Compulsory Pooling & Landowner Protections; Presentation to Compulsory Pooling Study Group of the North Carolina Mining & Energy Commission
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Presentation to Compulsory Pooling Study Group of the North Carolina Mining & Energy Commission on Forced Pooling and Landowner Protections. John Humphrey McSwain Agriculture Center Sanford, NC January 11, 2013
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Compulsory Pooling & Landowner Protections; Presentation to Compulsory Pooling Study Group of the North Carolina Mining & Energy Commission
- 1. Compulsory Pooling & Comp lsor Poolin & Landowner Protections Presentation to Compulsory Pooling Study Group of the North Caroling Mining & Energy Commission McSwain Agriculture Center Agriculture Center Sanford, NC January 11, 2013 John Humphrey John H mphre The Humphrey Law Firm 107 S. West St., PMB 325 Alexandria, VA 22314 Alexandria VA 22314 humphrey.law@earthlink.net 703‐599‐7919
- 2. Unitization and pooling of leased mineral estates fl d i l Cox Homestead Kelly Farm 2
- 3. Unitization and pooling of leased mineral estates fl d i l Cox Homestead Kelly Farm Leased mineral estate Leased mineral estate Leased mineral estate Leased mineral estate NC law authorizes the State to combine leased estates like the Cox homestead and Kelly farm here into a single drilling unit (G.S. § 113‐393) (1945). ( )( ) 3
- 4. Unitization and pooling of leased mineral estates fl d i l Cox Homestead Kelly Farm Leased mineral estate Leased mineral estate Leased mineral estate Leased mineral estate NC law authorizes the State to compel leased mineral estates within a drilling unit into a pool to share production and costs (G.S. § 113‐393) (1945). ( )( ) 4
- 5. Unitization and pooling of leased mineral estates fl d i l Cox Homestead Kelly Farm Leased mineral estate Leased mineral estate Leased mineral estate Leased mineral estate How drilling, production, and reclamation will proceed will be determined by the operator’s leases with the Cox family and with the Kelly family, supplemented by State rules. 5
- 6. Unitization and pooling of leased with unleased mineral estates l d i l Cox Homestead Kelly Farm Leased mineral estate Leased mineral estate Unleased mineral estate Unleased mineral estate 6
- 7. Unitization and pooling of leased with unleased mineral estates l d i l Cox Homestead Kelly Farm Leased mineral estate Leased mineral estate Unleased mineral estate Unleased mineral estate NC law authorizes the State to combine leased estates like the Cox land and unleased estates like the Kelly farm into a single drilling unit (G.S. § 113‐393) (1945). 7
- 8. Unitization and pooling of leased with unleased mineral estates l d i l Cox Homestead Kelly Farm Leased mineral estate Leased mineral estate Unleased mineral estate Unleased mineral estate NC law authorizes the State to compel leased mineral estates and unleased mineral estates into a pool to share production and costs (G.S. § 113‐393) (1945). ( )( ) 8
- 9. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 9
- 10. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate What are the effects on production of the p Kellys’ gas resource if the State compels p pooling?g 10
- 11. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate In a “loose gas” formation, pooling would enable g p g the Kellys’ gas to be produced from the Cox well without surface or subsurface access because “loose gas” migrates. He He 2 2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 11
- 12. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate A “loose gas” formation is the circumstance g that the 1945 NC Oil & Gas Conservation Act p contemplated. He2 He2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 12
- 13. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate But NC’s Triassic Basin is a “tight gas” formation. g g Gas, locked in the shale, is unlikely to migrate to y g q a nearby well in significant quantities, if at all. He2 He2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 13
- 14. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate “Tight gas” formations undercut the primary g g p y consumer protection basis for pooling – p preventing gas in an adjacent estate from gg j being produced without compensation. He 2 He 2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 14
- 15. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate However, the inability of tight gas to migrate y g g g strengthens the economic rationale for pooling p p g for operators and “orphaned” mineral rights owners who need a larger pool to recover costs. He 2 He 2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 15
- 16. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Which raises the question, if the State pools an q p unleased property like the Kelly farm, can the State also compel the Kellys to grant surface p y g and subsurface easements? He 2 He 2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 16
- 17. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Put differently, after the Kelly property is y yp p y pooled, what rights will the gas operator y y have on and under the Kelly family farm? He2 He2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 17
- 18. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate No surface Unified Estate Unified Estate access? Will the State’s authority be limited to y compelling the Kelly family into a pool with y the Cox family? He2 He2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 No drilling or drill‐ C2H8 CH4 through access? CH4 C2H8 18
- 19. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Surface Unified Estate Unified Estate access? Or will the State have the authority to compel y p the Kellys to grant the operator access to the yp p y surface and subsurface of the Kelly property? He2 He2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 Subsurface drilling or C2H8 CH4 C2H8 CH drill‐through access? 4 19
- 20. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Whether or not operators are granted surface p g and subsurface access rights significantly y affects estate owners beyond whether estate owners’ mineral resources are produced. He 2 He 2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 20
- 21. State power to compel granting access easements to gas operators Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Without surface and subsurface easements, “tight gas” cannot be produced via wells on j p p y p adjacent properties, but many other impacts to adjacent land also are avoided. He 2 He 2 CH4 CH4 CH4 CH4 CH4 CH4 CH4 CH4 C2H8 CH4 C2H8 CH4 21
- 22. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 22
- 23. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Another significant issue affecting landowners g g is which rules govern drilling, production, and p p p reclamation on pooled properties. 23
- 24. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate In an example like the one above where the p Cox family has a lease and the Kelly family g g does not, what rules govern how drilling, production, and reclamation will proceed on the pooled Cox and Kelly family properties? p y yp p 24
- 25. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate In this example, what rules govern how drilling, p g g production, and reclamation will proceed on p y yp p the pooled Cox and Kelly family properties? Cox Estate: Lease and State rules 25
- 26. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate In this example, what rules govern how drilling, p g g production, and reclamation will proceed on p y yp p the pooled Cox and Kelly family properties? Cox Estate: Lease Kelly Estate: and State rules State rules only 26
- 27. How easements and governing rules affect landowners l d Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 27
- 28. How easements and governing rules affect landowners l d Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate How surface and subsurface easements and how the source of rules governing gas p operations will affect landowners can be seen by considering the lifecycle of a lease on the p pooled Cox and Kelly family properties. y yp p 28
- 29. How easements and governing rules affect landowners l d Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Scene 1 After the pooling order is completed, a truck arrives with a crew ready to begin surveying arrives with a crew ready to begin surveying and conducting seismic tests. 29
- 30. How easements and governing rules affect landowners l d Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test Cox Lease Current State rules ‐ Notice: Notice prior to testing ‐ No notice to enable landowner to secure ‐ No limitations on testing fenced or gated areas or move equipment or activities ‐ Testing Limits: Types, timing, and manner of testing limited 30
- 31. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test (cont.) Cox Lease Current State rules ‐ Vegetation: Minimize ‐ No limitations on vegetation vegetation impacts, prior impacts, damages negotiated written approval to destroy after fact or determined in vegetation, pay fair market court value for damages, set valuation l f d l method 31
- 32. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test (cont.) Cox Lease Current State rules ‐ Structures: No impacts (gates, ‐ Damages to structures fences, buildings) without prior negotiated after fact or written approval & agreement determined in court on compensation ‐ No limits on off‐road access, ‐ Roads: Use existing access roads damages negotiated after except by written approval, fact or determined in court 32 remediate grass and turf
- 33. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test (cont.) Cox Lease Current State rules ‐ Holes drilled to be smallest bore ‐ Note limits on bore holes or possible, plugged & remediated remediation mandated ‐ Minimum buffer established for ‐ No buffer between testing testing activities from and existing infrastructure, structures, water sources, water sources, or livestock underground pipes, livestock 33
- 34. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test (cont.) Cox Lease Current State rules ‐ Sounds and vibrations from ‐ No limits on sound and seismic work to be muffled to vibrations protect occupants and livestock ‐ No remediation required ‐ Remediation: Operator agrees from testing activities to return property to original condition within set time 34
- 35. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test (cont.) Cox Lease Current State rules ‐ Liability: Operator strictly liable ‐ No shifting of risk to operator and agrees to indemnify ‐ No dispute resolution landowner against any claims or methods agreed to regulatory enforcement actions ‐ Dispute resolution methods agreed to 35
- 36. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 1. Operator survey and seismic test (cont.) Cox Lease Current State rules ‐ Insurance: Operator to maintain ‐ Minimal if any insurance prescribed amount of worker’s liability required for survey comp, employer’s liability, and seismic testing activities comprehensive general liability, and business auto and vehicle db d h l liability insurance 36
- 37. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Scene 2: Environmental consultant arrives to begin gathering of baseline data gathering of baseline data 37
- 38. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 2. Baseline data collection and environmental monitoring Cox Lease Current State rules ‐ Requires specific schedule, ‐ Baseline testing and monitoring required but standards not required but standards not locations, and disclosure of established and may be less monitoring groundwater, rigorous that what landowner surface water, soil, and air would negotiate [§2(c)] ‐ Original survey documents to be ‐ No requirements to provide provided to landowner survey documents 38
- 39. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Surface Use Agreement Standards – Construction Phase Scene 3: Sanford Herald has article about operator transferring some leases. Inquiries to transferring some leases. Inquiries to operator yield no reply until letter from new company arrives. company arrives. 39
- 40. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Limits on transfer of lease Cox Lease Current State rules ‐ Advance notice to mineral rights ‐ Notice of lease assignment owner of lease transfer or required within 30 days [§4(d)] written consent of mineral ‐ No restrictions on lease transfer rights owner prior to transfer 40
- 41. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Surface Use Agreement Standards – Construction Phase Scene 4: Three years pass. 41
- 42. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 4. Renewal Terms Cox Lease Current State rules ‐ 3‐year lease not renewed unless ‐ 10‐year lease term “drilling operations” have ‐ No standard of “bit in ground” commenced. If no operations, or “strata reached” provisions to can negotiate new lease. trigger lease renewal ‐ Force majeure clause Force majeure clause ‐ No force majeure clause operational for ten years [§4(d)] renewal at 3 years 42
- 43. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Surface Use Agreement Standards – Construction Phase Scene 5: 3 years pass. Drilling finally begins. 43
- 44. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 5. Surface Use Agreement Standards – Construction Phase Cox Lease Current State rules ‐ Written construction land‐use plan ‐ No timeline or written plan for containing setbacks from buildings construction provided t ti id d and water agreed to and provided ‐ No agreement on mitigation of to landowner light and noise from construction phase construction phase ‐ Lights and noise impacts minimized ‐ No right of inspection ‐ Right of inspection of construction 44
- 45. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 5. Surface Use Agreement Standards – Construction Phase (cont.) Cox Lease Current State rules ‐ Operator pays fair market value ‐ No compensation schedule or for all timber, crops, and valuation method for damage l ti th d f d established structures (including fences and gates) removed or damaged ‐ No temporary fencing set up ‐ No erosion control measures No erosion control measures ‐ Temporary fencing , drainage agreed to and erosion control measures 45 agreed to and established
- 46. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 5. Surface Use Agreement Standards – Construction Phase (cont.) 3. Surface Use Agreement Standards – Construction Phase Cox Lease Current State rules ‐ Soil quality maintained through ‐ No provisions for soil quality double ditching to separate top protection or avoiding soil soil and subsoil compaction made ‐ Soil compaction avoided ‐ Rocks removed from surface where unearthed 46
- 47. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 5. Surface Use Agreement Standards – Construction Phase (cont.) Cox Lease Current State rules ‐ Lease must specify allowable ‐ Lease must specify allowable water use, not conflict with water use, not conflict with landowner water usage, and landowner water usage, and provide for fair market value for provide for fair market value water [§4(d)] [ (d)] for water [§4(d)] f [ (d)] 47
- 48. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 5. Surface Use Agreement Standards – Construction Phase (cont.) 3. Surface Use Agreement Standards – Construction Phase Cox Lease Current State rules ‐ Plans, timeline, and payment ‐ No provisions for additional schedule for infrastructure infrastructure development development beyond well ‐ No limits on infrastructure ‐ Specific easements for development rights arising appurtenant infrastructure from pooling rights granted with geographic, height, 48 and depth limits
- 49. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 5. Surface Use Agreement Standards – Construction Phase (cont.) 3. Surface Use Agreement Standards – Construction Phase Cox Lease Current State rules ‐ Production phase land‐use plan ‐ No written production phase agreed to in writing land‐use plan prepared l d l d ‐ No written reclamation plan ‐ Reclamation plan agreed to in agreed to writing ‐ No drilling and construction No drilling and construction ‐ Drilling and construction phase damages measured and paid damages valued and paid 49
- 50. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Surface Use Agreement Standards – Construction Phase Scene 6: Check arrives in the mail from operator. 50
- 51. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Surface Use Agreement Standards – Construction Phase 6. Receive a royalty check – is it for the right amount? Cox Lease Current State rules ‐ After bonus check for acreage, ‐ No bonus payment ever monthly royalty payments received above statutory minimum once ‐ 12.5% statutory minimum production starts royalty received ‐ Royalties paid without deductions on greater of market 51 value or gross proceeds
- 52. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 6. Receive a royalty check – is it for the right amount? (cont.) 3. Surface Use Agreement Standards – Construction Phase Cox Lease Current State rules ‐ Royalty statement includes lessor ‐ No details required on name; lessor’s ID #; lease #; well payments and property name; API #; month and year of sale; oil, gas, and NGL volumes; price per barrel or l b l MMBtu; taxes; lessor’s interest, share of sale, deductions & codes 52
- 53. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 6. Receive a royalty check – is it for the right amount? (cont.) 3. Surface Use Agreement Standards – Construction Phase Cox Lease Current State rules ‐ Right of royalty audit can be ‐ No royalty payment audit rights exercised ‐ No rental payments for surface ‐ Rents paid for use of lands use of land ‐ Lease terms supercede any p y Division Order language 53
- 54. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 3. Surface Use Agreement Standards – Construction Phase Scene 7: Stranger drops in for coffee. Tenders offer for Cox Lease Current State rules gas and hunting lease above undeveloped gas and hunting lease above undeveloped portion of mineral estate. 54
- 55. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 7. Who can lease out undeveloped portions of land? Cox Lease Current State rules ‐ Horizontal and vertical Pugh ‐ No division of property clauses limited depth and range allowing leasing of unused of minerals leased originally portion of land. ‐ Retained acreage and depth clause frees from lease areas and zones leased but not 55 developed
- 56. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 7. Who can lease out undeveloped portions of land? (cont.) Cox Lease Current State rules ‐ Specific contract terms retaining ‐ No specific terms governing right of alternate uses for alternate uses or payment for timber, crops, and hunting and loss of alternate uses. preserving acreage for these purposes. ‐ Hunting rights near wellheads 56 leased to operator.
- 57. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 7. Who can lease out undeveloped portions of land? (cont.) Cox Lease Current State rules ‐ Mineral estate leased limited ‐ No limits on mineral types specifically to oil, gas, and pooled specifically identified natural gas liquids 57
- 58. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Scene 8: Scene 8: Is there supposed to be a pool of oil there? 58
- 59. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 8. Responding to accidents Cox Lease Current State rules ‐ Operator must indemnify surface ‐ Operator must indemnify owner against any claims related surface owner against any to operator’s activities on claims related to operator’s property [§4(c)] activities on property [§4(c)] ‐ Adequate operator bonding, capitalization, and insurance 59 requirements
- 60. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 8. Responding to accidents (cont.) Cox Lease Current State rules ‐ Operator must have and inform ‐ Operator must indemnify surface owner of emergency surface owner against any f i t claims related to operator’s response operation plans and activities on property [§4(c)] disclose details of all accidents ‐ Disclosure of hazardous Disclosure of hazardous ‐ Disclosure of hazardous chemicals materials to emergency used on or injected into land responders and regulators 60
- 61. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Scene 9: Scene 9: Honey, they’re just not listening to what I’m saying. saying 61
- 62. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 9. Dispute resolution process agreed upon Cox Lease Current State rules ‐ Operator agrees in writing to best ‐ No dispute resolution efforts to resolve dispute, procedures identified mediation, then court proceedings in county in which well located 62
- 63. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Scene 10: Scene 10: Then one day, the pump stopped. 63
- 64. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 10. Payments and renewals when operations are suspended Cox Lease Current State rules ‐ Habendum (continuous ‐ No lease provision protecting operations) clause releases shutting‐in of production mineral estate when production stops. ‐ If well shut‐in or flow reduced temporarily, shut‐in royalties paid. 64
- 65. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Scene 11: Scene 11: When you were a little girl . . . . 65
- 66. Rules governing development and production of pools d i f l Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate 11. Reclaiming and restoring land Cox Lease Current State rules ‐ Detailed written reclamation and ‐ No reclamation plan monitoring plan ‐ Requirement that operator ‐ Warranty of adequate operator provide financial assurance of capitalization and operator well closure, reclamation, bonding to cover reclamation and ongoing monitoring [§2(c)] ongoing monitoring 66
- 67. Protecting Landowners in the Law Protecting Landowners in the Law Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Conclusions ‐ Under current NC law, landowners compelled into a pool have . significantly fewer opportunities to protect themselves than those who negotiate their leases. those who negotiate their leases ‐ Compelling the granting of surface and subsurface easements affects a wider range of landowner rights than compulsory pooling alone. 67
- 68. Protecting Landowners in the Law Protecting Landowners in the Law Leased Cox Pooled Kelly Unified Estate Unified Estate Unified Estate Unified Estate Conclusions ‐ If a compulsory pooling rule that compels granting surface or . subsurface easements is implemented, the State should integrate into pooling orders the full array of measures integrate into pooling orders the full array of measures generally available in oil and gas leases to protect owners of any pooled mineral estate or appurtenant surface estate, whether unified or severed. h th ifi d d 68
- 69. Cox Homestead Kelly Farm Compulsory Pooling & Landowner Protections p y g Presentation to Compulsory Pooling Study Group of the North Caroling Mining & Energy Commission John Humphrey McSwain Agriculture Center Sanford, NC The Humphrey Law Firm January 11, 2013 107 S. West St., PMB 325 Alexandria, VA 22314 Alexandria VA 22314 humphrey.law@earthlink.net 703‐599‐7919 69