Pennsylvania's New Pooling Law
Act 66 of 2013 gives drilling companies the power to combine oil and gas leases into production units for horizontal drilling, unless it’s explicitly prohibited in the lease.
The law passed with overwhelming support in both the House and Senate and was signed by Governor Corbett on July 9.
The legislation was originally proposed as an effort to bring more transparency to royalty check stubs by requiring drilling companies to clarify the deductions they take.
Shortly before the law’s passage, a controversial section (2.1) was added. It gives companies the ability to pool leases without the consent of landowners:
Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontal drilling unless expressly prohibited by a lease. In determining the royalty where multiple contiguous leases are developed, in absence of an agreement by all affected royalty owners, the production shall be allocated to each lease in such proportions as the operator reasonably determines to be attributable to each lease.
The new law has angered a group representing the state’s mineral owners. The Pennsylvania Chapter of the National Association of Royalty Owners says while they support “fair” pooling, this new law is “pooling with no rules.” They believe the measure undermines a landowner’s ability to negotiate with gas companies.
After signing the law, Governor Corbett sent a letter to the General Assembly. He acknowledged the concerns over private property rights but argued the measure will enhance the efficient extraction of oil and gas, while still protecting the rights of landowners.
Less than two weeks after Corbett put his signature on legislation, EQT Corp. filed a lawsuit against 70 Western Pennsylvania landowners over drilling rights.
In the complaint, the company cited section 2.1 of the new law, arguing the landowners did not have the right to prohibit the company from doing seismic testing in search of gas on their properties.