Forced Pooling (yet again)

Imo, the industry is more interested in using forced pooling legislation as an inducement to landowners to sign leases rather than to force pool land.   With force pooled land, they would not be able to hbp the remainder of a property and they would not get their laundry list of ancillary rights. 

"Natural gas industry changes tactics for forced pooling in Fort Worth
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.. So, what's the real motivation for the MIPA [forced pooling] case?

"This will help us," Johnson [Chesapeake lawyer] said under questioning from commissioners, "to convince people that they ought to lease."

In other words, if Chesapeake can get its desired ruling from the commission and establish this case as the MIPA precedent, the company has more leverage. If people don't accept the lease terms offered by the company, Chesapeake can bring another MIPA case. Eventually, it'll be routine. ..."

http://www.star-telegram.com/2011/07/14/3222593/natural-gas-industr...

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Replies to This Discussion

Permalink Reply by William Ladd on July 17, 2011 at 12:54am

Looks like a deal that is geared to stealing the gas from the landowners no matter what they do.... lease or not lease!

 

Bill L.

aka Bummy

Permalink Reply by paleface on July 17, 2011 at 1:52am
 They don't say what royalty percentage the land owner will recieve when there part of the well is payed for.The charge for the well sounds real fair.With a high royalty percentage the land owner that held out could make alot of money? 
Permalink Reply by Ann Ticopa on July 17, 2011 at 3:34am

According to the article:

"Johnson said Chesapeake would "carry" the property owners who did not have the money to pay upfront, taking their investment and risk penalty out of their share of gas produced from the well. Hearings examiner Doherty argued that anyone who had taken that offer on any of the four already-drilled wells would not yet have seen a payout, three years after drilling was completed."

 

 

Permalink Reply by paleface on July 17, 2011 at 3:54am
 The working interest for the unsigned propertys was $12,487. - $27,482. on 100 acres thats about 1 month royalty,are these wells in production? If the gas company offerd that deal here I would look at that with great interest depending what the royalty rate is? No surface disturbance and a high royalty rate would make that a home run.
Permalink Reply by Ann Ticopa on July 17, 2011 at 4:53am
The parcels total "50 acres", not 100.  And since the landowner(s) involved in the hearing hadn't accepted Chesapeak's offer within 14 days, the 100% risk penalty had also kicked in.  This is a working interest arrangement and there would be no royalty.  (A royalty is a share of production and is generally paid irregardless of whether the well iis profitable to the operator.)
Permalink Reply by paleface on July 17, 2011 at 7:25am
 Why can't I paste web sights,when I click paste nothing happens?
Permalink Reply by FXEF on July 18, 2011 at 8:09am

paleface,

 

Use the link button to add URLs to a post.

Permalink Reply by paleface on July 18, 2011 at 9:24am
 Thank you FXEF,: PALEFACE 
Permalink Reply by paleface on July 18, 2011 at 9:37am
 Ann,I stand corrected its not a royalty its payment for profit after the expence of the well is payed back.So don't you think $12,487.- $27,482. is a fair price for the unsigned peoples cost to make the well? What does it cost to drill a marcellus well in PA. I think the unsigned people are getting a great deal from Chesapeake as long as the wells produce,and my question stands what percentage of the profit do the unsigned people recieve?
Permalink Reply by Ann Ticopa on July 18, 2011 at 2:31pm

I didn't say one way or the other whether I thought it was a fair buy-in price.  In PA, a well costs, give or take, $4M.  With a full 640 acre unit, that would be $6,250/acre/well.  Payout would be in the same proportion as buy-in,  after any risk penalty was paid and operating expenses were deducted.  

 

 

Permalink Reply by Wayne D on July 23, 2011 at 3:14am

Just wondering if my understanding of the forced pooling is correct.  If someone is leased with the primary driller ( lets say Shell ) of the unit  they would receive the agreed royalty rate ( minimum 12.5% ) based on their % of the unit  ?  If another  company held leases to the properties ( lets say Chesapeake)  that were part of the forced pool, They would chose how to participate . After well expenses and such are deducted they would recive 100% Profit based on the % of the pooled unit .  Chesapeake would then pay their agreed royalty to the land owner based on that lease.  If a private individual was forced pooled  there is no reason for them to be  intitlled to any less than 100% of the Profit (based on % of unit) after well expenses and sutch ,  If they chose to participate.

Permalink Reply by Ann Ticopa on July 23, 2011 at 5:10am

How well/poorly an individual landowner would do depends on the state's forced pooling law and the selling price of natural gas.   The usual gotcha for the landowner who can't/won't pre-pay his proportional share of the drilling costs is a "risk penalty".    That is, the well costs have to be paid more than once before profit sharing kicks in for the non-participating landowner.  Arkansas has a 400% risk penalty which, given the current low price of gas,  essentially translates to "lots of luck ever seeing a penny of profit sharing",  But, on the plus side, AK does require payment of a royalty to the non-participating owner.  For example, 1/8 of the landowner's share would be paid as royalty and 7/8 would go to paying down the risk penalty.  Otoh, Louisiana imposes no risk penalty so those landowners do stand a chamce of getting some profit sharing $$.  

 

BTW, I read yesterday that Corbett has said he might consider company-to-company forced pooling ... which is what Yaw proposed. 

 

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