A company has applied to the Oklahoma Corporation Committee (OCC) for approval of spacing units for horizontal drilling that include mineral acres owned by my family. My understanding has been that once a spacing unit has been approved, the statutory regulations in Oklahoma require that in order for a company to commence drilling operations in the approved unit(s), if they are unable to obtain private lease agreements with some of the mineral owners (despite good faith efforts to do so) the company must apply for a forced pooling order to be issued which would provide the unleased owners with various election options that include some combinations of royalty + bonus. I spoke with the landman listed as the “contact” on the spacing unit applications in order to ask a few questions and at one point when I mentioned forced pooling the landman asserted that an operator can simply choose to skip forced pooling and unilaterally carry all of the unleased mineral owner’s interest until 100% payout. Is that true, or would the company instead need to submit an application to the OCC requesting issuance of a pooling order?
I do not agree with the description provided by the operator. Under Oklahoma law, 52 O.S. § 87.1(e), an operator cannot avoid forced pooling. Rather, a pooling order is the mechanism to “carry” a mineral rights owner.
The “Carry” Option (Non-Participation): Under a forced pooling order, an unleased owner who does not want to participate in the drilling costs (pay upfront) can choose not to participate. In this scenario, the operator “carries” that owner.
100% Payout / Risk Penalty: If the unleased owner is carried, the operator typically incurs all risks and costs. In return, the operator is allowed to charge a “risk penalty”—often 100% to 300% of the well costs—before that owner receives any revenue from production, besides the statutory royalty.
**Why Operators Use Forced Pooling:**Even if an operator is willing to carry an owner, they still need a pooling order to legally define the rights to the spacing unit, allow for the 100% (or more) penalty, and ensure that the “hold-out” owner cannot claim a share of revenue without having incurred the initial risks.
Avoiding the Process: If an operator does not use forced pooling, they risk not having legal authority to develop the unit or, if a well is drilled without one, potentially facing claims of conversion or having to pay a higher share of revenue to the unleased owner.
In summary, the “carry until payout” option is actually a result of the forced pooling order, not a way to avoid obtaining one.
I hope this helps!
Blessings,
David