If I Don’t Sign a Lease (Or Sign a Pooling Amendment to an Existing Lease) Can They Drill Next to Me and Take My Gas Without Paying Me for It?

This issue is most likely to come up when a company’s landman approaches you as a mineral tract owner to either sign a lease that includes a pooling clause, or to sign an amendment to an old existing lease that would allow for pooling.  You may be afraid that if you do not sign they will drill next to you and drain or take your gas without your permission under the “rule of capture.” (For more on the “rule of capture,” who is harmed by it and why we need well spacing and royalty sharing, click here).

[Please note: If you are considering leasing, we highly encourage you to get a lawyer. People need to talk to a knowledgeable lawyer in any dealings with industry, especially before signing anything.  You pay for homeowner’s insurance and car insurance in case of a fire or wreck.  You should think of paying a lawyer as insurance to make sure this transaction will not be a disaster. We have a list of lawyers on our website here and additional resources and information on leasing here.]

Under the “rule of capture,” natural gas that migrates to a well bore naturally through the permeability and porosity of a formation belongs to the entity that drilled the well, even if that gas migrated from neighboring mineral tracts.  That might be a worry if the driller is proposing to drill a vertical well into a sandstone formation.  However, most wells today are horizontal wells into shale formations such as the Marcellus, the Utica, and the Point Pleasant.

Shale formations are much different than sandstone formations.  Sandstone formations are generally drilled with vertical wells and use only one or two tractor trailer loads of water to fracture the sandstone and release the gas.  Shale formations are much less permeable and much less porous, and, as a result, very little gas migrates to a well bore naturally.  This is why drillers use horizontal drilling and high-volume, slickwater hydraulic fracturing (which requires millions of gallons – or several Olympic swimming pools full – of water) to create fractures in the shale that extend 500 to 1,000 feet sideways from the horizontal well bore.

If these fractures extend into your mineral tract from a neighboring mineral tract, and cause gas in your mineral tract to migrate to the driller’s well bore on the neighboring land, then this is not natural migration of gas contemplated by the rule of capture.  WV-SORO believes that the driller has trespassed and that you would be able to sue the driller not just for the royalty that they would have paid you if they had properly leased your mineral tract, but perhaps for the total value of the gas.

Read a more about why we believe this in this press release from WV-SORO.  A copy of the ruling by a U.S. District Court judge which confirms our belief about the law can be found here.  Because it is not a decision from an appellate court, the decision does not set precedent and does not bind other judges.  However, it is still persuasive authority for WV-SORO’s position, and we think that mineral owners will be able to use the opinion to persuade other judges in other cases and on appeal.

Although the judge issued an order “vacating” his decision  as part of a settlement of the case that gave rise to the decision, we do not think that vacating the order lessens its persuasive authority very much, if at all.  Here is a quote from an authority on federal court practice and procedures that agrees with us.

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