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Texas Oil and Gas Regulation Update: Allocation Wells

Event Description and Agenda:

In Texas, an oil and gas operator must obtain a permit from the Texas Railroad Commission ("TRRC") prior to commencing operations for an oil or gas well. Operators who wish to drill horizontal wells must apply for permits which conform to regulations under TRRC Rules 37, 38, and 86. These regulations set forth spacing and density principles that determine whether a well may be drilled at a given location, along a particular path, or may traverse certain tracts. While horizontal drilling has dramatically increased the efficient gains in hydrocarbon extraction, as with any new technology, horizontal drilling presents its own unique set of legal and regulatory issues. To be sure, horizontal drilling has challenged the Texas Railroad Commission and the Texas Court system to apply and adapt traditional legal and regulatory concepts, which have been developed for over a century for vertical wells, to horizontal wells.

This webinar will discuss the benefits of horizontal drilling as well as the evolution of the TRRC regulations leading to allocation wells, as well as the existing Texas Case Law supporting the concept of permitting allocation wells. We will examine various scenarios as to when an allocation well permit might be applicable and will also examine some production calculation methods utilized to comport to the Texas Case Law. Finally, this webinar will discuss some open questions not addressed by Texas Case Law and the possible legal ramifications for operators.


  • Introduction
  • Key Insights on Allocation Wells in Texas
    • Evolution of the Texas Railroad Commission Rules Leading to Allocation Wells
    • Scenarios for Allocation Well Use and Underlying Case Law
    • Possible Allocation Calculation Methods
  • Conceivable Pitfalls Associated with Allocation Wells
  • Case Study