What is forced pooling?

Published 06/16/2009 07:16 AM   |    Updated 03/09/2010 11:03 AM
What is forced pooling?

Forced pooling is a term used to describe the process under Indiana Law that allows for a well to be drilled in certain situations where the owners of oil and gas interests in the drilling unit cannot agree to terms and conditions for integrating (or pooling) their interests. Before obtaining a permit to drill an oil or gas well, the operator must demonstrate to the Division of Oil and Gas that they have the minimum number of acres leased in accordance with state drilling unit and spacing requirements. When such a situation exists and one of the owners is prepared to commit to the expense of drilling and operating a productive well on the drilling unit, that party can petition the Department of Natural Resources to force the integration of the non-consenting owner's interest into the drilling unit.

Prior to submitting a forced pooling petition, the applicant must first demonstrate to the Division of Oil and Gas that they already own or control a significant portion of the interests in the proposed unit and have made a diligent attempt to negotiate a suitable lease with the non-consenting owner. Upon receipt of a petition for forced pooling, the Division of Oil and Gas will schedule an informal hearing and provide notice to the non-consenting owner of their right to participate and submit any relevant information they wish so that the Division can make a determination as to how the interests should be integrated.

Indiana law requires that oil and gas interests be integrated or pooled under these circumstances. The objective of the informal hearing is to gather sufficient information so that a determination can be made to ensure that the terms of integration are "based upon reasonable terms that give the owner of each tract an equitable share of oil and natural gas in the unit or pool. " The following link is to the statute which addresses the requirements for forced pooling. http://www.in.gov/legislative/ic/code/title14/ar37/ch9.html

The sole objective of the forced pooling process is to ensure that everyone who owns oil and gas interests with the drilling unit receives their fair and equitable share of the production of oil or gas from that well. If their interests were not integrated, the production proceeds would be distributed to the remaining interest owners and the non-consenting owner would receive nothing. To view the specific drilling unit rules, click on the following link and look for the drilling unit and spacing rules at 312 IAC 16-5-1 and 16-5-2: http://www.in.gov/legislative/iac/T03120/A00160.PDF

The Division of Oil and Gas believes that forced pooling should be considered only as a last resort and should not be used to avoid negotiation of suitable terms with persons who are willing to engage in negotiation. Clearly, we believe the best outcomes are those that are negotiated in good faith between willing parties.

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