Production Limits for Natural Gas to Stay in Place

Article excerpt

By Ronda Fears

Journal Record Staff Reporter

Natural gas production limits in Oklahoma will remain at status quo through the first quarter of next year, albeit at a lower rate than before 1992 proration reform, state regulators decided Monday.

An industry advisory group, however, is forming under the auspices of the Oklahoma Corporation Commission to study natural gas market demand trends and make recommendations on production rates for future quarters.

The commission voted to retain the winter production rate _ the greater of 40 percent of open flow or 1 million cubic feet a day _ provided for in a new proration law for unallocated gas wells. Unallocated wells account for about 80 percent of the 25,000 gas wells in the state.

Commission staff estimates that only about 1,000 wells are affected by the new production limits, though, because the other wells are not capable of producing 1 million cubic feet daily.

Before the new law became effective April 1, the production rate was the greater of 50 percent of open flow or 1 million cubic feet a day for unallocated gas wells. Many proration reform advocates argued that the high production rate aggravated a glut of gas on the national scene.

The winter rate went into effect Nov. 1 and would continue only through February under the law; then, at March 1 the summer rate _ the greater of 25 percent of open flow or 750 thousand cubic feet a day _ would kick in.

But the commission was granted authority to change the production rates on the basis of market demand, and has decided to set rates quarterly. Production rates are annualized, though, even though they are subject to change quarterly.

Thus, producers could be overshooting or undershooting gas production at any given time, only to offset it later in the year. Indeed, at a hearing two weeks ago before commissioners, several producers stated they are now overproducing to meet demand from gas buyers.

Yet, the commission found, after hearing arguments for and against returning to the 50 percent production rate, that there was not sufficient evidence to support a higher rate. …


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