Replies to This Discussion

Permalink Reply by Lynn Wigglesworth on July 12, 2010 at 12:45am

Of course it's not fair. "Forced pooling" exists in other places (like NY state), but is in land-owner friendly terms, so the O&G companies use it only as a last resort. As proposed in PA, it's a gun to landowners' heads, forcing them to accept pitiful terms. Why would a company ever offer a good deal if they can force a landowner into accepting 12.5% (with no bonus)?

I'm against forced pooling at all...it's taking away any rights that landowners imagined they might have to control their own property and resources. They are also talking about eminent domain to push through gas lines. It will be interesting (and possibly discouraging) to see what becomes law...it will show who is really running PA. I plan to lease ASAP for the best terms I can get before I'm forced into something I don't want.

Permalink Reply by Ann Ticopa on July 12, 2010 at 12:44pm

I'm sorry it appears not to have worked out for you with Chesapeake. At first glance, the >=75% requirement to apply for forced pooling looks like a "good thing". But one downside is that, in areas where one company owns most of the leases, it would become harder for another company to gain a toehold.

The HuntingPA.com forum has what is supposedly the draft legislation:
http://tinyurl.com/34o7ezs

Imo, the last phrase in this definition gets to the core of what this is about:
""Correlative Rights." The rights of each owner of oil and gas interests included or proposed to be included in a standard unit or a special unit or in any land that constitutes stranded acreage as defined in this Act, to have a fair and reasonable opportunity to obtain and produce their just and equitable share of the oil and gas in such sources of supply, without being required to drill unnecessary wells or incur other unnecessary expense to recover or receive such oil or gas or its equivalent. " [Section 6]

That is, the objective is to enable the operating companies to maximize their profits.

Also found this "interesting":

"The creation of units under this Act represent acts of the Commonwealth in promotion of the public welfare and are separate and distinct from the creation of voluntary units under pooling and unitization clauses in oil and gas leases. Units may be created under and in accord with the terms of this Act without regard to the terms or limitations of any voluntary pooling or unitization provisions of any oil and gas lease." [Section 7.a.(5)]

I hope people who have already leased their land - but it's not held by production - won't dismiss this draft legislation as something that doesn't matter to them. It might matter when lease renewal time rolls around.

Incidentally, the Act would be administered by a newly created "Pennsylvania Oil and Gas Fair Pooling Office", in the DCNR.

Permalink Reply by Lynn Wigglesworth on July 12, 2010 at 2:30pm

"Promotion of the public welfare"? I don't see how taking away a landowners rights is promoting public welfare. More likely what you said: maximzing profits for the gas companies.

Permalink Reply by BuckinghamGasMan on July 14, 2010 at 7:01am

The law would take away bargaining power from the landowner. I know people whose leasing strategy is to not take money now, but to wait until the drilling starts and the gas company can see just how valuable their property is. That person would suffer because they wanted environmental safeguards, money, delay in revenues -- who knows what their reason was, but it is their reason.

The only way I can agree with it is if the property in question is very small but effectively blocks a square mile of drilling from occurring -- an unlikely scenario.

Maybe the upfront payments and royalty percentage for those forced to join can match the best numbers in the pool to make it more fair?

Permalink Reply by Sam Douglass on July 14, 2010 at 4:10pm

As to the second alternative, if you are rich enough to pay your possibly 20% share of costs you are likely to make a lot more money because you should then get a proportionate share of the profits of the operator [your share of an operating interest rather than a royalty interest].

Most people can not come up with that kind of money to get that kind of deal. They end up with the kind of automatic buy-in after a multiple [in this case 400% is suggested] of the of costs is earned back by the driller. At that point you participate at a higher rate than the 1/8, 15% or 20% royalty. I have not read this stature, but it is not likely to be all bad - particularly after the legislature amends it.

Permalink Reply by Ann Ticopa on July 14, 2010 at 6:56pm

Which might (or might not) be attractive as a speculative investment. But not what the average retirees are looking to do with their homesteads. The only performance requirement I find is "the initial horizontal well must be begun by the commencement of drilling with a rig capable of drilling to the target formation in the integration unit within one year after the date of the order of the Office approving the unit, except ..." It could be a considerable time until the well is completed, the gathering lines are in, and the gas is marketed. Then, there would be the wait until the well operator has recovered 4X "all costs incurred".

In general, I think the DEP has done a good job in rising to the occasion. But imo, the sponsors of this bill are underestimating what it will take for the DCNR to gear up to handle these additional responsibilities. (To say nothing of how the Office will be funded.)

------------
"Section 10. Integration of Unleased Oil and Gas Interests.—
(a) In the order of integration of interests in a unit, an owner of an unleased oil and gas interest who has not entered into a voluntary agreement with the Applicant or other working interest owner shall be given the option to:
(1) be treated as a lessor under the lease attached to the joint operating agreement for the unit; or
(2) be treated as a non-consenting party subject to the terms of the joint operating agreement for the unit, entitling them to a proportionate share of profits after being assessed a risk fee apportioned among all non-consenting parties at the rate of 400% of their proportionate share of all costs incurred by the designated working interest owner; or
(3) be treated as a consenting party subject to the terms of the joint operating agreement for the unit, requiring them to contribute their share of all costs of preparing, drilling, completing, equipping and operating the well at the time of their election hereunder and entitling them to a proportionate share of profits."

Permalink Reply by William Ladd on July 15, 2010 at 4:42am

The idea smells like a rotten woodchuck to me. If these companies want to drill then let them approach each of the landowners and present a lease that does not have all of these twists and turns. Big money always seems to have rope around the necks of the very people who made them rich in the first place! And still they are not happy!

Bill Ladd
aka Bummy

Permalink Reply by Sam Douglass on July 19, 2010 at 2:26pm

most of my long comment got lost when I stopped for supper. Maybe I will try again.

Permalink Reply by Ann Ticopa on July 18, 2010 at 8:44am

"Supervisors move forward with gas lease
“The article I read in the paper still bothers me, about forced pooling,” said Supervisor Chairman Lew Prough. “They could say, ‘We’re going to drill under it. This is what the legislature says, and we’re going to do it now.’ Rather than get 20 percent, we would get 12.5 percent from drilling.”"

Sayre Times
http://tinyurl.com/3787mjx

Nice! If you can't temp people into signing a lease, scare them into it.

Here is a pdf of the draft legislation:
http://www.marcellus-shale.us/pdf/Forced-Pooling-Act_6-15-10.pdf

Permalink Reply by Lynn Wigglesworth on July 18, 2010 at 11:24am

Yeah, I don't like the idea of people being scared into signing. Still, $5750/20% for a no-drill lease is a very good deal. I'd take it in a heartbeat.

Permalink Reply by G.Martin on July 19, 2010 at 1:19am

FREE REPUBLIC SAYS,

This is nothing but a scam term created by lawyers to steal your property rights away from you without giving up the fair market value for your property Rights. In my opinion if the industry deems my property sooooooooo necessary to the production of their gas industry, then let them go and get the rights to my property under Emanate Domain and justly compensate me for the value of my property based on the average value of the pass three years and compensation for relocation . Then they can do whatever they wish with my property. With this force pooling the, being the lawyers, courts , government, in cooperation with the industry are forcing the citizens into this unlawful act and trying to convince you that you are being truly compensated by receiving a lease agreement. My answer too this is if I as a Property owner with Property Rights under my Bill of Rights wanted to sign a lease and waive my Rights, I would have done so on my own. Question : who will compensate me when and if they destroy my water source? I want to retain my RIGHTS. This is nothing but criminal in my opinion by all the parties concerned that are trying to force the people into this charade.

Permalink Reply by Lynn Wigglesworth on July 19, 2010 at 7:11am

I agree.

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