Case Information

*1 OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN John It. Taylor, Chief supemlsor Mr.

Oil k 0ai1 Di~ia10~

Railroad Commlsal~n oi Texas

Austin, Texan

Dear Mr. Taylor;

9, 19&O, rsquee

or not thr Commlsolon has the author head gar to burned

without such gas line Content, protidrd plant is avallabla in on has arisen, no doubt, by maeon

d (I), Saetion 3 cr drtiala Tha production of natural gaa or market

in oxcees of transportation faallltlee, or raaoonabla market demand for the type of gaa produaed." (One of the enumerated purposelr tor which the production of gas is prohibited.)

Mr. John E. Taylor, pags 2

Ths aseumsd finding on the part o f the Railroad Comrsis- sion that, as to tbs aubjsat gas, there would br no adequate trsnaportation or market facilities, mkss it nsosasary to deterstins whethdr them limitations operate on production for othar purpoaes; that is, if the gas cannot bs transported or sold, do the llmltatlone prevent its production for othsr purposes? Othsr.pro- visions of the aat warrant uasa of gaa by ths owner other than for transporting or selling the sane on ths mark&. Aocordlngly, subdsotlon (h) of Ssction 3 is a?plicabls as a llnitatlon only whers the owuer is sn- in transporting or selling the gsa on ths market. *aged There can be no produotion In axcsss of ths ncsd ror tranaport or sala except that ths sxcsss bs used ror soms othsr lawful purposa. Tha limitation contained in any ons subsaotlon of the act aannot reasonably be interpreted to preoluds other lawful use and we do not consider that the limnitation of this ssotlon operates to pr;aoluds the manufacture of carbon black without rirat extracting

the gasoline content. Ws next sxamins subasotlon (1) of Ssotion 3, Article 6006:

“(1) The use or natural gas ror the manuraaturs ot carbon black without first having extraotsd line content the natiral gaao- from such gas.” (Ona of the enumerated purposes for whish the produo- tion of gas la prohlbltsd.)

WI lntsrprst this’ subsootion to smbraos a limltatlon on produotlon of gas for a partloular ass; that like sub- section ths owner puts hla gas primarily (h), It ia not lnoluaivs of other ussa. wh6rs

to ths use of manufaotur- ing carbon black, the natural gasoline content mat be flrst rsaonored.

Hers the subjeot gas Is casinghead‘ gas and itB production i3 Only Incident t0 the production Or oil, not primarily ror the manufacture of carbon black. T’:e do not consider subssotion (1) of Section 3, Article as a limitation on it13 use. *3 ’

hr. John E. Taylor, pegs 3

In examining the whole of Article 6008, ws find other rsaaona for arriving at this conclusioa.

Casinghead gas Is by subsection (i), Section 2 of Article 6008 dsfined to be ‘*any gas and/or vapor in- digenous to an oil stratum and pr@duced from such stratum with 011.” Inasmuch aa br aubseatlou (d) of Ssation 2 any well producing in sxcsss of a gas/all ratio of 100,000 cubic fset of natural gas to each barrel of oruds petroleum oil aonstltutsa a gas well, than ths prcductlon cb gas In any well of less ratio oonstltutes an 011 well utisr sub- -sotion (s) OS Section 2, and ths gas from an 011 well is naosasarily casinghead gas.

Xs find in aubssation (m), Section 3, Articls 6008. by implication, gas from a well producing a gas/oil ratlo of leas than 100,000 to 1 may be put to any use, because it la only gaa produced in excess of that ratio $a:sz;t be put to one or mora of the uses authorized.

:

%xctLon~ (ml.. The production of mars than one hundred thousand ‘(1uZ: ,UUoj -cubic feet of gas to each barrel of crude petroleum unless such gas Is put to one or more of tbv uass authorized for the typs of such gaB so produced under nllo- cations made by the Commission. IQ Thia provision Is one of a nunber defining *waste”. By it oasinghead gas say be produced In quantltiea of less than 100,000 cubic rest for 1 barrel of 011, and not further utilized, without committ?ng statutory waete. Accordingly, should we have given subsection (i) of this section an Interpretation other than excluslvs In ahsraatsr It v:ould hsvs bssn at variance with ths per- of subsection (a). That gas not in ex- mlasivs rssults CeBS of the prohibited ratio of 100,000 cubla feet of gas to 1 barrel of oil may by virtue of subssotion (m) ellovsd to esaaps free into ths air without committing statutory waste, it follovs that no reasonable li~aitation could be placed upon the use of that gaa if not allowed T2e prevention of waste is the foundation or to escape. the poyrer of this governmental regulation arrd if complets liberation of the gee withcut use is not wcste, than no particular US4 of the gas could reasonably be determined to be waste.

Mr. John B. Taylor, paga 4 For furthar light on the intendmant of tha _ ~. .~.

Lagialatura, we rarer to subaeation (31 of Section 7, Article for speclrlo authorization tar tha uses of casingheed gaa. It reads:

*Subsection (a). Caainghaad gaa may be used for eny benafiolal Durpcaa, which includes the manuracture of nstural gasollne.w oQaphasla oura) P;a interpret this provlalon undoubtedly to include the sanufactura of carbon block, without the in oaition cl the Ilaitatlons provided in subsections (h7 and (1) of Section 3 of Article 6008.

Tour aeaond quaation 13 as ioll0ws: aDoes the ~Conuaisslon have the author- ity to parnit a gaaolina plant, -&lch vents a portion of Its residue gas to the air end operntaa iii a field which doea not produce both sweat and 8our gas to take Into its gathering linea and comaingle in auoh lines and in the plant meet or aour gas with casinghead gas if a volume of reelduo gas eqaivalant to or in axcasa of the total intake rrrvp gas walla, laes shrinkage resulting rrom gasoline ex- Lraotion, ie utilized for tha purpoa6 permitted for awaat and aour gas by Artiols 6008. ”

You hays quotad subsection (k) of Seatlon 3, Article 6006, and aubaaotiona (1) and (2) of Saotlon of the law 7, Article 6008. prammably‘aa provisions rafalng doubt as to the power of the Commiaalon to al- the venting, of dry gas, lrreapaotivs of the cir- low cumatancea sat out in your qunation. The atatad alr- cumatanoes would indicate that aaid dry gaa would be handled in such !na~er as aifactually to avoid waste. to us, howaver, that even though the manner It seam in which the dry gas may handled would afiactually avoid naata, yet neoerthalaaa, if in direct contraven- tion of the provisions the ealaa can- of the statutes, not be sanct ioaad. Subsection (k) OS Section 3 pro- vidaa:

A!r. John l3. Taylor. pagr 5

%ubsectlon (k) . Permitting any natural gas produced iron a gas wall to escape into the air before or after such gas has bean for its gaeolina processed content.* (Ona of savaral provlslons darining mwaaten. ) 7 of Artiole 600e provides Also Section that no gas from a gas wall shall be pemitted to escape Into tha air, excopt that it be utilized for certain purposes.

In the faoa of these two express statutory prohibitions against the ralaasa of dry gas, that is, awaet or sour gas irom a as well, wo ara of the belief ft that it cannot be done. f there is a way of kindling the gas so as to avoid praotioal waata with the venting of a commingled mixture, containing in part dry gas, the same will have to beg authorized by the Legislature.

Yours vary truly Yours vary truly Hugh &. Book Hugh &. Book Assistant Assistant RQB :BBB