Forced Pooling Or "Unitization" Forces Property Owners To Accept Drilling Article

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Forced Pooling or "Unitization" Forces Property Owners to Accept Drilling

Oil and gas exploration and extraction can be very profitable, or it can be a bust. And often the consequences are serious environmental damage and degradation, whether oil is found or not.

Author: Sara Goldstein

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Because of this, many people might be reluctant to participate in exploration, but they may not have the choice due to laws that allow "forced pooling" or "unitization" of properties for the purposes of oil or gas exploration.

What Is Forced Pooling?

Oil or gas deposits are rarely found on just one person's property. Instead, they spread out over dozens or even hundreds of plots, all of which must grant an easement to allow for exploration. However, forced pooling allows an oil company to begin exploration on a deposit without authorization from all property owners. Once a certain number of property owners sign on, the rest are automatically included, no matter how the owners feel.

Costs Associated with Forced Pooling

Many wells that are drilled never end up yielding any profit for anyone involved. They are, however, very expensive. When a group of property owners grants an easement for drilling, they are expected to pitch in to cover the costs of excavation. Even property owners who never agreed to the drilling may be expected to pitch in.

The expectations and rewards offered to property owners vary from state to state. One common policy offers land owners three options:

• Contribute to the cost and share profits
• Don't pay for the well and receive a reduced share of profits after a "risk aversion" penalty
• Receive a state-mandated minimum royalty payment

In some states, residents may not have all these options.

However, no matter the profit sharing options a resident may have, all are forced to share in the environmental costs of forced pooling. With recent expansion of the practice of hydraulic fracturing or "fracking" for exploiting natural gas reserves, concerns have been raised about the practice and its impact on communities. In a December 8 draft statement, the EPA stated that groundwater contamination in the town of Pavillion, Wyoming, had likely come from fracking fluids.

These fluids can give water an objectionable taste and odor, and when the EPA sampled water from the area, they found numerous organic compounds, including benzene and other known carcinogenic substances.

Forced pooling means that residents will now have no option but to accept the pollution that comes from this type of drilling.

Is Forced Pooling Eminent domain?

Critics of forced pooling say that the practice should be considered a form of eminent domain and "corporate welfare." After all, state power is being used to force property owners to give up rights to their land, rights that have fair market value and deserve full compensation. And there is some question about whether such a practice would be allowed in states that have reformed eminent domain to prevent abuse. In these states, such as Florida, eminent domain cannot be used to transfer property from one private owner to another private owner. It has not yet been tested in court whether forced pooling or unitization would be considered this type of prohibited eminent domain.

If your property is being threatened with an eminent domain action or with something that might be considered eminent domain, such as unitization, you can learn more about your rights by visiting the website of the Florida Property Rights Law Firm today.

About Author

The Florida Eminent Domain Law Firm represents individuals and businesses when the State of Florida attempts to take their land using Eminent Domain and Condemnation Laws.

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Forced Pooling or "Unitization" Forces Property Owners to Accept Drilling