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November 22, 2013

PADEP Has Jurisdiction To Decide "Forced Pooling" Request

Forced pooling in Pennsylvania is a controversial issue and one that remained largely untested until now.  Pennsylvania’s pooling law was enacted in 1961 and does not apply to the Marcellus Shale.  It does, however, apply to the deeper Utica Shale and allows an operator to gather landowners into a unit who have not voluntarily entered into an oil and gas lease.  One of the questions under Pennsylvania’s Oil and Gas Conservation Law was who decides whether to grant an operator’s application to force pool parcels into a spacing unit?

On November 20, 2013, the Pennsylvania Environmental Hearing Board (PAEHB) decided that question and ruled that it does not have “original jurisdiction” to approve requests for forced pooling.  Rather, the Pennsylvania Department of Environmental Protection (PADEP) must first decide whether a drilling company can force pool Utica Shale gas properties without the consent of all owners in the unit.

The PAEHB’s decision stemmed from a request by Hilcorp Energy Co. to establish a drilling unit by pooling property on a 3,267 acre stretch of land in northwest Pennsylvania.  Interestingly, Hilcorp had all but 35 acres under lease.  When Hilcorp filed the request this past July, the PADEP responded that “it did not have the authority to act on Hilcorp’s application and that an application seeking an order for well spacing or drilling units must be submitted to the Pennsylvania Environmental Hearing Board.”  The PAEHB disagreed and ultimately determined that the PADEP must first decide such request and then, only after it does so can the PAEHB hear an appeal.

Hilcorp’s request now goes back to the PADEP for consideration.  If granted, it would represent the first time that a company has used force pooling in Pennsylvania to facilitate horizontal hydraulic fracturing.

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