'Forced pooling': Why some Shreveport-Bossier residents have no say in drilling on their land.

BY LIZ SWAINE | Staff writer  shreveportbossieradvocate.com

https://www.shreveportbossieradvocate.com/business/local-drilling-b...

Recently, the Pea family in Shreveport got a voicemail and text from a landman looking to sign them to a mineral lease. The family lives in one of the urban areas that APEX intends to begin drilling for natural gas in October.

“I just want to make sure they understand that once APEX drills, they will receive a monthly payment (given the well produces), however, the payment they receive will be after APEX covers all their costs and they will not receive a signing bonus," read the text. 

“What does this mean?” the family asked The Shreveport-Bossier City Advocate.

It is called forced pooling. Forced, or compulsory, pooling, means that land will be included in a drilling unit whether the owner signs a lease or not. The Louisiana Department of Conservation and Energy has no numbers on forced pooling, which the state considers ‘private business contracts,’ said Patrick Correges, the Department of C & E's communications director. 

The law has been in effect in Louisiana since 1940, put on the books, said Correges, to encourage the development of minerals “and not be kept from doing that by someone else.” That “someone else” could be a neighbor or neighbors who refuse to lease their minerals.

Shreveport mineral consultant Skip Peel agrees this is one thing landowners have little control over. “All Haynesville drilling and production units are compulsory, whether the landowner wants to be included or not,” he said.

Whether the landowner signs a lease will make a difference in what he or she is paid.

The landowner could eventually make something off of their property without a mineral lease, said Correges, “but it may be well past the peak production of the well because you have to pay for your share of the cost of drilling the well, and those Haynesville wells, they’re pretty expensive.”

In other words, said Peel, “If they lease, they begin receiving royalty payments from first production. If they do not lease, they have to wait until the operator recovers the cost to drill and complete the well.”

The landman in contact with the Pea family offered a 20% royalty and a $500 signing bonus, saying “Just trying to make sure they as mineral owners receive the most money they can out of this deal.”

“If someone leases for a 20% royalty, they in effect are keeping 20% and giving the lessee 80%,” said Peel. “Those that do not lease will receive 100%, instead of 20%, of their proportional share of production but will get pencil whipped by deductions for leasing operating expenses after payout.”

Peel said larger property owners can negotiate for a higher royalty and/or signing bonus, but success generally depends on the size of the acreage.

Ultimately, each property owner has to make their own decision on whether to lease or not to lease, said Correges. “Some wells can last a very long time, so that 100% may pay out over a slower period of time. I mean that's for every mineral rights holder to decide for themselves.”

Peel's advice would be to go on and lease, especially if the land is a small, urban tract. “I prefer those with small acreage and very little mineral knowledge to be leased and avoid the headaches of being an unleased mineral owner,” he said.