Directive 065 - Energy Resources Conservation Board

Unit 1 Equity
1.1 Application for a Rateable Take Order
1.1.1 Background
The purposes of the Oil and Gas Conservation Act (OGCA) are, among other things, to effect
the conservation of oil and gas resources, to afford each owner the opportunity of obtaining
its share of the production of oil or gas from any pool, and to provide for economic, orderly,
and efficient development in the public interest. Section 36 of the OGCA mandates the ERCB
to address all three of these purposes. Historically this legislation has been used only in the
equity context and to allow for economic, orderly, and efficient development; other sections
of the OGCA have been used to ensure conservation of resources.
Under Section 36 the ERCB may limit the amount of gas that may be produced and/or
distribute the amount of gas that may be produced from a pool or part of a pool. Historically,
this legislation has been used to authorize the distribution of gas production among wells in a
nonassociated gas pool.
1.1.2 When to Make This Application
A situation that could warrant an application under Section 36 of the OGCA would typically
involve a number of gas wells of different ownership in a pool being on production. One
owner believes its reserves are being inequitably drained because its well has been placed on
production at rates that do not allow the well to capture the owner’s share of the pool
reserves. The well’s rate may be restricted by pipeline or processing capacity or by a gas sales
contract.
In the case where the rate limitation is due to pipeline or processing capacity, the owner has
capacity or its own facilities and believes that it would not represent economic, orderly, and
efficient development to build or obtain additional capacity. Where the limitation is due to a
gas sales contract, the owner has been unable to adjust the contract or produce gas in excess
of the contract to allow for an equitable rate of production.
1.1.3 How the ERCB Processes the Application
The ERCB considers the issuance of a rateable take order to be a very significant action
because it has the potential to override contractual arrangements put in place through normal
business practices. Consequently, before approving an application, the ERCB requires an
applicant to demonstrate that it is being deprived of the opportunity to obtain its share of
production from the pool. The applicant must show that drainage has occurred and continues
to occur or that it can be expected to occur with a very high degree of certainty. Additionally,
the drainage must be a result of the applicant not having an opportunity to produce its share
of production. The restriction in rate must not be due to limitation in well capability. The
ERCB has previously ruled that where the only limitation on production is well capability, a
producer is not being deprived of an opportunity to obtain an equitable share of production
(Decision 85-5).
Each application for a rateable take order proceeds to a public hearing.
ERCB Directive 065: Resources Applications / Rateable Take (March 2012) • 1-1