Two terms in the oil and gas industry that often cause some confusion are Pooling and Unitization. The rules for pooling and unitization are controlled at the state level, which means there are a lot of different ways in how they are practiced throughout the country. The rules are often different for various types of minerals or at what depth they are found under the surface. For this reason, it’s important to research how pooling and unitization works for your state and mineral interests. The experts at Master Mineral Holdings will explain the difference between these two terms and how they’re most often applied.
What Does Pooling Mineral Rights Mean?
A single pool of oil under the surface has the ability to span across several tracts of land, each with a unique owner. Also, because of oil’s fluidity, it can shift under the surface. This means that all of the resources may be removed by a single well on one of the tracts. As you might think, other mineral owners in the area wouldn’t be happy if their minerals were removed without compensation. This is what pooling accomplishes. Pooling means to bring together small tracts of land in the same area to grant a well permit within an established drilling unit. This helps comply with state spacing rules as well. Pooling can be both voluntary and compulsory and depends on the specific situation.
How Does Unitization Affect My Mineral Rights?
Most states recognize the ability of oil and gas resources to move across multiple tracts of land. These states require production companies to detail how the mineral royalties will be shared across of the mineral owners in the area. Unitization refers to determining how the royalties will be shared when a permit for drilling is filed. How the royalties are shared is based on what is known about the geography under and above the surface.
Another way to think about unitization is how mineral interests covering a common source of oil and gas are consolidated. Unitization not only makes it more efficient to extract the oil and gas, but also protects the rights of all owners within a pool.