Forced Pooling

A question has just come to mind:

Here is the assumed scenario:

I am unleased and have all around me old leases at least 5 yrs old. One relative within my gross acerage has signed a recent lease. Basically is a lease unreasonable if it includes generally accepted clauses advantageous to the mineral owner? Or is forced pooling all about the bonus and % and not so much the clauses, so that any counter offer of mine may be deemed by NDIC to be unreasonable.

I assume NDIC could not give any guidance on that. That they have no written policy on when a lessor is being unreasonable.

See what I am getting at. Because all around me might be old leases, are these old leases taken into consideration when I am a recent and first time lessor? Even given that a majority of the leassors in my tract have not/ever signed?

It does not seem fair that I am tied to the negoitating skills of my neighbors 5 years ago.

Especially with a new well 1/2 mile from my property line. It seems it would pull down the weighted average.

Should I go ahead and counter offer through my lawyer?


If they are your minerals, I would negotiate on my terms (bonus/%royalty/lease content) and don't worry about others around you. The NDIC has nothing to do with your negotiations with whomever. You didn't indicate where these minerals are located but many areas of ND are being leased for large bonuses and high % royalties (18-20%).

Just do your homework on leasing and don't worry about the others.

Joel, don’t hurry. It’s good that you have been thinking about this, but I don’t think you have been doing homework. A $25 subscription to the ND Recorders Information Network will allow you to look up the royalty terms and expiration dates of leases in your pool. Those will be the only ones that matter if you are force pooled, and 16% cost free royalty is the most you could expect from being force pooled. I have reported elsewhere that my brothers 16% cost free check is greater than my lease check for 19%. Watch those deductions! This is for = acres in the same well. In ND, I have found forced pooling to be a great bargaining chip on my side. The better the production is in your area the better it works. The first time a landman mentioned forced pooling, I took it as a subtle threat, they also added a few lies to help it along such as, I’d be facing a 300% risk penalty and I would get nothing til the well and penalty was paid for! I was curious enough to look up the law. I laughed my rear off. The mineral owners penalty is 50% and being I was in a good area I was guaranteed the 16% cost free royalty from the first barrel. It makes me chuckle still. The last thing on earth the oil co wants to do is carry your interest. If the well is poor and the oil co can’t recover their costs all they can do is attach a lien to your minerals. The minerals that evidently aren’t there. If the well is great they are capped as to how much they can make off your minerals. I look at it as exchanging places where the paycheck is concerned. If the well only recovers 3 times cost, it would be like trading your lease check for what the oil co earns off your minerals. Being carried interest might not fit everyone. You could end up with less if you have a bad well, but the only way you would end up with nothing is if your well is a duster, dry, no oil or gas. I’d try to find out information on the nearby well, and on the leases in my spacing. I’d keep negotiations open with your presumed operator. I’d seek competetive lease offers. and I would let it be known that I was. I think that Northern Energy Corporation, will make an offer on just about anything. I don’t think they are operators and I give no recommendation for them other than they seem willing to make offers. They are investors, and may flip your lease, or participate in your well. Most of all I would be patient. The better informed you are the easier it is to be patient. If the oil co didn’t think you had some oil they wouldn’t come calling. If you didn’t think you had some oil you wouldn’t be worrying. If I was certain I had no oil under me I would accept the best offer that came with certified funds, no IOU’s. Good luck!

I personally never let a lawyer negotiate on my behalf. I consult my lawyer on every step of the process before I entertain an offer, but I negotiate myself, believing that my skills as a negotiator, especially on my own behalf, are better than a lawyer (who is usually untrained in people skills). Some lawyers are very exceptional people persuaders, but to find one of those whom specializes in mineral properties would seem rare indeed.

I have no idea what is concerning you about the old leases. Negotiate as if they don't exist. You are subject to free market negotiations and can not force, regulate, or expect a doctrine of "fairness" to work, even if it existed.

I think you have obtained lots of good advice from smart people on this site. Swallow hard, keep your chin up, look out for your own controllable position and proceed forward not expecting any fairness or receiving any quarter from those who could care less about how well you come out. The mineral business is cut throat and filled with deception and greed. Where do you think the word "wildcat" came from?.....Good fortune, Thomas......