Force pooled

Article in the Steubenville Herald Star today. Several landowners in the Lisbon Ohio area were force pooled into a unit . No signing  bonus and 12/12% royalties.  Chesapeake  was the gas company.

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Permalink Reply by Scott T. on February 11, 2014 at 9:13am

I think old trapper is correct that most people holding out are small landowners......less than 2 acres.   However, these folks are still going to get at least 12.5% royalties if not the same as the signed landowners and they are not bound by a specific lease agreement.  At least they did not sign one.  Might be worth remaining unsigned just to have the freedom of not being bound by a specific contract?

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on February 11, 2014 at 9:53am

The contract that forced pooled landowners are under is whatever the ODNR Chief dictates.  Usually it's a similar contract to the one that is already in place with many of the leased landowners.

Permalink Reply by Scott T. on February 11, 2014 at 10:09am

Agreed Marcus but the forced pooled landowner did not sign it and that is not necessarily a bad thing.

Permalink Reply by Dodge Charger on February 14, 2014 at 9:52am

It is my understanding that when you are forced pooled, you become a 'partner' with the drilling outfit.  As such, you take part in the costs of development and operation.  Only AFTER you have 're-paid' your share of costs -- which can be up to 200%, including "penalties". 

This is copied from another site, and might explain it more precisely:

The procedure also anticipates the situation where the recalcitrant cotenant of a mineral estate will not sign a lease. In such a case, the Mandatory Pooling Order from ODNR would likely provide that mandatorily pooled parties are granted a pro rata share of production from the well and the standard 1/8th royalty interest upon production of the well.  However, such an Order would also require the parties to share all reasonable costs and expenses of drilling and operating the well as follows:

  • If the owner elects to participate (working interest owner), then the Mandatory Pooling Order must specify the basis upon which each owner of a tract pooled by the order shall share in these expenses.
  • A non-participating owner will not receive any share of production, exclusive of his/her share of the royalty interest, until their share of such costs are recovered by the Oil Company, plus an additional risk penalty.  The costs and penalty cannot exceed 200% of the non-participating owner’s proportionate costs of the well for high financial risk and horizontal wells, or 150% for other wells. ORC § 1509.27.

(http://www.oilandgaslawreport.com/2012/08/17/my-liberal-sister-is-a...)

Doesn't sound to me like waiting to be forced pooled is worth it.  Just MHO.

Permalink Reply by BIG on February 12, 2014 at 3:17am

Frank,

I think you have confused my statement with "eminent domain".  I do not agree with eminent domain where they can come in and take your land and tear down structures to build shopping malls and other businesses.

The oil companies are only pooling your minerals that are a mile below your surface in order to drill.  They are not there to take over your surface and use it as they want.  I am a landowner and want to protect my surface.  So I do value American property rights, but I also understand what the pooling process involves.

Permalink Reply by Greg K on February 14, 2014 at 4:16am

Sounds so reasonable...except it takes away the only bargaining chip the landowner has!!!

Permalink Reply by alan coogan on February 12, 2014 at 7:02am

Forced pooling in Ohio is an artifact of the 1965 spacing laws. Before that, the rule of capture (grounded in physical principles) prevailed. All landowners had a right to drill, regardless of actual or suspected interference between adjacent wells. Under spacing laws, some landowners cannot get a permit to drill given the size or shape of their parcel and must voluntarily pool with neighbors. Those who refuse to join in the pooling may then be forced into the unit, because under the correlative right doctrine, each still has the right to drill (a property right).  At this point the "taking" clause may come in because the government is involved.. The forced pooling is a safety valve, permitting each owner to exercise his/her rights. It is not a taking by the government of one's rights. So, it appears the enemy is one's neighbors and economic reality played out by the hand of the landowner's agent, the oil company.

rockslaw30

 

Permalink Reply by Ragnars Repo on February 12, 2014 at 7:05am
Do we agree it is still taking what is not owned?
Permalink Reply by Joseph-Ohio on February 12, 2014 at 7:18am
And not paying the landowner for seized valuable consideration - namely the landowner's right to lease or not to lease. That right has value. Thought even in circumstances where outright eminent domain is invoked the owners are paid fair market value for their loss.

How much are their losses when no signing bonus or royalty over and above 12.5% (tailgate class royalty) are taken away from the landowners ?

Horrible trespass.
Permalink Reply by scott peterson on February 12, 2014 at 7:21am

Its a really tough situation for sure but I would hate to have an acre or two parcel holding up 99% of the landowners in a unit from receiving millions in royalties. Thats not fair either.

Permalink Reply by Joseph-Ohio on February 12, 2014 at 7:38am
65% of 640 acres = 416 acres.
640 acres - 416 acres = 224 acres.
Could be one large landowner or any number of landowners making up the dissenting 224 acres holding up the show.
Why does everyone assume it's the small acreage landowners to blame ?
Just don't know until you look at the specific unit's acreage breakdown.
The 35% / 65% breakdown is indiscriminate seems to me.
Permalink Reply by scott peterson on February 12, 2014 at 7:40am

Certainly could be a large landowner but usually is not because of the dollars at stake....

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