Lease held with only 6% of acres in pooled Unit

My lease was pooled in from another well from another state (PA). The primary term of my lease was set to expire in March 2013 but in Jan 2013 they pooled in my 695 acre lease with a unit angling the unit to catch 44 acres or just 6% of my total lease thus holding my entire lease.  A well pad was constructed on my leased acres in 2010 and permitted but the permit has been allowed to expire with no intention of drilling in the future. My question to the group has anyone successfully fought a similar action? Does anyone know of any legal standard that has to be met on how many acres can be held by a pooling action? I am aware that originally pooling units was done to protect the landowners from having their gas stolen but now the law  is being perverted by the gas companies to hold acres.  The well that they held my acres with was drilled but is currently in inactive status with the state and yes the horizontal permit is going the opposite direction of my property. Is my property able to be held in this manner? I appreciate any insight to this situation.

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Permalink Reply by Keith A Williams on April 3, 2014 at 2:09pm

Reggie,

"My question to the group has anyone successfully fought a similar action?" Your lease is the controlling factor in this case. Similar would have to be the same lease. A lawyer looking at that lease would be the only person who could answer your question.

What I would point out is that this is the exact reason that a "HORIZONTAL PUGH CLAUSE" should be a part of all leases. Small acre leases maybe not so much, but when you are talking 100 or more acres, it's a must have. A horizontal PUGH would have avoided this situation.

My guess is that the lessee's legal team that wrote your lease, made sure that the wording would hold up in court for your exact situation. This is a very common happening.

IMHO

Keith Williams

Permalink Reply by Reggie Dunlop on April 4, 2014 at 3:21am

Thank Keith you are right a horizontal Pugh clause would have done the trick. Unfortunately, this lease was signed in 2005 long before anyone heard of the Utica so the pooling language in my lease is not the greatest .... and yes I do have a lawyer an he said that there is no case history because the gas companies would never let it get that far as having a summary judgement. 

Permalink Reply by LewPa on April 3, 2014 at 2:29pm

Reggie

The horizontal permit going the opposite way makes no difference, your acreage in the unit ties you to the well, no matter which direction it goes. You should be able to get your acreage not included in the unit released for no production within the primary lease terms. It all depends on how your lease reads. If you have  been getting shut in checks for all your acreage and have cashed them, you might have lost some of your rights to get out of the original lease. You need to read your lease over and over again to understand the language pertaining to the above points and then definitely talk to a good OG lawyer. LewPa 

Permalink Reply by mark on April 4, 2014 at 2:36am

mornin reggie
      would a pugh clause help your situation maybe ,a clause for at least 50% unitization would probley would have been the ticket but don't feel bad I know of a guy 154 acres and he got 1/2 of one acre unitized into the unit who is the O/G company? smells like chesapeke to me really sad feel bad for you but they are good at perverting the lease for there own good  the language in your lease probley gives them the right to partially include your acreage into the production unit I know townsend and brink  had some sort of legal action going against chk for landowners in greene township (beaver county) good knowlegable men maybe shoot them a call good luck 

Permalink Reply by Reggie Dunlop on April 4, 2014 at 3:23am

Thanks LewPa.  I did get a shut in royalty check which I did not cash.  I assumed that it was for the well on my property that they never drilled but perhaps it is for the other well that they pooled me in to.

Permalink Reply by Fred Flintlock on April 4, 2014 at 4:00am

This happens everyday, with less then 6% pooled. 

Permalink Reply by LewPa on April 4, 2014 at 4:36am

Hi Reggie

The shut in check stub should tell you what it is holding. I was in a similar situation, at about the same time frame also, but was able to get the acreage not in the unit released. It took about four months of phone calls, sending checks back, sending letters on my own, and finally going thru a lawyer to get it done. They were throwing me checks for shut in fees, delay rental fees, you name it, trying to get me to cash one. Once you cash one, you're screwed, because you have accepted their position. My lease read that the acreage had to be in production at the end of the 5 year term, no lease renewal, so the acreage that wasn't put in the unit got released. Somebody at the company totally screwed up, because 3 months later they came back and we renegotiated a new lease with better terms for the acreage that they just lost! Depending on your lease language, you have a good chance of getting out of the lease for the acreage that isn't in the unit. Good luck, LewPa   

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