Opinion ID: 1454703
Heading Depth: 1
Heading Rank: 6

Heading: PURSUANT TO OCC-OGR 2-105(d) (1987), UNDERAGE ACCUMULATED BECAUSE OF FAILURE OF THE PURCHASER TO TAKE GAS FROM AN UNALLOCATED GAS WELL MAY BE APPLIED TO ADJUST OVERAGE PRODUCED.

Text: Forest cites OCC-OGR 2-105(d) as support for the proposition that the overage produced in 1987 should be balanced by underages accumulated in previous years. [39] ONG insists Rule 2-105(d) is inapplicable to gas production, and that the Corporation Commission properly refused to apply past underages to the overages produced in 1987 from the Belcher Unit. Rule 2-105(d) provides that failure of a purchaser to run or take the allowable shall be grounds for reinstatement of accumulated underage. Corporation Commission rules have the force and effect of law. [40] Use of the term shall by a lawmaking body is normally considered as a legislative mandate equivalent to the term must. [41] Therefore, if § 2-105(d) applies, adjustment of the overage by application of past underages should be allowed. The term run is generally associated with transfers of crude oil from stock tanks, where it is stored after production, to a pipeline. [42] The term take, in the oil and gas industry, is more generally associated with gas production. [43] ONG's assertion that Rule 2-105(d) is inapplicable to gas production is premised on the fact that the rule follows the general heading of OCC-OGR 2-100 Oil and Gas Production From Oil Pools. ONG argues that Rule 2-102(d) cannot apply because the Belcher wells are unallocated gas wells. This argument is unpersuasive. ONG's own witness recognized that two rules, OCC-OGR 2-109 Classification of Wells for Allowable Purposes and OCC-OGR 2-110 Allowable for Increased Density Well, which directly follow Rule 2-100, are routinely applied to unallocated gas wells. Rule 2-105(d) may properly be applied to adjust overages produced from an unallocated gas well. This finding is supported by a revision in the Corporation Commission Rules. The subject matter formerly addressed in Rule 2-105(d) is now found in OCC-OGR 2-111. [44] Rule 2-111 concerns applications for reinstatment of cancelled underage for oil wells and for unallocated gas wells. Rule 2-111(B)(3) relates to unallocated gas wells and provides that inability to sell gas during the proration period shall be grounds for reinstatement of cancelled underage. Rule 2-105(d) does not restrict the accumulation of underages to either a specific time period, or to a limited number of MCFs. Underages may be accumulated under Rule 2-105(d) until they are balanced by equal runs in excess of the current allowables. In the instant cause, the underages accumulated from the Belcher Unit in 1986 alone are sufficient to balance the overage produced in 1987. [45]