What a disposition code is
Producing a barrel of oil usually brings gas with it. That gas, called casinghead gas on an oil lease, has to go somewhere. Each month the operator files a report with the Railroad Commission that says how many thousand cubic feet (mcf) went to each destination, and each destination has a code.
The total of all the codes equals the gas the lease reports for the month. Oil has a disposition total too. On the Commission’s Production Data Query these appear as the columns of the “Disposition Details” view, and on each lease page here as a stacked bar chart, one bar per month.
- 1Lease fuelBurned to run the wells and equipment. Not sold, usually no royalty.
- 2Transmission lineSold into a pipeline. Gas price, few or no plant products.
- 3Processing plantSent to a plant that pulls out liquids. Can carry processing fees and plant-product lines.
- 4Flared or ventedBurned off or released. Nothing sold, so nothing on the stub.
- 5–8Gas lift, repressure, otherUsed back on the lease or in a special way. Rare on royalty leases.
Codes as reported by the operator to the Railroad Commission each month. The five groups add up to all the gas the lease reports.
The codes, one by one
| Code | Name | What happened to the gas | What it means for you |
|---|---|---|---|
| 1 | Lease fuel | Used as fuel on the lease or in the field | Not sold, so no royalty is normally paid on it |
| 2 | Transmission line | Sold into a pipeline with no further processing | Paid at a gas price. Deductions, if any, are usually for gathering or compression |
| 3 | Processing plant | Delivered to a plant that removes natural gas liquids | Can bring plant-product lines and processing fees on your statement |
| 4 | Flared or vented | Burned or released, not sold | Nothing is sold, so nothing appears. Whether royalty is owed depends on your lease |
| 5 | Gas lift | Put back down a well to lift oil | Used on the lease, not sold |
| 6 | Repressure | Injected to hold reservoir pressure | Used on the lease, not sold |
| 7 | Carbon black plant | Sent to a carbon black plant | Rare in current data |
| 8 | Other | Another use the operator reports | Ask what the use was, if it is large |
Some months carry the label “no code,” which means the operator gave the volume but not a destination. A large no-code share is worth asking about because it tells you nothing about how the gas was paid.
Which codes you are paid on
Royalty is figured on gas that was sold. In practice that is the gas sent to a transmission line (code 2) or a plant (code 3). The audit on this site uses codes 2 and 3 as the state’s sold gas, multiplies by your decimal, and compares the result with your statement. Gas in codes 1 and 4 is subtracted before that comparison, because it was not sold.
Code 3 matters in a second way. Gas that goes through a plant can carry liquids such as ethane and propane, which the operator sells separately. The statement should then show plant-product lines as well as the gas line. Code 2 gas is sold as it comes out of the ground, so those lines are not expected.
Where to read them
- Open your lease on this site or in the Commission’s Production Data Query.
- On the lease page, look at the “Where the gas went” chart. Each colour is a code. A colour that changes size is a change in where the gas went.
- In the ledger, the gas sold and flared columns give the same numbers for each month.
- Put the months of any change next to your statements, and look for a change in the deduction lines the same month.
Remember that these numbers are the operator’s own filing. The Commission publishes them; it does not audit each month. If the code report looks wrong, the operator is the one to correct it.
Four patterns worth a question
1. Gas moved from a plant to a line, but processing fees stayed. If the lease switched from code 3 to code 2 and every statement still shows a processing deduction, the fee may be for a service no longer performed.
The question to ask
Since November 2024 the Railroad Commission reports this lease’s gas as sold to a transmission line, not a processing plant. Where is the gas processed now, what service are the processing fees for, and which lease clause allows them?
The state record is public. Look it up yourself first!
2. A jump in code 4. Flared gas is not sold. A month where flaring rises from a percent or two to five or ten percent means gas that earned you nothing. The audit flags months over 3 percent of the lease’s gas. Flaring and venting are regulated by the Commission’s Statewide Rule 32, so a sustained rise usually has a reason, and the operator can tell you what it is.
3. Plant gas with no plant-product lines. If code 3 carries the gas and your statements show no liquids revenue, ask whether the lease is paid on plant products.
4. A gap between gas produced and gas disposed. The codes should add up to what the lease reports. When they do not, or when a large share sits in code 8 or no code, ask for the operator’s explanation.
Codes are not an accusation. They are a map. They tell you where to look on the stub, and what to ask when a number does not follow from the one before it. For how deductions work once the gas is sold, read post-production deductions explained.