After talking at length with a knowledgable mineral rights owner,(company), I dont understand why Kansas doesnt force pool. It seems to benefit the mineral rights owner, and the Oil company. My father is in Ks politics, and I am trying to get him to look at this. Some good, unbiased info would be welcome.
Forced pooling ensures that more wells will be drilled.
It also ensures that the negotiating strength of a smaller undivided interest does not have the negotiating advantage that a non forced pooling states owner enjoys.
Forced pooling implies that oil and gas follows section lines. That is not a truism.
Forced pooling strips away from the landowner the ability to do with as he pleases with his minerals and let the state make those decisions for him. That goes against every cell in my body.
Forced pooling allows operators to act with arrogance and disregard towards the mineral owner.
If forced pooled, the mineral owner cannot use his own lease form to protect his minerals and if he owns the surface as well, to protect that interest also.
Want me to keep going on?
Thanks for the response Buddy. I have questions though.
1.Forced pooling ensures that more wells will be drilled. (This is a bad thing? For the Arabs? For who?)
2.It also ensures that the negotiating strength of a smaller undivided interest does not have the negotiating advantage that a non forced pooling states owner enjoys. (cant they drain your land if you dont sign a lease and you are nearby?) That is what this guy you buys alot of mineral interests told me.
3.Forced pooling implies that oil and gas follows section lines. That is not a truism. (I hear you on this one. the oil isnt devided underground that way.)
4.Forced pooling strips away from the landowner the ability to do with as he pleases with his minerals and let the state make those decisions for him. That goes against every cell in my body. (isnt that the States way of protecting the land owner?)
5.Forced pooling allows operators to act with arrogance and disregard towards the mineral owner. (Dont they have to have a little power to get enough people together to spend $4 million of their money looking for oil that will make the mineral owners rich?) They are taking alot of risk. How would you do it if you were an oil company Buddy?
6.If forced pooled, the mineral owner cannot use his own lease form to protect his minerals and if he owns the surface as well, to protect that interest also. (again I can see why this major oil company told me to have a good day with the changes I tried to make to their lease. They let me make a few actually. But there comes a point where they have to protect themselves as well. I understand that.)
It seems to me that force pooling makes sure that an oil company cant just go around small plots when they are fracking. They are going to drill 4 miles west of me and the Unit is drawn around a 10 acre and a 5 acre plot. Do those people lose out? I signed my 94 acres over because at the end of the day I was afraid that they would just skip me. If we force pooled I feel like I would have been included at the end of the day. Is there evidence that in areas that force pool that the bonuses and royalties are lower? That would be good info. Hey Im not trying to be a jerk, I really want to understand this. Thanks.
Buddy Cotten said:
Forced pooling ensures that more wells will be drilled.
It also ensures that the negotiating strength of a smaller undivided interest does not have the negotiating advantage that a non forced pooling states owner enjoys.
Forced pooling implies that oil and gas follows section lines. That is not a truism.
Forced pooling strips away from the landowner the ability to do with as he pleases with his minerals and let the state make those decisions for him. That goes against every cell in my body.
Forced pooling allows operators to act with arrogance and disregard towards the mineral owner.
If forced pooled, the mineral owner cannot use his own lease form to protect his minerals and if he owns the surface as well, to protect that interest also.
Want me to keep going on?
Best
Roger, forced pooling differs from state to state that has it. In Oklahoma you may make an election if force pooled for a bonus and royalty from probably 3 choices, basically the state makes you lease and I believe that the state includes some protections in the lease. In Montana and Colorado, I have not seen any penalty for being force pooled and you receive 12.5% royalty from the first barrel until the well is paid off at which time your interest becomes a working interest. In Wyoming the penalty for being force pooled could be 200% to 300% and you would receive nothing until the well paid for itself 2 to 3 times over. In North Dakota, if you are non-consent you receive the weighted average royalty of what everyone else in the spacing leased for or 16% whichever the operator elects from the very first barrel, in practice you may as well say 16%. In North Dakota there is a penalty for being force pooled, the penalty being 50% of the actual cost of drilling, which does not include surface equipment among other things. In North Dakota if they will not offer more than 1/6 [16.67] royalty and the bonus is not large, I would rather be force pooled. If Kansas patterned themselves after Wyoming, I don't think you would like forced pooling, if patterned after Montana or Colorado, you probably would like it. In North Dakota, I am fine with the law there, I'd prefer it to be the same as Montana or Colorado but I am not complaining. The question is, whose lead would Kansas follow if they did institute forced pooling?
Roger Oilmiester said:
Thanks for the response Buddy. I have questions though.
1.Forced pooling ensures that more wells will be drilled. (This is a bad thing? For the Arabs? For who?)
- I never said it was bad. You were looking for input. This is a fact -- a truism.
2.It also ensures that the negotiating strength of a smaller undivided interest does not have the negotiating advantage that a non forced pooling states owner enjoys. (cant they drain your land if you dont sign a lease and you are nearby?) That is what this guy you buys alot of mineral interests told me.
The undivided interest owner is in a stronger postition in a non-forced pooling state than a forced pooling state.
- I personnaly like Louisiana, where they force pool based on the oil water, gas water contact line. That is TRULY protecting the common reservoir and forcing conservation by not having unnecessary wells drilled.
3.Forced pooling implies that oil and gas follows section lines. That is not a truism. (I hear you on this one. the oil isnt devided underground that way.)
4.Forced pooling strips away from the landowner the ability to do with as he pleases with his minerals and let the state make those decisions for him. That goes against every cell in my body. (isnt that the States way of protecting the land owner?)
- The State protecting ME? Worst words that I ever heard was "I am from the government and I am here to help you." They are MY minerals and I want to do with them as I please -- which includes not leasing them. I do not want the help of a politician. Think that they can manage my minerals better than me? What's next? A state mandated lease form for landowners? Geeze Louise!
5.Forced pooling allows operators to act with arrogance and disregard towards the mineral owner. (Dont they have to have a little power to get enough people together to spend $4 million of their money looking for oil that will make the mineral owners rich?) They are taking alot of risk. How would you do it if you were an oil company Buddy?
- Actually, I own lots of working interests. Many in forced pooling states. Like shooting fish in the barrrell. In my home state, I regualarily negotiate leases for 1/4 royalty. That is almost unheard of in Kansas and North Dakota, and Colorado and Montana and South Dakota, and.... So therefore, I have a stronger negotiating position because I get to set the price and royalty and lease form on my minerals.
6.If forced pooled, the mineral owner cannot use his own lease form to protect his minerals and if he owns the surface as well, to protect that interest also. (again I can see why this major oil company told me to have a good day with the changes I tried to make to their lease. They let me make a few actually. But there comes a point where they have to protect themselves as well. I understand that.)
It seems to me that force pooling makes sure that an oil company cant just go around small plots when they are fracking. They are going to drill 4 miles west of me and the Unit is drawn around a 10 acre and a 5 acre plot. Do those people lose out? I signed my 94 acres over because at the end of the day I was afraid that they would just skip me. If we force pooled I feel like I would have been included at the end of the day. Is there evidence that in areas that force pool that the bonuses and royalties are lower? That would be good info. Hey Im not trying to be a jerk, I really want to understand this. Thanks.
- Going around small tracts. That is in states where the pooling transaction is by lease, generally. No lease, no pooling, no money. Your choice with your 5 acres. But you could negotiate no surface operations. That is the whole point. Negotiation. Like dying without a will. The state has one for you, called intestate descent and distribution. If you don't like the state's will the legislature made for you, then you can make your own will that commands the executor to follow yor wishes.
- There is definitive evidence that royalty (and that is where the money is) is much higher in Texas than in non-forced pooling states. Go to any county group on this site and see what people are being offered as royalty or what they signed for.
- Glad to help. Let's take North Dakota for an example. 1280 acre units. Forced pooling. Last week I negotiated a lease in Dimmit County, Texas for 1/4 royalty, cost free, lots of bonus, well obligation, leased the Eagle Ford only, damages for not drilling ($400 per acre) and had a horizontal formula of unit size equals 40 acres + .0624 x L, where L equals the lateral length from first take point to terminus. As an example, a 6000 foot lateral would hold 400 acres. Then continuous drilling kicks in on the lease form and the operator has to drill a well every 6 months until the lease is fully developed. In North Dakota, you drill one well per 1280 acres, move to the next 1280 and when you get your acrage drilled up, then you can develop at your leisure. Given the longivity of some of the horizontal wells, it could be 30 years before the acreage is developed. I'll be dead by then. Think that you can negotiate a lease like that in Oklahoma, Colorado or North Dakota? Think again.
Dear Buddy, good points but I know you negotiate better than the average mineral owner and the average royalty rates in ND have been climbing, especially since even the state has raised the amount of royalty they demand to lease state controlled mineral acres from the 1/6 of years past to 3/16 or 20% with some tracts drawing a bonus of over $11,000 per acre on some state lands. As has been mentioned, Kansas does not have forced pooling and I have never heard of anyone getting 1/4 royalty there, possibly because I'm not paying enough attention to Kansas. Have a great weekend Buddy.
I aver that the Arkansas method of force pooling benefits the landowner far better than the lack of force pooling does in say Pennsylvania. Being "spaced out" of a play is a disaster for many owners as they end up with nothing and all their oil and gas drained to boot.
Bad force pooling is not a benefit, but that isn't the rule in most cases. Only when you have a large tract do you benefit from non-pooling.
In Colorado I have minerals that are in a huge pool. It has provided a steady income for 3 decades. It will continue to do so for the next 30 plus if reserves are correctly estimated. I prefer to get that steady check each month for my life than to get a huge flush of money at once. It also means the next generation gets a benefit too. Horizontal drilling might see you getting 50% of your reserves flushed out in the first 18 months...and if prices are low (like gas is now) then you've lost huge chunks of money at the same time you're facing a horrific tax bill which will whack many of us at a much higher rate than if the check were divvied out over time.
Mr. Shields,
I agree on some points, but only when you have a large tract is not the only time you benefit from non-pooling. A small undivided interest in say, a section, gives a person tremendous advantage in leasing.