What is force pooling in the oil and gas industry?
A leasing agent for an oil and gas company has been nosing around the area, and the rumor mill has gone into overtime. Some of your neighbors are excited about the idea that an offer of an oil and gas lease might be forthcoming.
You – along with a few of your other neighbors – aren’t so sure that you’re interested in what the oil and gas companies have to offer, even though it could benefit you financially. Unfortunately, the decision to accept a lease or not may not be entirely in your hands. You could get “force pooled.”
How does force pooling work?
It’s not uncommon for oil and gas companies to “pool” several smaller tracts of land into the combined acreage they need to obtain a drilling permit. Most of the time, that’s part of the deal landowners make when they agree to a mineral and gas lease.
When all of the landowners with mineral rights don’t agree to a lease, however, the oil and gas company may appeal to the state to ask for the statutory, or legal, right to force the reluctant landowners into the agreement. The idea behind forced pooling is that the public interest in having the oil and gas well tap into the natural resources is enough to outweigh a handful of owners who won’t voluntarily participate.
If your neighbors have started to be approached by the landmen for an oil and gas company or you’ve already received a letter of interest, it’s important to understand both your options and any challenges you may face. Having experienced legal guidance early on in the process is wise.