When oil and gas companies want to drill in an area, they are generally required to apply for a permit from the state, then enter into a lease agreement with respective landowners. This gets complicated quickly when there are landowners that are unwilling to lease their land for drilling. In these situations, a process called forced pooling may be employed by compelling unwilling landowners into leasing their land under state law.
Forced pooling, also known as compulsory integration, occurs when a gas or mineral owner is compelled to participate in a unit through state law. The technique can be used by well operators to force unwilling landowners to participate in a unit, but it may also benefit landowners by preventing inequities resulting from the rule of capture. The rule of capture is a common law doctrine that allows a well operator to drain the resources from underneath a neighbor’s property without compensation to the neighbor. Without forced pooling, a neighbor could lose the value of the resources underneath his or her land with no compensation or be forced to drill her own well to access the minerals underneath the land.
In general, a well operator must obtain a mandatory pooling order if the land it has leased is insufficient in size or otherwise fails to meet state drilling requirements. The advantage of forced pooling is that if a unit is integrated, generally only one well will be placed inside the unit. Multiple wells may be placed in the same unit absent integration. A disadvantage of forced pooling is that it gives well operators leverage in negotiating a gas lease. If a landowner wants a higher royalty rate, the well operator may attempt to use integration to compel the landowner to participate at the state minimum royalty.
This Issue Brief outlines the forced pooling statutes in each of the Marcellus Shale states, including notice requirements for mandatory pooling, public hearings, royalty rates and any other requirements established under the state statutes.