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Permalink Reply by Trapper on May 8, 2013 at 12:11am

Does the island landowner get compensated? Could they hold up production by any court action?

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Permalink Reply by Frank Nesmith on May 8, 2013 at 1:00am

Yes there is Forced Pooling/Integration in Pennsylvania, but it does not apply to the Marcellus Shale. It does apply to wells that are drilled beyond the Onandaga layer in PA, which is where the Utica is. There have been a lot of questions on this. 

The Oil and Gas Conservation Law of 1961 only applies to wells that extend into the Onondaga horizon.  Thus, it is not applicable to the Marcellus Shale, which is higher than the Onondaga horizon (Baille, 2011).  Lawmakers passed the law in response to the inefficiency and waste fostered by the rule of capture. The Oil and Gas Conservation Commission administers the law as follows:

After a gas company drills a well on nearby land, any landowner who is directly affected by the well may apply to establish a drilling unit. The Commission establishes the surface area boundaries around a well that correspond to the underground sources of gas being collected by that well- a drilling unit.  Once the Commission establishes the drilling unit, landowners may ask the Commission to issue an integration order.  The integration order is “forced pooling,” since it may be applied without some landowners’ consent.  In return, the gas company compensates each landowner proportionally to the amount of their land in the unit (Baillie, 2011).

Since this law only allows one well per unit, gas companies drill fewer wells and engage in more efficient drilling practices, while still fairly compensating landowners.

http://marcellusfacts.wordpress.com/legislature-2/forced-pooling-3/...

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Permalink Reply by bungalow_steve on May 8, 2013 at 9:16am

They can and have "fish hooked" it into the Onondaga and then up into the Marcellus to engage the Oil and Gas Conservation Law. But not for force pooling reasons.

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Permalink Reply by Frank Nesmith on May 9, 2013 at 6:58am

What benefit is there to fish hooking it into the Onandaga besides force pooling? I knew they were doing that but never understood why. Can you enlighten us? I appreciate it. You guys are the best at teaching people. Thanks.

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Permalink Reply by bungalow_steve on May 9, 2013 at 7:35am

They are doing it for well spacing. I will try to find the article that talks about, it's on one of the oil and gas attorneys websites.

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Permalink Reply by Jim Litwinowicz on May 9, 2013 at 8:26am

Here is a strange twist in the law; say you have 200 acres next to a new unit.  You can petition to be included in the unit against the driller's wishes.  You would have to pay for your share of the initial costs but you would get 100% of the royalties for your % of the unit. Actually, its not even royalties since you would be part owner.

If the unit was 600, now 800 with yours added, you have to pay 25% of the costs of drilling. Thats a lot fo money upfront.  But since you would get 25% of the production of all wells in that unit, including different strata, that could be big return of the investment. And since the return is so good, there are some investors willing to partner with landowners going this route.

I don't know all the details like what if your offered a lease but refuse it. Or if there are geological reasons for not including you from the start. And if you did this, does that make you a partner with input on operations, costs, production, and more?

And I am certainly not an attorney so proceed with caution and a very good attorney!

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