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Hilcorp's Forced Pooling Request Stirring Controversy in Western Pennsylvania

After cancelling a set of public hearings last month regarding Hilcorp Energy Co.'s request for a forced pooling order on 3,267 acres in Western Pennsylvania, the state’s Department of Environmental Protection (DEP) has rescheduled those hearings for May.

The issue has shaped up to be a controversial one. Any pooling order the DEP chooses to issue would allow Hilcorp to develop four drilling units targeting the subsurface mineral rights of a handful of property owners in Lawrence and Mercer counties who have not given their explicit consent by signing a lease.

Hilcorp said it has secured leases with 99% of the landowners in the 3,267 acres. Those who have not signed a lease would still be compensated according to the terms of a unit agreement.

The DEP announced in early March that it would hold two public hearings, March 25 and March 26, but canceled those dates after it learned Hilcorp had not notified 200 landowners of plans for unit operations, which is common in other states when a company has secured the consent of the majority of landowners to make a forced pooling request. Two hearings are now scheduled for May 7 and May 8 in Lawrence County.

"As soon as we discovered that some of the residents within the proposed spacing units had not been identified by Hilcorp in its application, we began pursuing a delay to ensure that all potentially impacted residents would have ample time to be informed and prepared for the hearing," said DEP Deputy Secretary Scott Perry. "Hilcorp agreed to request a delay so that we could provide notice that goes above and beyond what the law requires."

In July 2013, Hilcorp filed the request with the DEP. It called upon a decades-old law passed in 1961 to justify its request to drill more than 7,000 feet underground into a shallow portion of the Utica Shale. The Oil and Gas Conservation Law of 1961, as it's called, applies only to the Utica and, if granted, Hilcorp would be the first company in state history to use the law to facilitate high volume horizontal hydraulic fracturing.

The DEP initially turned to an oversight panel, the Environmental Hearing Board, to make a ruling on the request, but the board ruled last November that it did not have "original jurisdiction" in the matter and handed the case back to the DEP, which was forced to call the public hearings under the 1961 law (see Shale Daily, Nov. 21, 2013; March 13). 

Since then, local news media have reported the stories of those on both sides of the unit requests, with quotes from landowners saying the law gives oil and gas companies too much power and others marveling at how a group of property owners with small stretches of land can hold up the plan.

Dozens of state's have similar forced pooling laws, including neighboring Ohio, where a "unitization" law was passed in 1965. According to the Ohio Department of Natural Resources, the agency had only received two requests for unit operations prior to the unconventional development of the Utica Shale. Since Chesapeake Energy Corp. filed the first to target that formation in 2011 and was approved a year later (see Shale Daily, March 20, 2013), the requests have been steadily on the rise.

The laws were passed at a time when multiple vertical wells were being drilled in high density and were aimed at reducing the number of drilling derricks at the surface. During recent hearings for unit operations in Ohio, exploration and production companies have touted drilling units as a means to reduce surface disruption and maximize reservoir efficiency with multi-well pads targeting large swaths of land.

When unconventional development first got under way in Pennsylvania, exploration and production companies had lobbied lawmakers to apply the forced pooling law to the Marcellus Shale as well, but no legislation ever materialized (see Shale Daily, June 9, 2011).

The DEP has appointed a hearing officer to accept testimony about the forced pooling request from both the public and Hilcorp at the hearings next month.

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