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PA Property Owners Sue to Stop Hilcorp's Forced Pooling Request

For the second time in less than two months, the Pennsylvania Department of Environmental Protection (DEP) has postponed indefinitely a set of public hearings regarding Hilcorp Energy Co.'s request for a forced pooling order in Western Pennsylvania. Three property owners filed suit earlier this month to stop the company.

Hilcorp's request and the DEP's public hearings about its merits now appear to have stalled, with the issue having grown more contentious since the company first filed for forced pooling in July 2013.

The state Commonwealth Court will now rule on the constitutionality of the request, which if granted, would allow Hilcorp to develop four drilling units targeting the subsurface mineral rights of a handful of property owners in Lawrence County, PA, who have not given their explicit consent by signing a lease.

Last year, when Hilcorp filed for forced pooling 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 portion of the Utica Shale. The Oil and Gas Conservation Law of 1961, as it is called, applies only to the Utica. If granted, Hilcorp would be the first company in state history to use the law to facilitate high-volume horizontal hydraulic fracturing (fracking).

Given the circumstances, the case has been deemed precedent-setting and it has switched hands three times already. 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, setting the stage for the public hearings (see Shale Daily, Nov. 21, 2013).

Hilcorp says it has secured 99% of the landowners in the 3,267 acres it wants to develop in Lawrence and Mercer counties along the state's border with Ohio, but five property owners in Lawrence County are holding out. Three of those property owners have filed a suit to prevent Hilcorp from developing the oil and gas underneath their property, saying in their complaint that the request amounts to a violation of the state's eminent domain laws with the seizure of private property.

Hilcorp has said it will not comment on the status of its request.

The landowners have cited concerns about air and water pollution and the disruptions that could arise from development, such as construction noise and truck traffic. Initially, the DEP had scheduled hearings on March 25 and March 26 (see Shale Daily, March 13) but canceled those meetings after learning that more property owners in the area needed to be notified (see Shale Daily, April 2). The agency had appointed a Harrisburg, PA-based lawyer to act as an arbitrator of sorts to hear and consider comments from those in favor of and opposed to Hilcorp's plans.

The hearings were rescheduled for earlier this month, but a DEP spokeswoman said the hearings would be pointless given a pending ruling from the court, which has not yet acted on the lawsuit. Dozens of states have similar forced pooling laws, including neighboring Ohio, where "unitization" requests have been on the rise with growing unconventional development in that state's portion of the Utica Shale (see Shale Daily, March 20, 2013).

The laws were passed at a time when vertical wells were being drilled in high-density and they were aimed at reducing surface disruption and maximizing reservoir efficiency. Any nonconsenting landowners in a forced pool are compensated under the terms of a unit agreement.

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