Another problem that occurs with oil and gas
leases is forced pooling laws. Texas does not require forced pooling; however, oil companies are lobbying the state legislature to adopt an allocation law, which is basically pooling. Pooling is the consolidation and combining of
leased land with adjoining leased tracts. The area is called a pool or a unit. Pooling has the benefi t to a production company of uniting all landowners’ leases into a common pool under a drilling company and utilizing a common underground geological reservoir. There are basically 2 types of pooling — voluntary
and forced. Compulsory or statutory are other names used for forced pooling, which is initiated by state law. Most states, including Oklahoma, Arkansas and Louisiana, have this type of provision for compelling the landowner to enter into a pooling arrangement. The state and the production company usually set the cost formula and landowners typically have very little input. Payments by the production companies to landown-
ers in a pool are calculated on contributed surface acres and not on how much oil and gas is underground. “This is about the only fair way to calculate payments,
because the only known quantities of oil and gas are what are found around the wellhead,” Lucas says. Oklahoma has forced pooling, and according to
the Oklahoma Corporation Commission, only 1 initial well is allowed in a drilling and spacing unit. Owners who want to propose a well must secure the commit- ment of other owners in the unit. Other owners must either agree to share in the well’s expense or lease or assign their working interest to the proposing owner in exchange for a royalty interest in future production. “In the ‘70s, oil companies signed long-term leases
for large areas of land at defl ated prices,” Lucas says. “Many of these areas were held in reserve rather than putting them into production. Stock prices are based on the amount of mineral reserves a company holds, so it is advantageous for them to carry as much leased mineral deposits as possible. Long-term mineral leases without production are not good for landown- ers because they can’t take advantage of increases in the lease market.” “A lease contains a primary term and a secondary
term,” writes John McFarland with Graves, Dougherty, Hearon & Moody, P.C., based in Austin. “The primary term is usually expressed as a fi xed number of years
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