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What Is Forced Pooling?

What Is It?: Oil & gas extraction is often implemented under a legal framework known as unitization. This means that several properties may be combined into a single entity called a unit. Oil & gas is extracted from the unit as a whole — i.e. there may be only one well for the entire unit. Royalty and expense calculations are determined for the entire unit, and rights owners are compensated based on the percentage of their acreage in the entire unit. (A unit may encompass properties belonging to several different owners.) Most “recent” leases (21st century or so) include a clause giving the extraction company the right to unitize.

In what amounts to a form of subsurface eminent domain, the law in some circumstances may allow the extraction company to integrate into a unit properties which are not even leased, or are leased to a different extraction company. This is Forced Pooling. In effect, a landowner subject to Forced Pooling is leased by force. The extraction company can take the oil & gas (and can frack to get it!) from the unfortunate landowner, the landowner is given a royalty as compensation, and the right to be spared from fracking is simply taken from the landowner.

Why Does It Matter?: If you are subject to Forced Pooling, your right to refuse to be fracked is taken from you. Your right to have a say that fossil fuels in your subsurface property shall be left in the ground is taken from you by force of law. If you believe that private companies should not be given eminent domain for their own private gain, you should be very concerned about forced pooling.

When Does It Apply?: In New York State, unitization is mandatory, where it is known as compulsory integration. (However, in New York there is currently a state-wide moratorium on fracking.) In Pennsylvania, oil & gas extraction is governed by two different laws, and their accompanying rules (PA Code): The Oil & Gas Act — replaced by Act 13 — and the Oil & Gas Conservation Law. The Oil & Gas Conservation Law — originally passed back in 1961, and not amended since except to pass around its duties to different state government agencies — includes Forced Pooling. It is supposed to apply only at a layer called the Onondaga Horizon and below. In most places the Onondaga is just below the Marcellus Shale. However: the Oil & Gas Conservation Law may also apply to “conservation wells”. A conservation well is defined as a well that “penetrates” the Onondaga. There are many wells that have been permitted as “Marcellus Conservation Wells”. E.g. the extraction company may file a Drill & Operate Well permit application asserting the well penetrates the Onondaga, and file a plan indicating they intend to drill down through the top of the Onondaga, come back up to the “kick-off point”, and drill horizontally through the Marcellus above the Onondaga. In this case the DEP may require the driller to cement the bottom of the well back up to the kick-off point. Does it still “penetrate” the Onondaga after being cemented back up to the Marcellus Shale? We don’t know. Does Forced Pooling apply to such a well? We don’t know. Conventional wisdom is that it doesn’t.

The Utica Shale is below the Onondaga horizon. Forced Pooling as delineated in the Oil & Gas Conservation law apparently applies to the Utica.

On July 9, 2013, Governor Corbett signed Act 66 of 2013, which was originally described as having the purpose “to require gas companies to list all deductions on royalty check pay stubs”. Without scrutiny, a provision was slipped into this bill allowing an extraction company to integrate into a unit any leased property where the lease did not prohibit unitization: “Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontal drilling unless expressly prohibited by a lease”. This acts as a kind of forced pooling of properties that are leased by “old” leases.

How Does It Happen?: An extraction company wanting to apply the Oil & Gas Conservation Law applies to “The Oil & Gas Conservation Commission” for a Well Spacing Order. There has been some confusion regarding the identity of “The Oil & Gas Conservation Commission”. As originally passed, the OGC Law envisioned that “the Commission” would be a body identified as such, holding hearings, making its own rules, etc. The OGC Law was amended “from the outside” via two state reorganizations. The first time “The Oil & Gas Conservation Commission” was abolished and its duties given to the Department of Environmental Resources (DER). (However, the language in the law referring to “The Oil & Gas Conservation Commission” was not changed, so the text of the law still refers to “the Commission”.) The second time DER was split into the Department of Conservation and Natural Resources (DCNR) and Department of Environmental Protection (DEP), and the duties of “the Commission” were given to the DEP. However, when Hilcorp Energy applied for a Well Spacing Order in the first case under the OGC Law for unconventional drilling, DEP replied that “the Commission” meant the Environmental Hearing Board, so Hilcorp reapplied there, resulting in Environmental Hearing Board Docket # 2013155. In a stinging rebuke to the DEP, EHB ruled that “the Commission” was indeed the DEP, so Hilcorp has reapplied there. At this writing, DEP has not identified a particular body as “The Oil & Gas Conservation Commission” and requested and received an outside Hearing Officer to hear the case. DEP is thus acting in a dual role as both the venue and a party to the case.

The extraction company seeking a Well Spacing Order can ask “the Commission” for an Integration Order as part of its Well Spacing Order. The Integration Order actually executes the Forced Pooling. There has to be a hearing, following which “the Commission” either denies the application, or issues its orders.

Where Can I Find It?:
Oil & Gas Conservation Law: Click here, then TITLE 58 P.S. OIL AND GAS, then CHAPTER 7. OIL AND GAS CONSERVATION LAW

25 PA Code Chapter 79: Click here. This gives the rules and regulations for implementing the law.

Penn State Law Summary of the Oil & Gas Conservation Law (2009)
This was written before there were actually any cases for unconventional drilling.

First Forced Pooling Case under the Oil & Gas Conservation Law:
Environmental Hearing Board Docket # 2013155. (Note this case is closed.)
DEP Docket # 2013-1. This is the case before DEP on Hilcorp’s application for a Well Spacing Order. (Scroll down on the Conservation Law page to “In Re. The Matter of The Application of Hilcorp Energy Company for Well Spacing Units (Docket No. 2013-01)”
Commonwealth Court Docket # 266 MD 2014 — Matteo et al vs. Hilcorp Energy et al. This is a case before Commonwealth Court seeking to have the DEP proceedings stayed and have the Oil & Gas Conservation Law declared unconstitutional. (Note this is an unofficial repository.)

Environmental Hearing Board Rules & Procedures: 25 PA Code Chapter 1021.
This contains a wealth of information, including motions to intervene and amicus briefs.

Eminent Domain Code: Click here, then TITLE 26 Pa.C.S.A. EMINENT DOMAIN

Disclaimer: This was not written by a lawyer, and should not be taken as legal advice.