PoolingCost DeterminationChange of Operator

Eric R. King

Week FourSeptember 15, 2011

The Forced Pooling Statute

• In order to avoid the drilling of unnecessary wells

• To protect correlative rights

• Prevent economic waste

May require owners to pool and develop the lands in the spacing unit as a unit

OAC 165:5-7-7: Pooling

OAC 165:5-15-3:Pooling Orders

May your negotiations as a Landman on values be as sharp

as this couple’s math.

(g) Notice of hearing for a redetermination of well costs shall be as provided in the initial application. Such request shall be in the form of a motion filed under the original CD number of the pooling.

Cost Determination “Motion”

OAC 165:5-7-7(g)

Pooling Cases

• Pooling cases summarized– Be sure and review case number 52 and

53 involving Harding and Shelton.

• Since 1960 the Commission has ruled that participants may share in force-pooled acreage

• The Right to Share is an equitable right• Randy Specht the Commission Appellate

Referee has suggested the time is ripe to make this issue the subject of a rulemaking. See alsoMichael L. Decker’s article, In Search of a Visage of Truth – Rulemaking or Adjudication at the Corporation Commission, 60 OBAJ 2655 (1989)

Participant’s Right to Share in Force Pooled Acreage

Strategy in Enforcing Such Right

Unusual Overburdened Transactions

1. 1/4 royalty

2. Bonus of $500 per acre to be paid within 2 years of execution of lease

3. 100% back-in after payout

4. Request for statutory bond allegedly available under 52 O.S. Sec 87.1 (allegedly allows for deduction of completed well costs from production – but makes no provision for payment in the event of a dry hole)

Unusual Overburdened Transactions

1. 40% burdened leases delivering a 60% NRI

We are fortunate to have captured the reaction of a news anchor regarding the acceptance of the

unusual overburdened transactions

Overburdened Transactions

The Treatment of Excessively Burdened

Working Interests Under a Pooling Application

See “A Primer on Forced Pooling of

Oil and Gas interests in Oklahoma”

by Charles Nesbitt, 50 O.B.J. 648 (1978)

A clip that explains the hierarchy at the Corporation Commission

Commissioners Mineral Owners and Oil Companies

The Lawyers

Change of Operator 165: 5-7-11

Sample Forms

Eric R. KingOne Leadership Square, 15th Floor

211 N. Robinson Ave.

Oklahoma City, OK 73102

(405) 235-5518