(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.      
        (1) Capacity oil allowable--The allowable assigned from time to time by the director of the Oil and Gas Division or the director's delegate to an oil lease or unit engaged in a secondary or tertiary recovery program, that is consistent with the ability of the lease or unit to produce and that will prevent the occurrence of overproduced status for the lease or unit. Capacity oil allowables encompass and supercede what the Railroad Commission formerly designated as waterflood allowables.        
          (2) Offsetting operators and unleased mineral interest owners affected by the application--All offsetting operators and unleased mineral interest owners to the lease or unit except for those offsetting operators and unleased mineral owners the director of the Oil and Gas Division or thedirector's delegate determines to be unaffected by the application.          
            (b) Application. The director of the Oil and Gas Division or the director's delegate may grant a capacity oil allowable for a lease or unit, to the operator of a secondary or tertiary recovery project, when evidence of production increase in response to the secondary or tertiary recovery project is noted. The operator's application for a capacity oil allowable shall consist of:            
              (1) a written request that shall contain a statement indicating that all offsetting operators and unleased mineral interest owners affected by the application have been sent a copy of the complete application, and a list of such offsetting operators and unleased mineral interest owners indicating the date that notification was sent;              
                (2) evidence of the operator's participation in the subject secondary or tertiary recovery project;                
                  (3) a platindicating all producing wells and injection wells on the lease or unit and all offsetting operators and unleased mineral interest owners to the lease or unit;                  
                    (4) if available, signed waivers of objection from all offsetting operators and unleased mineral interest owners affected by the application; and                    
                      (5) a production graph illustrating both increased production and volumes of water or other substances used in the secondary or tertiary recovery project that have been injected on the lease or unit since initiation of the secondary or tertiary recovery project.                      
                        (c) Notice and hearing. If the operator does not submit signed waivers of objection from all offsetting operators and unleased mineral interest owners affected by the application, there shall be a minimum of 21 days notice of the application for a capacity oil allowable; provided that, if the operator requests a hearing to consider the application, such hearing shall beheld only after at least 10 days notice. If the director of the Oil and Gas Division or the director's delegate declines to approve the initial application, or if a protest is received by the Oil and Gas Division within the prescribed notice period, the operator may request a hearing to show that the capacity oil allowable is necessary either to prevent waste or to protect correlative rights. Any hearing held pursuant to this section shall be held only after at least 10 days notice. If the operator submits signed waivers of objection from all offsetting operators and unleased mineral interest owners affected by the application, or if no protest is received by the Oil and Gas Division within the 21-day notice period, or if no protestant appears at a hearing to consider an application for a capacity oil allowable, the capacity oil allowable may be granted administratively by the director of the Oil and Gas Division or the director's delegate if the application establishes thatthe capacity oil allowable is necessary to ensure maximum recovery from the secondary or tertiary recovery project.                        
                          (d) Temporary basis. A capacity oil allowable may be granted on a temporary basis by the director of the Oil and Gas Division or the director's delegate upon receipt of a complete application indicating that an immediate allowable increase is necessary to ensure maximum recovery from the secondary or tertiary recovery project. If a hearing is held to consider the application, any capacity oil allowable previously granted on a temporary basis under this section will remain in effect until a signed order of the Railroad Commission is issued in the matter. If the commission order denies the application, or if an applicant fails to request a hearing to consider a protested application, additional production resulting from the capacity oil allowable granted on a temporary basis will be treated as overproduction.                         
     Source Note:        The provisions of this §3.48 adopted to be effective March 28, 1988, 13 TexReg 1257.