Possible force pooling , maybe

My friend in Noble county has a delimma, A company wants to sign a lease with her because they have a unit about completed and shes almost in the middle of it. She's thinking she may be better off to make them force pool her land. Their offering close to 6000 to lease but she thinks she may be better to hold off and become a part owner in the well when they drill. Isn't it after they recoup 200 percent of the cost of drilling then she will receive he money. I told her how would you ever know when that is and in the long run would you make any more money.. About forgot she owns 2 acres. Any opinions would be appreciated because she's an older woman that doesn't know what to do.. Thanks

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Permalink Reply by evan on December 23, 2013 at 3:39pm

Hey Joe I may be able to help you on the second part of your question. I recently had a lease that was about to expire and I got thrown into a "production unit" at the last second to hold me.  Well they got everything wrapped up and got a permit and formed a " drilling unit "  , Now I am not in the drilling unit.  The production unit was 639 acres.  The new drilling unit is now 137 acres so I will not be paid for this first well cause none of my acreage is in the drilling unit.  

Permalink Reply by Joseph-Ohio on December 23, 2013 at 4:22pm
Thanks Evan.

Guess we can't take words at face value anymore can we ?

To me the phrase 'drilling unit' would mean a unit of land of a given area and shape that was to be drilled at sometime in the future.

Then the phrase 'production unit' would mean the same unit of land after a well was drilled with the well in 'production'.

These folks writing the rules come up with their own definitions - dictionaries mean nothing.

Thanks again Evan.

J-O
Permalink Reply by Joseph-Ohio on December 23, 2013 at 5:36pm
That in itself is scary because every word becomes arguable.

Yes could mean no today and back to yes tomorrow !

If they wrote computer programs like that (substituting 1's and 0's for yes's and no's) no program in the world would work ! !
Permalink Reply by Joseph-Ohio on December 23, 2013 at 5:26pm
Evan,

Thought I read on other posts that terms of the lease could be written to specify that all acreage included in the drilling unit earn an acreage pro-rated portion of royalty for any well developed ? ?

If that were so the phrase 'production unit' doesn't enter into matters / becomes useless ? ?

Have you ever read anything along those lines here (on GMS) ? ?
Permalink Reply by evan on December 24, 2013 at 5:23am

Joseph, at first I was excited to be in the unit but then they changed it to 137 acre unit to drill  the first lateral.. I thought I would be getting some royalties until they did that .  But I know for a fact that they didnt have all the acreage in the proposed 639.74 acre unit.  They just said they did to keep me and another landowners lease from expiring. It's funny who owns the other acreage and if you know much about anything you ll see that this company will never get the rest of it. Can't explain on here why but not hard to figure out

Permalink Reply by Sam Moore on December 24, 2013 at 3:37am

Forced pooling is done to people with land and the company needs to have 90% of the acreage leased to do this.  Force unitizing is done to other oil and gas companies and only requires them to have 65% of the land for a unit.

Permalink Reply by Joseph-Ohio on December 24, 2013 at 4:24am
Thanks Sam,

Then (to me) it sounds like that 'Force Unitization' could be the most landowner oppressive tactic - not 'Force Pooling'.

However, the Chief determines what is 'just and reasonable' in either instance.

Perhaps the Chief determines it 'just and reasonable' to remove a landowner from one lease and into another (perhaps landowner deficient) lease in either circumstance ? ?

Who knows what the Chief would determine to be 'just and reasonable' ? ?
Permalink Reply by Sam Moore on December 24, 2013 at 4:53am

"Then (to me) it sounds like that 'Force Unitization' could be the most landowner oppressive tactic - not 'Force Pooling'."

No, Forced Unitization does not happen to the landowner only to other oil and gas companies.  If the landowner has signed a lease that they are happy with to company A and company B force unitizes company A the landowner still has the lease terms they agreed to with company A.  If they are not leased or have a working well on their property that they own out right they can not be unitized.  They would need to be force pooled.

Force Pooling is not something O&G companies want to do because it cost them money.  It is talked about a lot by landmen but for every 100,000 times they bring it up it will happen less than 1 time.  If this was profitable for the O&G companies the landman would never mention it and it would happen all the time.

Permalink Reply by Joseph-Ohio on December 24, 2013 at 5:05am
Maybe it will be profitable after the Severance Tax changes (should it pass into law as it appears the option to inflict the tax liability on another is part of the Bill) ? ?

It's that co-mingling of the force pooling / force unitization / Severance Tax rules and revisions to them that give me pause.

Too much O & G latitude and resident authority with the ODNR Oil and Gas Division Chief to suit me.

I am a cynic and become more cynical every minute.

I would rather be labeled as a cynic than as naive myself.
Permalink Reply by Jim Litwinowicz on December 24, 2013 at 4:56am

Joe;   When someone is force unitized, one company can force other companies to co-operate in a unit. They only force unitize land that is already leased. The terms of the pre-existing lease are still enforced including all royalty calculations and any and all landowner protections. At least, that is how I understand how it works....if I am wrong, someone please correct me.

This is actually good for the landowner, IMO, as it means companies are more likely to cooperate in forming units since they know they can be forced into one at a later date. Meaning they may get drilled sooner and that the available land is used more efficiently with less surface disturbance.

Permalink Reply by babette wyatt on December 24, 2013 at 5:06am

Good morning everybody, I could be wrong on the forced pooling as well. I read our government does not want oil or other natural resources to sit and not be used. I understood, if I don't sign a lease, the company forced pooling would be laying pipe horizontally and my resources would run through the reservoir and there is nothing I can do about it. I have 335 acres, didn't sign with EQT on a lease dated 1901. But there are 14 of us who just found out we owned the mineral rights under the land. I don't know what to do, but I hope they are not allowed to force pool the way I thought it was done. 

Permalink Reply by Joseph-Ohio on December 24, 2013 at 5:16am
Jim L.,

Right now I don't think anyone can tell how the Chief will interpret it all in any application being considered - and to me, that's a big unknown.

Wasn't that way before and it worked for over 100 years.

It all gives me great pause fellows.

Can't see that it fixes anything.

Looks to me like it just opens more doors to problems / litigation.

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