Forced Pooling? Do we have it or not?

I attended a seminar the other day by Terry Englander, most probably THE LEADING AUTHORITY on the Marcellus Shale in the world. He indicated two very interesting facts that I thought completely different about.

First, he said that there is force pooling in every state except PA and KS. He also stated that force pooling is only in effect above the Onondaga Horizon. The Utica is below the Onondaga, so force pooling is able to be done everywhere. (Oil and Gas Conservation Law Act 359 of 1961)

Secondly, he indicated that a frac can extend out as much as 2000ft and because of the Law of Capture, gas can be recovered from under an unleased property with no compensation to the unleased property owner.

 

Anyone with competant knowledge care to comment?

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Permalink Reply by cheliped on November 11, 2011 at 3:28pm

I am interested in learning more.....waiting for comments

Permalink Reply by ShaleAdvice (Steven C. Townsend) on November 12, 2011 at 3:06am

Actually, the Law of Capture works just like that.  If the fracturing does in fact extend underneath your property, then the gas may migrate over to the adjacent property.  A lot has been discussed about this and geologists have disputed whether the fracuturing actually extends this far in most formations.  Most agree that it does not. 

Permalink Reply by cheliped on November 12, 2011 at 3:29am

what about the forced pooling?

Permalink Reply by paleface on November 12, 2011 at 3:32am

 I've not heard the 2000 foot number used before in the north east area,3 to 5 hundred feet is what I was told?

 What happened to Homer he would know?

Permalink Reply by Jim Litwinowicz on November 12, 2011 at 4:53am

You have it backwards, from what I know after talking to several attorneys.  First, this is in regards to Pa only...other states have their own laws. There is no forced pooling basically from the Marcellus and up(shallower). There is a provision for forced pooling on anything below that which would include the Utica and Trenton Black River.  But it has never been done. I talked to attorneys that have researched this and they say there is not even a clear system or any set regulations on how to proceed. All they know is that it falls under the DEP jurisdiction.

There has been a lot of talk about new legislation  on various types of forced pooling but it is very controversial and the governor has come out against general forced pooling.  He said he would consider a system allowing forced pooling between companies for lands/gas&oil rights that are already under lease. This would be to allow pooling when two or more companies with leased properties fail to come to an agreement on forming a unit.

Its something that people need to monitor and stay involved in.

Permalink Reply by fred on November 12, 2011 at 12:23pm

what if your willing to lease with a gas company, and they don't lease you do they have the right to take your gas?

 this is in PA.

Permalink Reply by Jim Litwinowicz on November 13, 2011 at 5:59am

No, they cannot take your gas with out leasing first.  The rule of capture does allow them to take whatever gas travels underground but in these shale plays, very little travels.  In the future, there may be some activity in force pooling of the Utica or deeper strata but that would be a PR nightmare for a company to do.  There is such a vast area of land already under lease that there is little need to engage in such a disruptive activity, IMO.

Permalink Reply by paleface on November 13, 2011 at 7:43am

 It sounds like Dr Englander is on a campaign for forced pooling?

Permalink Reply by Jack Straw on November 13, 2011 at 1:34pm

Re:"It sounds like Dr Englander is on a campaign for forced pooling?"

Mike stated what he understands Dr. Englander passed along as a matter of fact.

I do not see that Dr. Englander took any personal stand on the matter - the good Dr. simply stated the situation as it today exists.

A correction to what Mike stated, PA allows forced pooling for the Onondaga Limestone and below. Fortunately for many, The Marcellus Shale lies directly above the Onondaga Limestone.

Doubtless, the O&G industry would very much like to have "forced pooling" for the Marcellus.

The day that forced pooling for the Marcellus comes into play in PA would be a sad day for those who think that they should have the right to decide with whom they wish to associate.

Let us hope that the PA legislature pays more attention to the citizens rather that the O & G industry lobbyists.

Permalink Reply by cheliped on November 14, 2011 at 12:25am

i wonder if this will be used as a leasing tool for landmen.  For example: where both marcellus and utica occur, we will include you in on the forced pooling for the utica so why not sign for the marcellus since we will be there anyway?

Permalink Reply by Jack Straw on November 14, 2011 at 4:47am

I do not know exactly how landmen are compensated for their labors, but I am  confident that the landmen who brings in the most acreage (under terms that are most attractive to their O&G employers) receives higher compensation than less "successful" landmen.

And, I also believe that the landmen who can make the most persuasive arguments are more likely to get the acreage than less silver-tongued compatriots.

The negotiations between a landowner and a landman are a somewhat lopsided affair.

On one side you have a landman with a lease/contract in hand that has been honed over the past 100+ years in a manner such that it guarantees the lessor the most, while offering the least to the lessee. Standing behind the landman are one or two levels of management and a hallway filled with in-house Attorneys with decades of experience.

On the other side you have a farmer or truck driver or widow on Social Security or a retired school teacher - none of whom are likely to have an especially good understanding of what they are getting/could ideally be getting/or getting themselves into.

They call the document a lease, but in reality it is a contract that can be in force for an extraordinary length of time (our extended family has 500 acres tied up in a lease Held by Production with three wells paying $100/well/year – a lease signed in 1880).

When a lease is signed, a 80-87½% interest in any O&G is relinquished – with terms that can limit the use and commercial value of the surface land.

My advice to anyone presented with a lease to sign is – seek out a local Attorney with O&G knowledge and experience. Have your Attorney review the lease, suggesting alterations. Entering a potential long term commitment (which might involve an extraordinary amount of money) warrants paying an Attorney $400-$600 in order to attempt to protect ones interests.

All in my humble opinion.

I am not a lawyer.

I am simply a landowner trying to educate myself.

 

 

Permalink Reply by mike4t on November 14, 2011 at 6:43am

I am not in favor of a government interfering with the peronal property of its citizens, but I would like to say that listening to Dr Englander changed my mind on forced pooling.

 

To not have forced pooling is a great waste of our natural resources both economically and environmentally. I'll explain my understanding.

 

If one small landowner, let's say 15 acres, decides that in no way will he ever sign (his absolute right), he will potentially block quite a few acres beyond the well pad  from production. The gas that is not recovered from those farther acres, most probably never will be recovered resulting in an economic loss to those landowners blocked by his acreage. Not only that, but an attempt to recover that gas may require an additional pad site at an uneccessary expense to the O&G co, but also at an additional impact to the environment. Chances are that this gas will stay in the ground forever, not even to be recovered by future generations.

 

That was the whole reason behind the Oil and Gas Conservation Law Act 359 of 1961. Who knew 50 years ago that we would have this great energy potential just below our feet.

 

Every other state in the union except PA and KS allows forced pooling. I think when they start to drill below the Onondaga that the O&G cos will do everything they can to prevent a PR nightmare, but as of right now, they do have the absolute right to drill under everyone's property.

 

Those without a lease will probably get the federal minimum percentage of 12.5% and most probably will not get any upfront bonus money. IMHO

 

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