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Permalink Reply by Jim Litwinowicz on August 12, 2011 at 2:06am

This excerpt is from an email to an attorney about forced pooling in Pa for strata below the Marcellus like the Utica;

 

1. There is a force-pool law on the books that applys to Utica.

2. It has never been used, to the best of my knowledge.

3. If a petition is filed, the DEP has jurisdiction to hear and decide it.

4. The compensation depends on how the unleased landowner elects to proceed. He can proceed as a lessor under a "fair and reasonable" lease as determined by the DEP (??? - see #2), or as a working interest partner. As a working interest partner, the landowner would get paid 12.5% and the 87.5% would be used to repay the gas company the lessor's operating share, times 2 (if the landowner would actually have the cash, he could pay the costs up front and not get the times 2 penalty!). After the gas company is repaid the landowner would get to keep 100% of the gas attributed to his property.

5. I have no idea how long this process would take.

6. A petition could be filed by a gas company or a landowner.

 

Jake and I have done the math and we think that if a landowner would have the cojones to actually file one of these, they should be able to come out ahead in the long run versus leasing. The drawback is no bonus, of course, and there is no track record with the process, so no one would know what to expect. Now if the landowner had the cash to pay the operating costs, then they'd really come out ahead.

 

So if your are forced into a unit in Pa you get no bonus payments and the royalty is only 12.5%

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Permalink Reply by Ann Ticopa on August 12, 2011 at 6:03am

Yes, but ... that's not based on the legislation proposed last year in PA.  Under the Gergely/Everett draft Conservation Pooling Act, the non-consenting party's risk penalty is 400% and there is no mention of a pass-through royalty. 

Section 10. Integration of Unleased Oil and Gas Interests. [line 836-888]
http://www.marcellus-shale.us/pdf/Forced-Pooling-Act_6-15-10.pdf

..

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Permalink Reply by Jim Litwinowicz on August 12, 2011 at 10:35am

What do they mean by "risk penalty?" And I see that even in the new law one forced into a pool still gets only 12.5% and I see no mention of a bonus or delay rental payments. And what lease is used? Pugh Clause? Commitment to drill at least one horizontal or can it all be HPB with a shallow or straight vertical well?  What costs can be deducted? Will all surface activities be permitted?

 

Lots of questions...few answers.

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