Force Pooling
A state regulatory action that compels mineral owners within a spacing unit to participate in drilling operations when voluntary agreement cannot be reached.
Detailed Definition
Force pooling (also called compulsory pooling) is a regulatory action by a state oil and gas conservation agency that compels all mineral interest owners within a defined spacing unit to participate in drilling and development operations. It is used when one or more mineral owners refuse to voluntarily agree to pooling.
When force pooling is used
- An operator has leased the majority of mineral interests in a spacing unit
- One or more mineral owners refuse to lease or participate voluntarily
- The operator applies to the state regulatory agency for a force pooling order
- Without force pooling, the holdout owner could prevent development of the entire spacing unit
Legal basis
- Authorized by state oil and gas conservation statutes
- Based on the police power to prevent waste and protect correlative rights
- Available in most oil and gas producing states (though procedures vary)
- Not available in all states (Texas is a notable exception for some situations)
Force pooling process
- Operator files an application with the state conservation agency
- All affected mineral owners are notified
- A hearing is held before the agency
- If the order is granted, holdout owners are given options (typically: lease, participate as a working interest owner, or be pooled with specified terms)
- The pooling order specifies the terms imposed on the holdout owners
Options for force-pooled owners
- Accept a lease at market terms
- Participate as a working interest owner (bear proportionate costs)
- Be pooled with a specified bonus and royalty
- Receive a risk penalty if they elect not to participate (varies by state)
Controversy
Force pooling is controversial because it compels mineral owners to participate against their will. Supporters argue it prevents one owner from blocking efficient development; critics view it as an infringement on property rights.
Related Terms
Mineral Lease
A contract by which the owner of minerals grants another the right to explore for and produce them for a stated term, in exchange for payments such as bonus, rental, and royalty.
Working Interest
The interest in an oil and gas lease that carries the right to explore, drill, and produce, together with the obligation to pay the costs of those operations.
Pooling
Combining separately owned tracts or interests within a spacing or drilling unit so that a well can be drilled and production shared among them, by agreement or by state order.
Unitization
Combining leases and tracts over all or part of a field or reservoir into one unit, developed and operated as a single property under an approved plan.
Spacing Unit
The area of land assigned by a state conservation agency to a well in a pool, with its size, shape, and permitted well location set by order.