A 4 Acre Mineral Owner Holding up Hilcorp--This is why forced pooling was invented
How would you like to own the lions share of minerals in this unit and have a 4 acre owner stop its' development. Welcome to Pennsylvania.
Jay
NEW BEDFORD, Pa. (AP) — An energy company is dusting off an old, unused state law that can force property owners to accept oil and gas drilling under their land, pitting neighbor against neighbor in a Pennsylvania community and raising the possibility that lawmakers will have to take sides.
Houston-based Hilcorp seeks to use a 1961 Pennsylvania law to drill under the property of four holdout landowners in New Bedford, near the Ohio border an hour north of Pittsburgh. The concept, known as “forced pooling,” means that people who don’t sign leases get bundled in with those who do, to make drilling more efficient and compensate all the landowners.
The stakes are high. Property owners can reap royalties totaling hundreds of thousands or even millions of dollars from drilling in the Utica Shale formation, which lies below the better-known Marcellus Shale.
Suzanne Matteo, one of the four who has refused to sign a lease, said she is furious that the company may be able to drill under her property without her permission.
“It’s un-American,” she said.
On the other side are many neighbors who have signed leases, such as Bruce Clingan, who owns the roughly 200-acre Tanglewood Golf Course with his wife, Jody. They signed a lease with Hilcorp a few years ago and received a signing bonus of more than $500,000, plus 18 percent royalties on future production.
“I don’t understand how people that own 4 acres of ground can hold up such a big thing. I don’t agree with that,” Clingan said.
Hilcorp said that 99 percent of the property owners in the 3,267-acre tract have signed leases, and that drilling would occur a mile or more under the surface of the holdout’s property. Invoking the old law, the company said, would ensure that “all participants, leased or unleased, are compensated for the minerals they own.”
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Replies to This Discussion
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Permalink Reply by Hopeful About Natural Gas on -
I happen to know several folks with under an acre of minerals and they leased and got danged good bonus money back in '08 - but I don't personally know anyone who believes the o&g folks are "stealing" the gas they have rights too - not to say there cannot be mistakes made in heir/ownership over time.
Someone more knowledgeable could correct me but it seems like to eliminate forced pooling would be to very badly damage mineral owners, consumers and even people like teachers (from taxes paid by o&g folks, including income taxes) It might cripple the hunt for natgas and make some areas impossible to drill in.
Hang
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Permalink Reply by Two Dogs, Pirate on
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I have worked for many operators some are better than others but most want to get to the bottom on title issues. Dry holes solve title problems, "HL Hunt".
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Permalink Reply by 1kw6x71km1v37 on
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Skip, I suspect you and those law firms do not encounter UMI's very often, as they, unlike your clients, are unrepresented by professionals. They tend to be small landowners, relatively uneducated, who don't have a clue about what to do next to rectify the situation.
Max, it's been my observation that E&P's will simply pocket the money past payout on UMI's unless the UMI or his representative initiates action under L.R.S. 30:10 to capture the funds. The initial burden is completely on the landowner's back. Of course, a letter will just result in a bunch of double talk, if the operator even bothers to reply. You have to sue them to get their attention, and that requires a dollar amount sufficient for all concerned, including the attorney and other costs. Let me tell you, it's a real booger to pick.
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Permalink Reply by Skip Peel - Mineral Consultant on
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I know a good number of UMI's. In fact they contact me regularly here on GHS.
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Permalink Reply by Two Dogs, Pirate on
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Maybe I have been sheltered by my broker of the past 15 years. He has tried to keep the company name clean and not worked for outlaws that would taint the name/company that dates back to the 1940's.
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What estimated percentage of those UMI's had the respective operators voluntarily come forth and account for well activities?
I guess the next question is logically, what per centage of those UMI's are sitting around not knowing what to do, all the while being shafted by their co-owners in minerals?
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Permalink Reply by Skip Peel - Mineral Consultant on
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The majority of folks who thought they were UMI's turned out not to own the minerals they thought they owned. There is a number of ways that can occur and it is quite common. We discussed that often in the early days of GHS. Then there are those that may have an ownership interest but do not have a clear chain of title due to a lack of proper probate. If an energy company feels that the chances are good that they own some undeterminable fractional portion of the whole, they will take protection leases. Those folks get a lease and get a bonus payment but then have their royalties placed in suspense until they clear their title. Operators don't get their share of production.
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Permalink Reply by Two Dogs, Pirate on
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Most UMI's are not poor and know what they are doing or think they know what they are doing. Many poor UMI's are getting a check from the gov and are afraid of losing the gov money.
The area that I experienced the most title problems in my career was by far DeSoto Parish. I would try my best to clear up the problems but some problems can't be fixed. I remember one UMI in Winn Parish that thought he owned 100% of the property because he had been paying the taxes for years. No explaining on my part could convince him that he was wrong.
In the Haynesville you will find that many Lessors were paid that didn't own the minerals. The clean up crew will be at work up there for years. When ever you have an area that is hot and operators are scrambling to buy up as many leases as possible in a short amount of time and using landmen that are inexperienced you are going to have problems. A lot of the young in-house landmen don't know what they are doing also. They will hire brokers and contractors that bring them out to fancy hunting lodges to get the work. Many of these brokers don't care if their landmen are doing things the right way because they will probably be long gone before the mistakes come to light. Many of these prospects never get drilled so the mistakes never surface. I would say that many times the operator is getting screwed more that the lessor.
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Permalink Reply by John Parker on
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Two Dogs:
It is very comforting when someone really knows a subject and what they are talking about.
You must be very comfortable in your wisdom, understanding and true knowledge regarding what you just stated.
Excellently set forth my friend.
GHS readers, absorb every single word Two Dogs just stated. They are as real as real gets.
~ ~ John
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Permalink Reply by HBP on
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Been reading along the thread. Agree with 2 Dogs that the Haynesville title was done in a microwave instead of a crockpot - so yes, there are many mistakes sitting out there on paydecks.
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Permalink Reply by Two Dogs, Pirate on
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One mistake I saw was a big one a million and a quarter paid to a woman based on a tax sale deed done in 2004. The woman was small part owner of the estate making the deal a redemption.
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Permalink Reply by John Parker on
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Two Dogs:
The suspense! Did she get to keep the buck and a quarter after the dust settled?
I am sure there was a lot of dust, hide or flesh. LOL
~ ~ John
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