3173.14 Conditions for commingling and allocation approval (surface and downhole).§ 3173.14 Conditions for commingling and allocation approval (surface and downhole).
(a) Subject to the exceptions provided in paragraph (b) of this section, the BLM may grant a CAA only if the proposed allocation method used for any such commingled measurement does not have the potential to affect the determination of the total volume or quality of production on which royalty owed is determined for all the Federal or Indian leases, unit PAs, or CAs which are proposed for commingling, and only if the following criteria are met:
(1) The proposed commingling includes production from more than one:
(i) Federal lease, unit PA, or CA, where each lease, unit PA, or CA proposed for commingling has 100 percent Federal mineral interest, the same fixed royalty rate and, and the same revenue distribution;
(ii) Indian tribal lease, unit PA, or CA, where each lease, unit PA, or CA proposed for commingling is wholly owned by the same tribe and has the same fixed royalty rate;
(iii) Federal unit PA or CA where each unit PA or CA proposed for commingling has the same proportion of Federal interest, and which interest is subject to the same fixed royalty rate and revenue distribution. (For example, the BLM could approve a commingling request under this paragraph where an operator proposes to commingle two Federal CAs of mixed ownership and both CAs are 50 percent Federal/50 percent private, so long as the Federal interests have the same royalty rates and royalty distributions.); or
(iv) Indian unit PA or CA where each unit PA or CA proposed for commingling has the same proportion of Indian interests, and which interest is held by the same tribe and has the same fixed royalty rate; and
(2) The operator or operators provide a methodology acceptable to BLM for allocation among the properties from which production is to be commingled (including a method for allocating produced water), with a signed agreement if there is more than one operator;
(3) For each of the leases, unit PAs, or CAs proposed for inclusion in the CAA, the applicant demonstrates to the AO that a lease, unit PA, or CA proposed for inclusion is producing in paying quantities (or, in the case of Federal leases, capable of production in paying quantities) pending approval of the CAA; and
(4) The FMP(s) for the proposed CAA measure production originating only from the leases, unit PAs, or CAs in the CAA.
(b) The BLM may also approve a CAA in instances where the proposed commingling of production involves production from Federal or Indian leases, unit PAs, or CAs that do not meet the criteria of paragraph (a)(1) of this section (e.g., the commingling of leases, unit PAs, or CAs with different royalty rates or different distributions of revenue, or where the commingling involves multiple mineral ownerships). In order to be approved, a CAA under this subparagraph must meet the requirements of paragraphs (a)(2) through (4) of this section and at least one of the following conditions:
(1) The Federal or Indian lease, unit PA, or CA meets the definition of an economically marginal property. However, if the BLM determines that a Federal or Indian lease, unit PA, or CA included in a CAA ceases to be an economically marginal property, then this condition is no longer met;
(2) The average monthly production over the preceding 12 months for each Federal or Indian lease, unit PA, or CA proposed for the CAA on an individual basis is less than 1,000 Mcf of gas per month, or 100 bbl of oil per month;
(3) A CAA that includes Indian leases, unit PAs, or CAs has been authorized under tribal law or otherwise approved by a tribe;
(4) The CAA covers the downhole commingling of production from multiple formations that are covered by separate leases, unit PAs, or CAs, where the BLM has determined that the proposed commingling from those formations is an acceptable practice for the purpose of achieving maximum ultimate economic recovery and resource conservation; or
(5) There are overriding considerations that indicate the BLM should approve a commingling application in the public interest notwithstanding potential negative royalty impacts from the allocation method. Such considerations could include topographic or other environmental considerations that make non-commingled measurement physically impractical or undesirable, in view of where additional measurement and related equipment necessary to achieve non-commingled measurement would have to be located.