Mississippi Forced Pooling
A mineral owner recently called me concerning a situation affecting him involving forced pooling and I am aware his situation has been made public elsewhere, so I thought I would post, in general terms, about forced pooling.
The point of this post is to encourage everyone to seek competent legal advice before entering into a lease agreement. This is NOT an attempt to provide legal advice.
That said, it doesn't hurt for laymen to at least read a law to grasp enough to know legal advice is needed.
So, I have copied below a small section of the forced pooling statute (Mississippi Code Section 53-3-7), just for starters in the discussion
(g) In the event a pooling order is issued by the board, and any nonconsenting owner does not subsequently agree in writing as provided for herein, and if the operations on the existing or proposed well which are described in the pooling order are actually commenced within one hundred eighty (180) days after the pooling order is issued by the board, and thereafter with due diligence and without undue delay, the existing or proposed well is actually completed as a well capable of producing oil, gas and/or other minerals in quantities sufficient to yield a return in excess of monthly operating costs, then, subject to the limitations set out in this section, the operator and/or the appropriate consenting owners shall be entitled to receive as alternate charges (alternate to and in lieu of the charges provided for in subsection (1)(b) of this section; provided, however, that in no event shall the operator and/or the appropriate consenting owners be entitled to recover less than such charges provided in subsection (1)(b) of this section) the share of production from the well attributable to the nonconsenting owner's nonconsenting interests in the ...
Here is a link to an online version of the codification of the law itself
http://law.justia.com/codes/mississippi/2013/title-53/chapter-3/in-general/section-53-3-7
What all this means (as I understand it) is that if drilling operations begin within 180 days (roughly 6 months) of a forced pooling order and you are not leased, you can be held liable for "alternative risk charges" (to be withheld from your portion of the earnings from the well). Alternative risk charges include a charge for 2 1/2 times the cost of drilling and completing a well. Drilling operations are generally considered to begin when a well spuds, but this is another legal question...so get an attorney if you are in this situation.
It is my understanding that if you lease to anyone other than the operator after notice and from the date of that order until the beginning of "drilling operations," then the lessor of your property could be held liable for "alternative risk charges," which could include a charge for 3 times the cost of drilling and completing the well, if this lessor doesn't pay his way down.
What all this really means is you need to get competent legal advice before entering into a lease agreement with anyone and when receiving a notification from an oil company about force integration of your mineral rights into a unit.
Get legal advice folks.
Now, what are your thoughts on the subject?
