Important: Force Pooling in Ohio

  Upon viewing this thread http://gomarcellusshale.com/group/carrollcountyohio/forum/topics/in... I sent a email to the ODNR O&G Chief to get a answer on this.

 

Hello Mr Erdos
  I would like clarification upon the issue of forced pooling. I have looked at the issue with the information supplied at the ODNR O&G website. However it is very loose in the terms of what would be considered a offer by a O&G company that would be acceptable by your office in approving of forced pooling of a individuals property. I took this from the Go Marcellus Shale web site: http://gomarcellusshale.com/group/carrollcountyohio/forum/topics/in...
In part:

Just received an interesting phone call from a landman that's working for Kenyon/Chesapeake.  We have 92 acres - 78 is leased and the remainder was on an old lease that expired in February and is now "unleased".  We have taken a "let's wait and see" approach with this 14 acre parcel and have been contacted by a couple of different landmen about leasing over the last few months. 

The most recent offer was a couple of weeks ago at $5800/acre with a gross 20% royalty and acceptance of the SURE or ALOV lease by Kenyon/Chesapeake.  Our caller today told us that Chesapeake has told them (the landmen) that they can no longer make that offer.  They can only ask for $5000/acre with a NET royalty and may only use the original "base" Chesapeake lease, and there's no guarantee they can get that. 

The landman also indicated that we should read up on "forced pooling", because now that Chesapeake has over 95% of the land in Carroll County under lease, they will begin forcing the unleased owners to be pooled into their units at their terms and 1/8 royalty.  He indicated that the "competition" has left town and Chesapeake no longer has any incentive to increase the prospective lease terms. 

Is anyone else hearing this same info?  Personally, I think its a scare tactic to get people to sign...especially since we heard very similar comments from a landman "long ago" when they were trying to get us to sign our 78 acre parcel for $600 an acre (which we didn't do, by the way).  Just thought I'd pass the info along though and see if anyone else cares to comment.

  I would hope that the ODNR would consider the Constitution in regards to the taking of personal property in regards to this issue. 

 

My question is would the ODNR consider the outdated old standard of minimal lease value and only 1/8th royalty or would the ODNR require the requester of a forced pooling request to at least make the current landowner friendly lease terms, lease bonus and royalty being offered in the state as the basis? 
 Thank You
Billy P. Whyde
  What do you think will be the answer?

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3mfqdrnrij9iaPermalink Reply by 3mfqdrnrij9ia on May 5, 2012 at 9:49am

Check out this link, http://www.ohiodnr.com/mineral/mandatory_pooling/tabid/19234/Defaul...

It should answer your questions about forced pooling.

Permalink Reply by time will tell on May 5, 2012 at 11:52am

Thanks Ron . That should answer the questions .

Permalink Reply by Kathleen on May 6, 2012 at 7:36am
I wonder why that doesn't mention how many forced pooling permits/requests are allowed per year. I know I've seen it before. I followed the urban drilling link thinking maybe it only effects urban drilling but there was no mention of it there either. Hmmmmmm
Permalink Reply by Finnbear on May 7, 2012 at 5:03am

Attached is some more info on the subject.

Attachments:
Permalink Reply by Kathleen on May 7, 2012 at 10:59am
Thanks! You found it!
I wonder when they say five times per year in the second link, is that per landowner or per unit? The reason I'm asking is in the first link section I

D. On the survey plat, highlight those properties that are being mandatory pooled and indicate the distance from the wellhead to those property boundaries

It sounds like they could add a few properties to the one application to force pool in that unit.

Silly question: window acreage, does that mean in the middle of the proposed unit. I tried googling it and I just keep coming up with window acreage for sale.
Thanks again for sharing these. I book marked them so now I'll have them to share too. :0)
Permalink Reply by Michael L Phelps on May 10, 2012 at 3:05am

Mandatory Pooling is a confusing and touchy subject. ODNR enforces Oil and Gas laws to promote proper use and utilization of Ohio's natural resources (please do not use this as a "qoute", because the statement encompasses additional language).  Unfortunately the State will have to comply with the law it has on the books no matter how out dated the law may be.  ODNR can write policy to cover how laws are enforced as long as they are in compliance with the law. I have not read the law in a while but do know it is based on percentages of acreage in order to obtain a drilling tract.  Getting an exact answer on this from ODNR might take some doing since all previous Pooling orders in the past were based on vertical wells containing 20 to 40 acre drilling tracts.

As far as holding out for the best price: what is the best price? ( one answer; the best price is the price you get paid the day you sign) While the initial signing bonus is a major pay check, the royalties from a well will far exceed the intial bonus payment.  Chesapeake does appear to have the monopoly on a number of areas, there are still some smaller companies working around these areas as well, it will take some research on the landowners part to try and find another deal, will it be a better deal, (tough question to answer)?

There is a trend going on of lease prices falling in other counties too?

Permalink Reply by Billy Park Whyde on May 10, 2012 at 3:40am

  The trend will only last as long as the landowners allow it to! Supposedly Graham and Graham  of the  group HQ in Muskingum County has over 90,000 acres! I don't personally believe it there target was originally set at $3,500/acre while not far from them the going rate is close to $6,000 . They set a cut off date to join of April 1st 2012. Pretty quick to set a cut off date when we have seen lease go from $50 an acre at 12.5% to $5,900 at 20% within a year not far from us. 

  My hunch is they have both ends of the candle lit. Since one of their council personally told me that the companies would not except a limited formation lease I have to ask myself if you haven't even started negotiations how would you know this unless you have already been in contact with the companies? 

  In Muskingum County the HBP land is saturated by small operators. The leasing from these small operators flipping has been very very quite. My belief is the HBP leasers smell the money in more ways than a private landowner. They can negotiate for the lease reassignment cash, over riding royalty, even working interest in possible wells.  While probably 90% or higher of these older wells have paid for themselves the producers are not hard up to make any deals they are making money more than the land owner is.  

  I believe this is the major set back right now in leasing. We are seeing small numbers of land owners those that are ignorant of the value or need some crumbs to get by on in lease transactions but nothing major.  A 100 acres means nothing if it is surrounded by HBP leases the O&G companies can't obtain at the price the smaller oil producers demand.  

 My opinion is based upon my locality.

Permalink Reply by bo boboski on September 21, 2014 at 4:40am

Does'nt the landowner who gets force-pooled into a unit,[ in the long run], end up making more $$$ from their minerals than if they signed a lease.? Is'nt there something in those rules that pays the landowner much more after the well gets paid off . Which may only take a year?

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