Ohio: Forced Pooling: How Many Acres?

Ohio does have forced pooling; a buddy of mine without a lease thinks he cannot be forced pooled because of the size of his acreage which is 150 acres and drilling is occurring close to his property Is this true is their a limit on the amount of acres that can be force pooled?  If this answer has been given before just point me to the discussion--sometimes the answer is in an unlikely discussion.   Thanks in advance.

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Permalink Reply by rmc on June 8, 2013 at 11:34am
As long as the oil and gas owners choose to sit on their hands and do nothing the public officials won't feel any pressure to represent their positions only the ones that are making the most noise the oil and gas companies with there lobbyist .
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 8, 2013 at 5:26pm

Being a working interest partner is great if you have the mass capital to buy into the well.  It also is great once a company has delineated out the best ways to drill and has their frac formula down to an exact science.  Being a working interest partner in early wells can be economic calamity, especially for an ordinary person with no access to huge lines of credit or free flowing cash.  

Permalink Reply by Tim Tarr on June 8, 2013 at 11:57am

Let the State get a severance tax and just watch forced pooling drop to 50.01%

Permalink Reply by Americanoilnd on June 8, 2013 at 1:34pm
Have any of you took the perspective of the already "leased" landowner in this unit? Without the ability to force pool, those mineral owners may not have access or ability to recover their minerals. That is a big reason for force pooling.
Permalink Reply by Joseph-Ohio on June 8, 2013 at 2:32pm
Yes, I believe I have.
The leased landowner's deal is the driver.
Whatever the Signing Bonus was for the 65% of the Unit's landowners
should also be the Signing Bonus for the unleased landowner being
force pooled - and there should always be a Signing Bonus for a
Utica lease.
No good creating a Drilling Unit made up of landowners held
by old 'tailgate' class leases for horizontal lateral Utica Wells.
IMHO
Permalink Reply by Tony Yurina on June 8, 2013 at 4:07pm

I would hope the 15% royalty awarded by the ODNR Commissioners would not include post production / market enhancement cost deductions.

I am curious, in the case where no bonus money was awarded to the land owner, why not escrow the "fair bonus money" and use the escrow amount as a prorated portion towards his working interest in the well?  Or pay the land owner at his option. 

This concept is similar to eminent domain, when you entertain correlative rights of the neighbors....... although not for the good of the general public, it is for the good of the near proximity of the general public.  

It reasons that fair compensation be paid to the land owner forced into the unit, fair in a sense that the bonus money should be included since the working interest  "Penalty percentage" ranges from 200% to 300% of the well pay off.  Now that contrived penalty is a stretch to reach for many of the wells costing $9 million to complete.  And just who is going to audit that payoff amount? 

If ODNR is certain a well will pay off at 300% of cost to develop, then why not force the leasing/drilling company to buy the minerals outright for a percentage of that sum, UP FRONT. 

The landowner owns 100% of the minerals before the KING's men divide the spoils here.

You have to question the Black Jack dealer on this one !!    He knows the odds.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 8, 2013 at 5:29pm

The 300% payback is such a scam.  Halcon's pooling application states that the well in Trumbull (Kibler, maybe?) will not be profitable.  Period.  So a landowner forced into a unit will never see that "super royalty" because the well isn't going to make 3x its cost back.  Forced pooling can be a total nightmare for those on the losing end.

Permalink Reply by Americanoilnd on June 9, 2013 at 4:43am
I am curious as to the validity of the 200-300% risk penalty...typically that applies to a company holding a lease that chooses not to participate. Landowner risk penalty is typically 50%...but also receive the average royalty of all leases in the unit...Will check into OH risk penalty guidelines...
0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 9, 2013 at 3:47pm

When I get to the office tomorrow I'll reread the pooling application and see if I can get you more information on that.  

Permalink Reply by Tony Yurina on June 10, 2013 at 3:16pm

From ODNR.

Mandatory Pooling

Mandatory pooling is requested when an operator is unable to acquire the leases to meet the necessary acreage and/or distance requirements when applying for a drilling permit.

Mandatory pooling is created by section 1509.27 of the Ohio Revised Code and has been in effect since October 15, 1965. A mandatory pooling order can be applied for if a tract of a land is of insufficient size or shape to meet the requirements for drilling a well and the owner has been unable to form a drilling unit on a just and equitable basis. There must be no obvious alternate location and the operator must have assembled the majority (about 90 percent or higher is recommended) of the unit with lessors that want to have a well drilled.

When the Division of Oil and Gas Resources Management (DOGRM) receives an application for mandatory pooling:

  • A geologist reviews the application for completeness. Special attention is given to make sure the operator has verbally contacted the pooled party either by telephone or in person in an effort to obtain a lease from them.
  • The application is scheduled to be presented by the operator before the Technical Advisory Council (TAC)which meets on a quarterly basis to hear mandatory pooling requests and other matters of a technical nature;
  • The affected landowners are notified that an application has been filed and that they have the right to attend the TAC hearing;
  • After hearing testimony from all concerned parties, the TAC makes a recommendation to the chief of DOGRM, either to approve or deny the application;
  • The chief issues an order either denying or approving the mandatory pooling application;
  • Upon receipt of the Chief’s Order, any affected party has 30 days to appeal the order to the Oil and Gas Commission.
Permalink Reply by Billy Park Whyde on June 8, 2013 at 6:53pm

How about this situation say adjoining landowners were sucked into a boiler plate lease at say $500/acre at 12.5% royalty but you intentionally held off as you believed lease prices would rise along with royalty and better protection clauses. Why should you have to pay for your neighbors mistakes? 

Permalink Reply by Joseph-Ohio on June 9, 2013 at 12:55am

Exactly BPW.

Boiler plate ('tailgate' class) $500/acre, 12.5% royalty leasehold agreements; are not FAIR Utica / Point Pleasant Interval and / or long fractured horizontal lateral and / or high production deep vertical well leasehold agreements by today's standards. 

Can't call those FAIR leasehold agreements by any stretch these days / this new era. 

Call it more like grand larceny / theft.

Hello summer 2013, $4.00/gallon gasoline and northeast Ohio refinery shut-downs.

Everyone, especially landowners (stuck in an obsolete 'tailgate class' lease or landowners as yet un-leased) need to be on BPW's bus on this.

Write / call your government and Agricultural Committee members holding hearings on changes to Gas & Oil leasehold and well rules.  As it is now the rule changes being contemplated (that I am aware of) are landowner oppressive / unfriendly.

Let's get our legislators on the right side - the landowner's and consumer's side.

All IMHO

 

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