North Carolina § 113-394 - Limitations on production; allocating and prorating "allowables."

§ 113-394. Limitations on production; allocating and prorating "allowables."

The Commission may limit the total amount of oil, including condensate, which may be produced in the State by fixing an amount which shall be designated "allowable" for the State. The Commission may then allocate or distribute the "allowable" for the State among the pools on a reasonable basis and in such manner as to avoid undue discrimination, and so that waste will be prevented. In allocating the "allowable" for the State, and in fixing "allowables" for pools producing oil or hydrocarbons forming condensate, or both oil and such hydrocarbons, the Commission may take into account the producing conditions and other relevant facts with respect to such pools, including the separate needs for oil, gas and condensate, and may formulate rules setting forth standards or a program for the distribution of the "allowable" for the State, and distribute the "allowable" for the State in accordance with such standards or program, and where conditions in one pool or area are substantially similar to those in another pool or area, then the same standards or programs shall be applied to such pools and areas so that as far as practicable a uniform program will be followed; provided, however, the Commission shall allow the production of a sufficient amount of natural gas from any pool to supply adequately the reasonable market demand for such gas for light and fuel purposes if such production can be obtained without waste, and the condensate "allowable" for such pool shall not be less than the total amount of condensate produced or obtained in connection with the production of the gas "allowable" for light and fuel purposes, and provided further that, if the amount allocated to pool as its share of the "allowable" for the State is in excess of the amount which the pool should produce to prevent waste, then the Commission shall fix the "allowable" for the pool so that waste will be prevented. Repealed by Session Laws 2013-365, s. 4, effective July 29, 2013. Whenever the Commission limits the total amount of oil or gas which may be produced in any pool in this State to an amount less than that which the pool could produce if no restrictions were imposed (which limitation may be imposed either incidental to, or without, a limitation of the total amount of oil or gas which may be produced in the State), the Commission shall prorate or distribute the "allowable" production among the producers in the pool on a reasonable basis, and so that each producer will have the opportunity to produce or receive his just and equitable share, as such share is set forth in subsection G.S. 113-392(d), subject to the reasonable necessities for the prevention of waste. Whenever the Commission limits the total amount of gas which may be produced from a pool, the Commission shall then allocate or distribute the allowable production among the developed areas in the pool on a reasonable basis, so that each producer will have the opportunity to produce his just and equitable share, as such share is set forth in subsection G.S. 113-392(d), whether the restriction for the pool as a whole is accomplished by order or by the automatic operation of the prohibitory provisions of this law. As far as applicable, the provisions of subsection (a) of this section shall be followed in allocating any "allowable" of gas for the State. After the effective date of any rule or order of the Commission fixing the "allowable" production of oil or gas, or both, or condensate, no person shall produce from any well, lease, or property more than the "allowable" production which is fixed, nor shall such amount be produced in a different manner than that which may be authorized. In allocating "allowables" to pools, the Commission shall not be bound by nominations or desires of purchasers to purchase oil from particular fields or areas, and the Commission shall allocate the "allowable" for the State in such manner as will prevent undue discrimination against any pool or area in favor of another or others which would result from selective buying or nominating by purchasers of oil, as such term "selective buying or nominating" is understood in the oil business. History (1945, c. 702, s. 14; 1973, c. 1262, s. 86; 1975, c. 19, ss. 37, 38; 1987, c. 827, s. 112; 2012-143, s. 2(e); 2013-365, s. 4.) Editor's Note. - For policy recommendations, legislative intent, and statement of principles regarding development of a modern oil and gas regulatory program, see the preface to Session Laws 2012-143, noted at G.S. 113-389 and G.S. 113-395. Effect of Amendments. - Session Laws 2012-143, s. 2(e), effective August 1, 2012, substituted "Commission" for "Department" throughout the section; and in subsection (a), substituted "shall allow" for "shall permit" in the third sentence. Session Laws 2013-365, s. 4, effective July 29, 2013, in subsection (a), rewrote the first sentence, and substituted "may" for "shall" throughout the second sentence; deleted the former first sentence in subsection (b); redesignated the former last sentence in subsection (b) as the second paragraph in subsection (a); and in subsection (d), deleted the former first sentence, and added "Whenever the Commission limits the total amount of gas which may be produced from a pool" to the beginning of the present first sentence.