Newspaper article THE JOURNAL RECORD

Recommended Allowables Get Hearing

Newspaper article THE JOURNAL RECORD

Recommended Allowables Get Hearing

Article excerpt

By Jessica Danker

Journal Record Staff Reporter

Oil and gas industry representatives and the Oklahoma Corporation Commission Technical Staff justified their recommendations for 1994 second quarter unallocated well allowables by the anticipated new low in the United States natural gas storage levels at a hearing Friday.

"It is clear that we will emerge from the winter with storage reduced to low levels _ probably the lowest in at least 12 years," said Claude V. McNully, manager of the commission's technical department.

"Clearly market forces will dictate a high level of demand for the upcoming storage season. We can either allow the production and sale of this gas or we can curtail it and observe as the slack is taken up by other states and Canada," he said.

McNully said the commission must make a decision on setting the allowables for the second quarter before March 16.

"Based on the low level of stocks that are now inevitable at the end of the heating season and the downward trend in peak storage over the last four years, an exceptionally high rate of production throughout the summer will be necessary to replenish storage," McNully said. "We recommend that the allowables for the coming quarter be set at the greater of 50 percent of calculated wellhead absolute open flow or 1 million cubic feet per day."

McNully said recommendations from the industry varied from less than 35 percent of absolute wellhead overflow to unrestricted flow.

"The majority of those who participated favored a limit of 45 to 50 percent, and strongly advocated that anything less than 45 percent should not even be considered," McNully said.

Carl D. McCutcheon, vice president of energy acquisition for Agricultural Minerals Corp. of Tulsa, said his corporation recommends adopting the staff's recommendation of a 50 percent level for the second quarter for 1994.

"We consume one-fifth of all the natural gas that goes into the industrial sector here in the state of Oklahoma," McCutcheon said. "We are very concerned about the current low levels of natural gas storage throughout the country."

McCutcheon said that a recent Merrill Lynch report said "we are less than 15 billion cubic feet from posting a new all-time low _ the low was set at the end of March 1978 at 1. …

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