Layla Cummings Research Fellow, DENR February 8, 2013 An Overview of Pooling in Five Oil and Gas Producing States Slides: What is Pooling? Unitization Policy Behind Pooling Pooling in Other States Pooling in Arkansas Pooling in Colorado Pooling in Ohio Pooling in Texas Pooling in West Virginia Issues to Consider

1. An Overview of
Pooling in Five
Oil and Gas
Producing
States
Layla Cummings
Research Fellow, DENR
February 8, 2013

2. What is Pooling?
 Poolingis the process of combining leases
to create a drillable area under state’s
spacing laws, rules, and regulations
 Compulsory pooling is often used to form
a “drilling unit,” which is an area that can
be efficiently drained by one well

3. Unitization
 Unitization of land designates a common
source of supply, such as a reservoir of oil. The
entirety of the land overlaying the common
source of supply is considered to be within this
unit.
 Compulsory unitization combines land to
develop a whole reservoir
 Commonly associated with secondary
recovery operations

4. Policy Behind Pooling
 Prevents
waste by encouraging efficient
land development and use, including the
avoidance of overdrilling
 Protects
correlative rights by ensuring
development for owners of small tracts
 Maximizes ultimate recovery

5. Pooling in Other States
 40states have laws authorizing
compulsory pooling (including North
Carolina)
 All
states provide for notice and
opportunity for a hearing before land is
pooled

6. Pooling in Arkansas
 Integration is authorized for the prevention of
waste and to avoid the the unnecessary
drilling of wells
 50% voluntary minimum acreage agreement
required for exploratory units for compulsory
pooling and 75% voluntary minimum acreage
agreement required for compulsory
unitization
 Requires good faith offer to landowners
 Statutory Pugh Clause

7. Pooling in Colorado
 Statutory pooling is authorized in order to prevent
or assist in preventing waste, avoid the drilling of
unnecessary wells, or to protect correlative rights
 80% voluntary minimum acreage agreement
requirement for compulsory unitization
 Requires good faith offer to landowners
 If a party objects to the placement of a well, they
may apply for a hearing before the Colorado Oil
and Gas Conservation Commission

8. Pooling in Ohio
 Mandatory Pooling is authorized where necessary to
protect correlative rights and provide effective
development, use, and conservation of oil and gas
 No surface operations without written consent of the owner
 The Ohio Division of Mineral Resources Management
recommends a 90% voluntary minimum acreage
agreement to apply for a compulsory pooling order
 65% voluntary minimum acreage agreement requirement
for compulsory unitization
 In order for an application to be granted, there must be no
other obvious alternate location for the drilling unit

9. Pooling in Texas
 Pooling is authorized to avoid the drilling of
unnecessary wells, protect correlative rights, or
prevent waste
 No compulsory unitization
 No minimum voluntary acreage agreement
requirement for compulsory pooling
 An applicant must make a fair and reasonable offer
 Automatic dissolution of a unit if there is no
production within a year

10. Pooling in West Virginia
Shallow Wells
 West Virginia splits its statutes by the depth of
well. There are 3 different statutes for shallow
wells, deep wells and secondary recovery,
and coalbed methane wells
 Pooling is not available in shallow wells, which
is where the Marcellus Shale lies
 West Virginia lawmakers recently considered
a bill to allow compulsory pooling or “lease
integration” in shallow wells

11. Pooling in West Virginia
2011 S.B. 424
 Senate Bill 424 was introduced on
February 4, 2011 and addressed forced
pooling in the Marcellus Shale
 The Bill contained a voluntary minimum
acreage requirement of 75% in order to
apply for a compulsory pooling order

12. Pooling in West Virginia
Deep Wells
 For deep wells and secondary recovery operations,
compulsory pooling is authorized in West Virginia
 There is no minimum acreage agreement
requirement for compulsory pooling
 Compulsory unitization is available for secondary oil
recovery operations and requires 75% voluntary
minimum acreage agreement
 No drilling will be initiated on the tract of an unleased
owner without the owner’s consent

13. Issues to Consider
 Whether to retain compulsory pooling
 Requiring a fair and reasonable offer to
landowners
 Consent of the surface owner of unleased pooled
land for surface operations
 Statutory Pugh Clause
 Dissolution of Pooling Orders

14. Thank You!
Layla Cummings
N.C. Department of Environment and Natural Resources
layla.cummings@ncdenr.gov

15. Material Disclaimer
The information herein is public information and has
been prepared solely for educational purposes and to
contribute to the understanding of oil and gas law
and compulsory pooling. While every attempt was
made to insure that these materials are accurate,
errors or omissions may be contained therein.