Presented by Rural Advancement Foundation International (RAFI-USA) Research & Policy Associate James Robinson. May 21, 2013.
For more information about forced pooling and landowner rights visit: http://rafiusa.org/issues/landowner-rights-and-fracking/
4. Leasing History in the Shale Gas
Basin
14 counties could be impacted by fracking
Over 9,000 farms on over 1.3 million acres of
farmland
Gas companies have targeted Lee County
Companies active in NC since 2006
Currently 80 active leases in Lee County covering
9,307 acres
5. Leasing History: Predatory
Leasing
NC leases offer landowners little compensation
$2,000 - $15,000 per acre bonus payments in other
regions
$1 - $20 bonus payments in North Carolina
Minimum Royalty Payments of 12.5%
Unreasonably long drilling phases
Typical Primary drilling phase 3-5 years
Primary drilling phases in NC leases 15-20 years, start
date unclear
Few landowner protections that limit financial risk and
legal liability for landowners
6. Current Law: Session Law
2012-143
Passed in 2012
Legalized the processes involved in hydraulic fracturing but prohibited
permits until regulations are in place
Tasked the Mining and Energy Commission with creating the regulatory
structure to govern fracking and other development of gas and minerals.
Established some landowner protections, including:
"cooling off" periods after leases are signed
minimum royalty payments, and
a requirement for operators to post a bond sufficient to cover
reclamation of a surface owner's property
30 day notice for “land disturbing activities”
“Registry of Landmen”
7. Current Legislation: Senate
Bill 76
Passed the Senate
Currently in the House, but no action has been taken on
the bill
Authorizes DENR to issue permits on or after March
1, 2015 (MEC regulations scheduled to be complete by
October 2014)
Repeals the Landman Registry
Removes the State Geologist from the Mining and
Energy Commission (MEC), among other MEC changes
Authorizes “deep injection wells” to dispose of fracking
fluids
9. Mining and Energy Commission:
Current State of the Process
MEC committees in rule drafting process
Rules that pass committees are voted on by the full MEC
Current draft rules: http://portal.ncdenr.org/web/mining-and-
energy-commission/draft-rules
Chemical Disclosure Rule (Environmental Standards
Committee)
Water Acquisition and Management Rule (Water and Waste
Management Committee)
No rules have been finalized
Study groups will make recommendations to the legislature
by October 2013
Full MEC regulations due to be complete in October 2014
10. Compulsory Pooling: What is
Compulsory (Forced) Pooling?
Forced Pooling- Known as compulsory pooling in
North Carolina, forced pooling is used to create a
drilling unit by forcing non-consenting landowners
into a lease.
Currently legal in North Carolina (G.S. § 113-393)
(1945)
This is normally done with small or irregular tracts for
the purpose of having sufficient acreage to comply
with spacing unit regulations.
12. Compulsory Pooling: Unconventional
Natural Gas
12
Does not migrate
toward a well on a
neighbor’s property
and requires
horizontal drilling to
access.
Landowner A Landowner B
13. Compulsory Pooling:
Rationale
Prevents environmental damage by minimizing wells
Maximizes recovery
Makes development of minerals more economical for small
mineral rights owners who share in drilling cost with other
mineral rights owners
Makes development of minerals more economical for oil and
gas companies
14. Compulsory Pooling: What are
the arguments against it?
Removes the right of individual property owners to
control their own mineral resource.
Removes any incentive for the industry to negotiate
with small landowners in some circumstances.
Possible unintended consequences for the
unleased landowner
Possible drop in property value
Mortgage impacts
15. Compulsory Pooling: How do
other states deal with this issue?
Approximately 40 states have laws authorizing compulsory
pooling (including North Carolina)
West Virginia- Pooling is not available in shallow
wells, which includes the Marcellus Shale (West Virginia
§22C-9-7)
Ohio- Recommends a 90% voluntary acreage agreement
to apply for a compulsory pooling order (Ohio DNR)
Texas- An applicant must make a fair and reasonable offer
to non-consenting landowners and the unit is dissolved if no
production within 1 year (Texas Natural Resources Code
Chapter 102)
16. Compulsory Pooling
Study Group (CPSG)
The CPSG is studying North Carolina’s current forced
pooling law and reporting needed regulatory changes
or updates, including legislative proposals, by Oct
1, 2013 to the Joint Legislative Commission on Energy
Policy and the Environmental Review Commission.
First Recommendation: “No surface operations or
disturbances to the surface of the land shall occur on a
tract pooled by an order without the written consent of
or a written agreement with the owner of the tract that
approves the operations or disturbances.”
17. CPSG: Next Recommendations
May 31: Whether or not compulsory pooling should
be legal, and under what circumstances if it is legal
May 31: Penalties and compensation for
compulsorily pooled unleased landowners
May 31: Prerequisites for a compulsory pooling
application
18. Compulsory Pooling: RAFI’s
Recommendations
RAFI supports voluntary pooling in North Carolina as a
way for landowners to increase negotiating leverage.
RAFI does not support forced pooling because it limits
landowners’ ability to control their own property, can lead
to pressure sales, and brings many legal unknowns to
the compulsory pooled landowner.
If forced pooling is retained in North Carolina, it should
be closely regulated, only occur when more than a
super-majority of landowners favor pooling, and provide
very favorable terms to non-consenting landowners.
19. How to Get Involved
MEC Meetings: http://portal.ncdenr.org/web/mining-and-
energy-commission/meeting-schedule
Contact MEC Member:
http://portal.ncdenr.org/web/mining-and-energy-
commission/members-information
DENR Shale Gas Listserv: email “subscribe” to
denr.shale.gas-subscribe@lists.ncmail.net
RAFI: http://rafiusa.org/issues/landowner-rights-and-
fracking/get-involved/
RAFI Email List: http://rafiusa.org/subscribe/
I work with the Rural Advancement Foundation International. We’ve been studying and educating landowners about hydraulic fracturing for about 3 years. Some organizations focus on the environmental impact of hydraulic fracturing or on energy issues. We have focused on helping landowners understand the risks involved in leasing their mineral rights and hydraulic fracturing. We also work to help landowners recognize predatory mineral rights leasing offers. When we saw that landowners were signing predatory leases several years ago, we recognized landowner rights education as a need within our community.I’m going to cover five subject that include 1) a brief overview of hydraulic fracturing, 2) North Carolina’s shale gas basin and leasing history, 3) current law and existing bills on hydraulic fracturing, 4) current state of the MEC and CPSG process, and 5) how to get involved with the MEC process.
Currently, the only leases that have been signed are in Lee Co. This includes about 80 leases covering about 9,000 acres.
This took place before hydraulic fracturing was legal in North Carolina. Oil and gas companies were acting in anticipation of new legislation.
Leasing happened before hydraulic fracturing was legal. In 2012, the legislature passed SB820 or SL 2012-143.
Finally, I’m going to cover compulsory pooling and the work of the compulsory pooling study group. This is the issue that RAFI has focused on most to date.
Forced pooling makes more sense as a landowner protection in the case of “loose gas.” Non-consenting landowners never have a well on or below their property.
Forced pooling makes less sense in the case of “tight gas.” You have to go and get the gas, which requires access to the subsurface.
Unlike North Carolina, these state and other states have additional regulations governing compulsory pooling.
The compulsory pooling study group is trying to answer those questions.
These are the questions that must be addressed by the compulsory pooling study group and added to North Carolina’s regulatory structure.