Tuesday, May 24, 2011

In Defense of Forced Pooling:
Clowns to the Left of Me, Jokers to the Right, Here I Am...

[I wrote this this morning as a comment on an item appearing in Marcellus Drilling News — a commendable, forthrightly pro-drilling web site resurrected from a hiatus in January 2011 (but without ever a full explanation) by owner, Jim Willis.  As time goes on, I suspect Willis's project could become as key an informational resource in Appalachia as such web-based outlets as Million Dollar Way, touting ND's Bakken; the Powell Shale Digest, launched to cover TX's Barnett; or the Haynesville Play Blog, on doings down on the LA/TX line.  For the time-being, though, MDN is necessarily much more about politics than it is about production.]

Key angles that get consistently overlooked in the debate over forced pooling — over-heated as it's become, from both the side of the left, and the right:

Forced pooling is the legal mechanism by which two or more lease-holding companies can be compelled to work together, benefiting royalty-seeking landowners who already signed, but with separate companies.  In PA, the status quo is that many mostly leased areas won't get drilled (or will get drilled only part way), because there's a blockage caused by a well-positioned speculator who performs no useful economic work — except to take a lease, and then to put his hand out for way more than his fair share of the proceeds of the gas wells.

Forced pooling (together with an up-to-date dormant minerals statute) can also sort out unproductive gray areas where there's nobody on hand and findable with clear-enough title to sign the necessary lease — such as cemeteries, or really old oil and gas severances, etc.  In a state such as PA, clinging to antique statutes, these title glitches can in fact limit the drillbit's horizontal reach, but for no defendable reason of actual private property rights, or fairness.  Instead, in these cases, the law is truly an ass.

Lastly, forced pooling traces its political history to "progressive" and "conservationist" philosophies — both of which are precursors to the very same environmental movement that now finds the situation convenient and useful for decrying these sorts of laws.  If we, as a society, have our rules set up so as to leave behind a hodgepodge of odd-shaped parcels of undrilled and unfracked shale — rock that can never again be economically revisited — then this is the functional equivalent of wasting a future generation's share of a finite, non-renewable natural resource.

On this, I ask — where is the hew and cry?

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