Oil & Gas Lease Rights: To Pool or Not to Pool

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Oil & Gas Lease Rights: To Pool or Not to Pool

Way back in the simpler times of 2016, I wrote a blog titled “To Pool or Not to Pool Your Oil and Gas Lease Rights.” At that time, it was an unsettled question as to whether an oil and gas producer in West Virginia could pool or unitize a property where the oil and gas lease does not expressly grant that right.  To put it another way, in the absence of a pooling clause in an oil and gas lease, does the producer have an implied right to pool? 

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On November 18, 2020, that question was finally answered by the West Virginia Supreme Court in the case titled, Ascent Resources-Marcellus, LLC v. Huffman, et al. (Docket No. 19-0347) In that case, the parties agreed that the 1980 oil and gas lease at issue did not expressly grant Ascent Resources the right to pool or unitize.  Therefore, Ascent Resources sought a judgment that, in the absence of such a pooling clause, it had the implied right to pool.  The Tyler County Circuit Court held that Ascent Resources did not have an implied right to pool and could not do so without express consent. 

Ascent Resources appealed that decision to the West Virginia Supreme Court.  The Supreme Court agreed with the Tyler County Circuit Court.  It held that the oil and gas lease at issue was unambiguous in regard to pooling—it simply said nothing on the topic.  The Supreme Court went on to state that implying the right to pool would “substantially and materially [alter] the anticipated burden on the [property].”  Accordingly, the Supreme Court held that a right to pool or unitize will not be implied into an oil and gas lease.  

In essence, the Supreme Court held that it was the clear intent of the parties to the 1980 oil and gas lease to allow oil and gas development of that specific property.  That was what was contemplated by the parties.  Horizontal drilling (i.e. fracking) by way of pooling would be a substantially increased burden on the property that was not negotiated by the parties in 1980.  Therefore, the right to pool would not be inferred.

A WIN FOR WV LAND & MINERAL OWNERS!

Oil and Gas Royalty Document - The Division Order

This is a great win for West Virginia land and mineral owners!  As I’ve been beating the drum for years, it is unfair for oil and gas producers to obtain “ancient” oil and gas leases and seek to modernize them for their benefit but not the mineral owners.  If producers want to modernize these leases to permit pooling and unitization, they should be willing to offer modern lease terms in return (including a bonus payment, royalty rate and language, and operational terms as well). 

GKT CAN HELP

In my practice at GKT, I’ve represented numerous land and mineral owners on oil and gas lease modifications and amendments to permit pooling.  If your property is subject to an “ancient” lease, this is very likely your only chance to modernize that lease for your benefit and obtain more than the typical 12.5% royalty rate. 

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If you’ve been approached with an oil and gas lease modification or amendment to permit pooling, call GKT at (304) 845-9750 or live chat at GKT.com.  As always, I’d be happy to set up a free, no-obligation consultation at my office. 

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