Importance of Understanding Pooling Clauses in Oil and Gas Agreements

Pooling clauses are considered as the important clauses to be considered in the oil and gas agreements. They are a bit tricky and when ignored, forces the owners to enter into a pooling agreement even though the owner don’t feel like accepting the pooling agreement. Before going to know what the pooling clause says let us know what pooling is, then followed by the clauses in the agreement.

Pooling: Pooling is combining the leased lands with the adjacent leased lands to make a single unit. This process helps the mining companies to drill oil or gas in different leased lands using a single production unit and can utilize one common underground geological reservoir. This saves a lot of money for the drilling company and reduces labor costs effectively.

Understanding the pooling clause: It is important for the land owners to check whether the the content in the pooling clause is the same as they discussed with the companies. It is due to the best interest of the mining companies that the pooling clause is included. It is very necessary to check for the pooling clause and to understand the rights prior to signing the agreement so that the land owner can avoid legal problems. In some cases, if the owner is not aware of the pooling clause and didn’t noticed the terms and conditions in the pooling clause, he/she will be subjected to compulsory pooling of the leased land under state laws.

So, it is always beneficial to check for the pooling clause, to understand the details in that clause and finally to sign the agreement when you are satisfied with the terms in that clause. In case you do not like pooling or any other policies in the agreement, you can mention it upfront to the company so that they can make necessary corrections and settle the issue before signing the agreement.

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