State study group focuses on cooperation measures

Apr. 27, 2013 @ 05:00 AM

A state study group focused on pooling of land has recommended that oil and natural gas operators be compelled to work together, under certain circumstances, when it involves leased tracts in close proximity.

The N.C. Mining and Energy Commission study group’s recommendation should streamline the process, forcing the gas and oil operators to work for the benefit of the landowners, said Compulsory Pooling Study Group Chairman Ray Covington.

“The biggest takeaway from the meeting today is that everything we talked about was in the interest of the landowners,” Covington said after the meeting, held at the McSwain Extension Education and Agriculture Center Friday.

For example, if oil operator X leased 200 acres of land, and oil operator Y leased 200 acres of land near X, they would, under the recommendation, be compelled to work together if it was not economical to drill separately, said study group resource member John Humphrey, of Humphrey Law Firm.   

“It would basically force them to quit fighting and get together to develop the unit,” he said.

In Pennsylvania, Humphrey said, there are examples of two different companies leasing land next to each other and, because it was not economical to drill separately, the area was not mined. Under the study group’s recommendation, the companies would work together to combine the area of land, making it economical to mine for the operators and the land owners who leased the properties.

“It would resolve those types of conflicts and those issues,” Humphrey said.

The resolution to present the recommendation to the full mining commission passed unanimously.

In other matters, the study group considered:

• Information regarding cost sharing of drill sites under compulsory pooling in other states from Southwestern Energy Senior Vice President for Land and Business Development Jim Dewbre. No action was taken by the study group.

• A presentation by Humphrey on reporting and notice requirements to land owners from oil and gas operators. In other states, there have been issues of landowners receiving their royalty checks from the operators with little accompanying information or documentation, he said.

The National Association of Royalty Owners has recommended that the name of the land owner, specific identification codes, property address, well number, the date the minerals were sold, volume of minerals sold, the amount taken out of a check for taxes and deductions and contact information for the operator, among other items, be included with landowners’ checks. No action was taken by the study group.