Unitization, Compulsory Integration, and Forced Pooling: What Does It All Mean? For example, in West Virginia, non-consenting landowners may either: 1) sell their mineral interests to participating landowners for just consideration or 2) elect to participate on a limited basis (without sharing full costs) on terms to be determined by the board entering the order. Many states have adopted laws—in addition to mandatory unitization laws—to govern circumstances in which neighboring landowners disagree about whether or not to extract mineral resources from common pools underneath their land. Under the Tennessee statute, a forced integration order may be entered if more than fifty percent of landowners with interests in the pool request such unitization. In most states, non-consenting landowners must either pay an up-front cost to compensate the drilling company for bearing the costs and risks of production, or must pay these costs out of their share of the mineral profits. Alabama uses a risk-penalty approach, wherein any non-consenting landowner who does not agree to pay a prospective proportionate share of drilling and completion costs is subject to a risk penalty of 150 percent of the tract’s share of the reasonable costs of drilling and production. 21151 for the Elm Tree-Bakken Pool to terminate an overlapping 2560-acre spacing unit comprised of Sections 17, 18, 19, and 20, Township 153 North, Range 93 West, McKenzie and Mountrail Counties, North Dakota (Sections 17, 18, 19, and 20), and amending Order No. In this case, a landowner would be allowed to extract only an amount of oil or gas proportionate to their share of the overall drilling area. In this case, such a landowner would be allowed to extract only an amount of oil or gas proportionate to their share of the overall drilling area. Despite this criticism, courts have consistently found mandatory pooling laws to be constitutional. NDCC 38-08-08 is the statute that defines the process for compulsory pooling and penalties on those who do not participate in the cost and risk of drilling operations. If an integration order is entered, the operator may charge each interested owner only for the actual reasonable expenditures required for the development of the resource. § 377.28). Once the BOGC issues an involuntary pooling order, which they can do if over 50% of the owners consent, there are three consequences for the non-consenting owner: The property of the non-consenting owner is pooled into the lease and drilling is allowed to go forward. 2020-35 - June 3, 2020 - Burgum Rescinds Executive Order 2020-33; 2020-34 - May 30, 2020 - Burgum Declares State of Emergency in Fargo, West Fargo and Cass County, Activates North Dakota National Guard; 2020-33 - May 27, 2020 - Burgum Suspends Rule on Ending Fund Balances for School Districts Field Order Number. Wyoming uses a risk-penalty approach, through which non-consenting owners may be required to pay their full share of the costs of production, plus up to 300 percent of their share of the costs and expenses of drilling, reworking, deepening or plugging back, testing and completing. Compulsory pooling and unitization statutes have to be within the police power and should not violate due process requirements. Under the Ohio scheme, the operator or owner of a well (or members of a voluntary drilling unit) who bears the costs and risks of production may deduct from a non-consenting owner's share of the well's profits his share of the costs of operating the well plus a risk penalty of up to 200 percent of these costs. However, it has been criticized as being too favorable to extraction companies. This website uses cookies to analyze traffic and for other purposes. States have adopted mandatory pooling laws to attempt to protect landowner rights and promote the efficient extraction of natural resources. City. New York Environmental Conservation Law § 23-0901. In addition, non-consenting owners may be required to pay up to 200 percent of their share of any new equipment costs. If Farmer A agrees, the extraction company will likely still need to obtain the mineral rights of his neighbors in order to form a drilling unit big enough to drill a wellhead. This percentage varies among states, with Ohio’s law requiring the consent of 90 percent of landowners and Virginia’s law requiring only 25 percent before other landowners may be obliged to enter into the mandatory pool. When a common pool of oil or gas lies under the property of two or more neighboring landowners, the rule of capture applies unless it has been superseded by state statutes Accordingly, the first person to gain control over the resource (by extracting the resource from the ground) gains exclusive ownership over that resource. The Upper Midwest Order (F.O. Colorado uses a risk-penalty approach, wherein any non-consenting landowner must pay for 100 percent of his share of equipment and operating costs for the well as well as 200 percent of his share of costs incurred in well exploration (this is the risk penalty). Thirty-eight states have some form of forced pooling law. Alaska’s scheme is also unique in that it allows landowners to drill on their individual parcels in the event that a voluntary pooling agreement cannot be reached and the conditions are not met for a compulsory pooling order. [Continental] made application to the Commission for an order amending Order No. The remaining 7/8 interest is subject to a risk-penalty amounting to 100-300 percent of his share of the costs of development. In July 2006 the contract was upgraded to include GIS through the efforts of the North Dakota GIS Technical Committee, working in cooperation with the Information Technology Department and the Office of Management and Budget. A non-consenting landowner in Montana may be required to pay up to 100 percent of his share of the costs of the operation of the well, plus 100 percent of his share of any equipment acquired to drill and operate the well, plus up to 200 percent of the costs of staking and well-site preparation. production costs are carried by the operator and the owner is only responsible for the proportionate share of the costs of drilling if the well is successful. If, however, compulsory pooling orders Under this approach, non-consenting owners can choose an alternative from a list of options that best fits their own specific circumstances upon receiving a mandatory pooling order. No additional risk-penalty is assessed for landowners who do not choose to participate in drilling. Idaho law provides that a landowner whose land is subject to a mandatory pooling order (an order of commission according to the statute) may either: 1) Choose to participate in the costs and risks of production or 2) Choose to sell his leasehold interest to the participating owners for just compensation. Mandatory pooling laws, however, have been controversial. Colorado uses a risk-penalty approach, wherein any non-consenting landowner must pay for 100 percent of his share of equipment and operating costs for the well as well as 200 percent of his share of costs incurred in well exploration (this is the risk penalty).