New Castle News

May 26, 2014

Mitchel Olszak: Forced pooling and a clash of rights

Mitchel Olszak
New Castle News

NEW CASTLE — There’s an old saying: The right of your fist ends where my nose begins.

It’s a reference to the fact that in a free society, there are still boundaries that must be respected.

All rights come with restrictions. Typically, these rules are intended to provide protections for others in the community, a means of achieving a reasonable balance of interests.

So how does all of this pan out on the subject of forced pooling?

This term has come to public attention only recently. It refers to the legal ability of shale gas drillers to include properties in a fracking operation, even if the owners of those properties have not signed leases.

One such driller, Hilcorp, is pursuing this effort in Pulaski Township. The company has a large tract of land under lease there, but a few holdouts have caused them problems.

So the driller is invoking an obscure state law, demanding the ability to frack under these properties as well. The owners would receive royalties for any gas or oil taken, but they have made it clear that’s not what they want.

Instead, what they want is to be left alone and not have their property disturbed by the driller.

Superficially, it would appear forced pooling is an assault on private property rights. And to some extent it is. But the matter is more nuanced than that.

When it comes to recovering gas and oil, it’s difficult to fully respect property boundaries. That’s because pockets of these substances do not recognize property lines drawn on the surface.

With a traditional oil or gas operation, a well is drilled and mineral are extracted in a manner that’s much like sucking soda through a straw. There’s no way to take it from one property while leaving it under another property undisturbed.

Shale operations employ horizontal drilling and the process known as hydraulic fracturing — fracking — where the layer of rock that contains hydrocarbons is shattered to release the fuel. Drillers can gauge and estimate the limits of a fracking operation, but it’s not completely precise.

If some property owners in an area refuse to sign leases, they are within their rights to do so. But what happens if their refusal impacts neighbors who have signed leases and want to benefit financially? The concern is that the holdouts could make a decision not only for themselves, but for others as well.

That’s one of the rationales behind forced pooling, so that a minority of property owners don’t dictate to a majority. But if Hilcorp gets its way, this minority will lose rights it values.

Forced pooling is now being challenged in court. I’m not sure what the result will be. The state authorized forced pooling as a way to best utilize an essential resource on behalf of the commonwealth. But the state does not tax shale gas, so there is no broad interest here. And at this point at least, there is hardly a shortage of natural gas demanding high-efficiency extraction.

Forced pooling is basically a taking akin to the use of eminent domain. And while recent court decisions have expanded the use of eminent domain in dubious ways, a taking is supposed to provide a public benefit beyond private profit. Under the circumstances, I’m not sure forced pooling meets that standard.