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Thank Goodness For Mineral Rights
When Fracking Fractures Communities

Energy production has a long history of dividing communities. Oil and gas booms transform surrounding towns, flooding sleepy hamlets with drilling equipment, streams of trucks, and money. In many cases, people are willing to endure the ruckus for the financial compensation that comes with it, but building a consensus at the community level can be very tricky. As the New York Times reports, one energy firm is looking to use a 63 year old law to force holdouts to agree to drilling:

Houston-based Hilcorp seeks to use a 1961 Pennsylvania law to drill under the property of four holdout landowners in New Bedford, near the Ohio border an hour north of Pittsburgh. The concept, known as “forced pooling,” means that people who do not sign leases get bundled in with those who do, to make drilling more efficient and compensate all the landowners.

This is a tough one. On the one hand, we can sympathize with the majority of landowners in the affected area that are eager to cash in on fracking. On the other, forcing homeowners to sign on the dotted line is less than ideal, or, as one such party put it, “it’s un-American.”

There will always be tricky cases like this, but on the whole, Americans have a much better shot at being fairly compensated for leasing out their land to drillers. The United States affords landowners mineral rights, something few others in countries abroad enjoy. In fact, these mineral rights are one of the reasons why America has so successfully tapped its shale reserves, and why the shale boom is proving to be so tricky to replicate abroad.

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  • Fat_Man

    The problem solved by forced pooling is that oil and gas are liquids. Drilling from point A will suck the oil and gas out from under the neighboring properties. If the neighbors are not compensated by forced pooling, they will get nothing. It also decreases the number of wells that need to be drilled in any area so that the oil can be efficiently exploited with out undue inconvenience to the neighbors. The only loser in forced pooling is the neighbor who wants to block drilling completely, and even then they have lost little other than the right to be little bitches.

  • gabrielsyme

    The problem that forced pooling most avoids in this context is not the landowner that only desires peace and quiet, but the difficulty of having numerous landowners competing to gain the completion premium. The difficulty of course, is that by avoiding paying the completion premium, a company will in fact be paying rather less than the actual open-market value of the resource; the law thus enriches the acquiring company at the expense of the landowners.

    I am unsure of the Pennsylvania law, but forced-pooling laws ought to include an independent assessment of the value of the access to the resource which then is equitably distributed among the landowners. I would imagine that under such a law both landowners and acquisitors would benefit: most landowners would receive a higher payment, and the acquiring company would be faced with a more certain and possibly swifter process.

  • Boritz

    Who knew having oil and gas on your property was such a drag?

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