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What is Pooling? An Overview of Pooling in Five Oil and Gas Producing States. Presentation to NC MEC 2013.

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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

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What is Pooling? An Overview of Pooling in Five Oil and Gas Producing States. Presentation to NC MEC 2013.

  1. 1. An Overview ofPooling in FiveOil and GasProducingStatesLayla CummingsResearch Fellow, DENRFebruary 8, 2013
  2. 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. 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. 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. 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. 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. 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. 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. 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. 10. Pooling in West VirginiaShallow 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. 11. Pooling in West Virginia2011 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. 12. Pooling in West VirginiaDeep 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. 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. 14. Thank You! Layla CummingsN.C. Department of Environment and Natural Resources layla.cummings@ncdenr.gov
  15. 15. Material DisclaimerThe information herein is public information and hasbeen prepared solely for educational purposes and tocontribute to the understanding of oil and gas lawand compulsory pooling. While every attempt wasmade to insure that these materials are accurate,errors or omissions may be contained therein.

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