Forced pooling is a commonly used leasing maneuver, legal in most traditional oil & gas states, that compels a landowner to give up his subsurface mineral rights if a certain percentage of his neighbors do so. It works out well for drillers, who can work on neatly arrange plots of land, and, many argue, for the landowners, who get royalties from the drilling.
But with the spread of drilling to areas unfamiliar with these age-old arrangements, forced pooling has created a moral crisis for many conservatives who, on one hand, want to support oil and gas development, but on the other hand, can’t make peace with the idea of surrendering private property rights.
This story appeared in EnergyWire in July 2012.
‘Forced pooling’ of mineral rights wins over some staunch property-rights advocates
In the rig-dotted gasland of northeastern Pennsylvania last year, a conservative lawmaker from the South did some soul-searching.
It was there in the Marcellus Shale hot spot of Bradford County that Mitch Gillespie was moved to support “forced pooling” — a leasing practice that, at first glance, seems to steamroll Republicans’ tightly held notions of private property rights.
In a forced pooling scenario, a resistor of oil and gas drilling can be compelled to lease his or her own mineral rights if a certain percentage of neighbors do so. This last resort allows companies to manage clean-cut plots with minimal equipment, and many argue it actually serves the landowner’s best interest by providing a cut of the profit.
The practice is commonplace and fuss-free in many traditional oil and gas states. But as shale drilling permeates from coast to coast in areas less accustomed to the complexities of mineral rights, forced pooling has triggered scrutiny from many pro-drilling conservatives seeking to reconcile it with their ideals of individual rights.
“I have struggled with this issue for two years now,” said Gillespie, a North Carolina state representative who describes himself as the staunchest property-rights advocate in the Legislature. But after his trek to Pennsylvania, where forced pooling is not in play, Gillespie’s mind is made up.
“Forced pooling is a way that property owners can actually receive some royalties from the gas that’s underneath their property,” he told EnergyWire this week.
Gillespie now faces the formidable task of winning over other decisionmakers in North Carolina, a state that has limited gas resources but nonetheless is cobbling together a regulatory framework for drilling.
He reasoned with fellow lawmakers on the House floor last month: “If you don’t do something to protect that landowner by forced pooling, then the gas companies when they do the fracking will steal their gas, and they’re going to get nothing.”
Though gas companies might cringe at the word “steal,” the logic stands. Because of its physical properties, natural gas, like water or oil, will migrate to areas with lower pressure. So, if a company pumps gas from beneath Home 1, the gas from Home 2 will begin to seep over into the void. At that point, Home 2 has no claim on the migrated gas.
An 1889 Pennsylvania Supreme Court ruling cited in a review by the North Carolina attorney general puts it this way: “Possession of the land, therefore, is not necessarily possession of the gas. If an adjoining, or even a distant, owner drills his own land, and taps your gas, so that it comes into his well and under his control, it is no longer yours, but his.”
It’s those very properties that spurred forced pooling in the first place. Without pooling, supporters argue, one successfully producing well in an area would prompt the sinking of many more as overlying property owners scramble to cash in on the find. Soon enough, each parcel would be punctured with straws desperately draining the oil and gas. Pooling, on the other hand, allows a driller to centrally place a well to access the broader supply with less surface disruption.
“Pooling is intended to conserve natural resources, particularly surface areas,” said James Pardo, an attorney at McDermott Will & Emery, “while at the same time allowing for development … in the most efficient way with the most minimal impact.”
But it’s not so cut-and-dried to skeptical conservatives, not to mention environmentalists and other drilling critics. …
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