Instead of locating every last mineral rights owner and contracting with each mineral rights owner on an individual basis (lots of time wasted), the producer/operator asks the state for permission to "pool" all mineral rights owners, thereby setting remuneration based on agreement reached with a majority of the mineral rights owners. Obviously when an oil company can't find all those with interests in the spacing unit, pooling is the solution. It appears that the right to pool is the last step in the paperwork/bureaucratic process before preparation for drilling actually begins.
Sunday, December 11, 2011
For Newbies: Pooling
Elsewhere they are asking what happens if an oil company drills a well but can't find all those who have mineral rights associated with said well. My hunch is that this is what pooling is all about.
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I don't quite understand the pay scale on pooled minerals. If x,y&z leased 15 years ago for $100 an acre and a,b&c leased today for $1000, what would l,m&n get if pooled, $550?
ReplyDeleteI've had landmen use pooling as negotiation leverage, i.e. "If you don't lease with us for this amount and under these terms, we'll pool you." I don't react well to threats, so I may get my answer first hand..
That's why there is a commission or committee or panel or whatever they are called to adjudicate these issues.
ReplyDeleteI can't address the personalities of the landmen, but the landmen are doing many folks a service by informing them of "pooling." When I started this blog, I knew nothing about pooling. Based on comments I get here as well as those I see elsewhere, I get the feeling that most folks are very, very uninformed about the leasing process.
There are still folks writing me or writing others asking how to read a section map. That speaks volumes. We've only been in this boom for four years or more. Folks who can't read a section map and refuse to deal with landmen are hurting themselves.
[I digress: thirty or forty years ago, somehow I let a very pushy mutual fund salesman into my house to sell me a mutual fund. At some point I knew I wouldn't buy anything from him. But I did learn a lot about mutual funds. He talked a lot about mutual funds but never mentioned load/no-load funds. After he left, I started my own research. I have invested ever since. I never bought from him, and would never buy a load fund, but it was only because I took advantage of all his knowledge, that I got enough information to start my own research.]
Landmen would be a great source of information but due to preconceived notions, many folks are afraid to talk to landmen.
If you control mineral rights, and one person decided not to sign a lease, and pooling was not allowed, you would be quite unhappy if the oil company simply walked away, deciding not to drill.
The answer is not that everyone has his/her price. Not true. A 93-year-old woman with no heirs might not sign no matter what just because she hates landmen. Without pooling, the other mineral rights owners would not see their minerals developed.
Regardless of how you feel about landmen, they are a source of information. They all work for someone; if they are "threatening" you call their boss. They always provide you with a business card (or should provide you with a business card).
I guess that came off wrong, I have nothing against landmen. Actually it was just this one and his attitude in negotiation. His true title was probably "leasing agent".
ReplyDeleteI have used landmen for mineral searches and are very happy with the results. Sorry for the confusion.
On a bright note, your reply may have opened some eyes and answered some questions.
Red, thanks. I had to work pretty hard to come up with a tactful answer, but I was sincere in what I finally posted.
ReplyDeleteOne of the reasons my dad was successful to the degree he was, was his ability to work with anyone. He didn't sign deals with anyone, but he was willing to work with anyone.
I see that in Donald Trump, as outragous as that may be. Not Donald Trump, per se, but the archetype of businessmen, the public personality -- a "Donald Trump" sees opportunity everywhere. If he feels he is not be treated fairly, he walks away, but in the process he's learned a lot, a lot about the deal, and a lot about himself.
Good luck with all your wells. I appreciate you taking the time to comment.