated reservoir or from one or more tracts of land producing from different commission-designated reservoirs as follows:

   1. (1) Administrative approval. Upon written application, the commission may grant approval for surface commingling administratively when any one of the following conditions is met:

      1. (A) The tracts or commission-designated reservoirs have identical working interest and royalty interest ownership in identical percentages and therefore there is no commingling of separate interests;
      2. (B) Production from each tract and each commission-designated reservoir is separately measured and therefore there is no commingling of separate interests; or

      3. (C) When the tracts or commission-designated reservoirs do not have identical working interest and royalty interest ownership in identical percentages and the commission has not received a protest to an application within 21 days of notice of the application being mailed by the applicant to all working and royalty interest owners or, if publication is required, within 21 days of the date of last publication and the applicant provides:

         1. (i) a method of allocating production to ensure the protection of correlative rights, in accordance with paragraph (3) of this subsection; and
         2. (ii) an affidavit or other evidence that all working interest and royalty interest owners have been notified of the application by certified mail or have provided applicant with waivers of notice requirements; or
         3. (iii) in the event the applicant is unable, after due diligence, to provide notice by certified mail to all working interest and royalty interest owners, a publisher's affidavit or other evidence that the commission's notice of application has been published once a week for four consecutive weeks in a newspaper of general circulation in the county or counties in which the tracts that are the subject of the application are located.
   2. (2) Request for hearing. When the tracts or commission-designated reservoirs do not have identical working interest and royalty interest ownership in identical percentages and a person entitled to notice of the application has filed a protest to the application with the commission, the applicant may request a hearing on the application. The commission shall give notice of the hearing to all working interest and royalty interest owners. The commission may permit the commingling if the applicant demonstrates that the proposed commingling will protect the rights of all interest owners in accordance with paragraph (3) of this subsection and will prevent waste, promote conservation or protect correlative rights.

   3. (3) Reasonable allocation required. The applicant must demonstrate to the Commission or its designee that the proposed commingling of hydrocarbons will not harm the correlative rights of the working or royalty interest owners of any of the wells to be commingled. The method of allocation of production to individual interests must accurately attribute to each interest its fair share of aggregated production.

      1. (A) In the absence of contrary information, such as indications of material fluctuations in the monthly production volume of a well proposed for commingling, the Commission will presume that allocation based on the daily production rate for each well as determined and reported to the Commission by semi-annual well tests will accurately attribute to each interest its fair share of production without harm to correlative rights. As used in this section, "daily production rate" for a well means the 24 hour production rate determined by the most recent well test conducted and reported to the commission in accordance with Statewide Rules 28, 52, 53, and 55 (§§3.28, 3.52, 3.53, and 3.55 of this title (relating to Potential and Deliverability of Gas Wells Go Be Ascertained and Reported, Oil Well Allowable Production, Well Status Reports Required, and Reports of Gas Wells Commingling Liquid Hydrocarbons before Metering)).
      2. (B) Operators may test commingled wells annually after approval by the Commission or the commission's delegate of the operator's written request demonstrating that annual testing will not harm the correlative rights of the working or royalty interest owners of the commingled wells. Allocation of commingled production shall not be based on well tests conducted less frequently than annually.
      3. (C) Nothing in this section prohibits allocations based on more frequent well tests than the semi-annual well test set out in subparagraph (A) of this paragraph. Additional tests used for allocation do not have to be filed with the commission but must be available for inspection at the request of the commission, working interest owners or royalty interest owners.
      4. (D) Allocations may be based on a method other than periodic well tests if the Commission or its designee determines that the alternative allocation method will insure a reasonable allocation of production as required by this paragraph.

   4. (4) Additional notice required. In addition to giving notice to the persons entitled to notice under paragraph (1)(C) of this subsection, an applicant for a surface commingling exception must give notice of the application to the operator of each tract adjacent to one or more of the tracts proposed for commingling that has one or more wells producing from the same commission-designated reservoir as any well proposed for commingling if:

      1. (A) any one of the wells proposed for commingling produces from a commission-designated reservoir for which special field rules have been adopted; or

      2. (B) any one of the wells proposed for commingling produces from multiple commission-designated reservoirs, unless:

         1. (i) an exception to §3.10 of this title (relating to Restriction of Production of Oil and Gas from Different Strata) has previously been obtained for production from the well; or
         2. (ii) the applicant continues to separately measure production from each different commission-designated reservoir produced from the same wellbore.
3. (c) If oil or any other liquid hydrocarbon is produced from a lease or other property covered by the coastal or inland waters of the state, the liquid produced may, at the option of the operator, be measured on a shre or at a point removed from the lease or other property on which it is produced.

4. (d) Oil gravity tests and reports (Reference Order Number 20-55, 647, effective 4-1-66, and Reference Order Number 20-58, 528, effective 5-10-68.) If oil or any other liquid hydrocarbon is produced from a lease or other property covered by the coastal or inland waters of the state, the liquid produced may, at the option of the operator, be measured on a shore or at a point removed from the lease or other property on which it is produced.

   1. (1) Where individual lease oil production, or authorized commingled oil production, separator, treating, and/or storage vessels, other than conventional emulsoin breaking treaters, are connected to a gas gathering system so that heat or vacuum may be applied prior to oil measurement for commission-required production reports, the operator may, at his option, apply heat or vacuum to the oil only to the extent the average gravity of the stock tank oil will not be reduced below a limiting gravity for each lease as established by an average oil gravity test conducted under the following conditions (Reference Order Number 20-55, 647, effective 4-1-66):

      1. (A) the separator or separator system, which shall include any type vessel that is used to separate hydrocarbons, shall be operated at not less than atmospheric pressure;
      2. (B) no heat shall be applied;
      3. (C) the test interval shall be for a minimum of 24 hours, and the average oil gravity after weathering for not more than 24 hours shall then become the limiting gravity factor for applying heat or vacuum to unmeasured oil on the tested lease.
   2. (2) Initial gravity tests shall be made by the operator when such separator, treating, and/or storage vessels are first used pursuant to this section. Subsequent tests shall be made at the request of either the commission or any interested party; and such subsequent tests shall be witnessed by the requesting party. Any interested party may witness the tests.
   3. (3) Each operator shall enter on the face of his required production report the gravity of the oil delivered to market from the lease reported, and it is provided that should a volume of oil delivered to market from such lease separation facilities not meet the gravity requirement established by the described test, adjustment shall be made by charging the allowable of the lease on the relationship of the volume and the gravity of the particular crude.
   4. (4) Where a conventional heater treater is required and is used only to break oil from an emulsion prior to oil measurement, this section will not be applicable; provided, however, that by this limitation on the section, it is not intended that excessive heat may be used in conventional heater treater, and in circumstances where such heater treater is connected to a gas gathering system and it is found by commission investigation made on its own volition or on complaint of any interested party that excessive heat is used, either the provisions of this section or special restrictive regulation may be made applicable.

Source Note:The provisions of this §3.26 adopted January 1, 1976; amended to be effective February 23, 1979, 4 TexReg 436; amended to be effective March 10, 1986, 11 TexReg 901; amended to be effective February 18, 1994, 19 TexReg 783; amended to be effective June 23, 1997, 22 TexReg 5747; amended to be effective May 1, 2000, 25 TexReg 3741.