A meeting of the Mississippi Oil and Gas Board held Wednesday at Southwest Mississippi Community College was largely dominated by oil industry lawyers.
But one landowner disrupted proceedings when she spoke out against a practice that landowners say favors oil companies over them.
Retired Adams County school principal Katherine Harrison stood up in the front row of a conference room where the Mississippi Oil and Gas Board was holding its monthly meeting to express her opposition to “forced pooling.” The practice forces landowners who don’t lease their mineral rights to be charged for a share of the costs of drilling taking place on their property.
“I think what’s going on is terrible,” she said. “We worked all our lives for this land. Now we have no rights. We’re seeing it degraded, and we feel like we are being taken advantage of.”
Forced pooling, also known as forced integration, is a way the oil industry sows up large swaths of land without having to acquire leases from all landowners.
The practice is based on laws written in the 1930s and 1980s, well before fracking began in the state, according to Howard Leach, the board attorney for the Mississippi Oil and Gas Board.
As the Tuscaloosa Marine Shale oil play nears commercial status, the number of integrations has increased exponentially. At Wednesday’s meeting, the board approved 106 petitions alone, although not all involved the TMS.
Force pooling involves the way oil companies acquire land on which to drill.
By definition, a section of land is 640 acres. With the TMS play nearing commercial status, it’s not unfamiliar for oil companies to acquire three sections at a time, sometimes more than 2,000 acres.
But oil companies don’t have to drill on the acreage they acquire right away, and can sit on the leases. And no drilling means landowners aren’t receiving royalties from oil production.
If a company can obtain leases from at least a third of the landowners, they can forcefully integrate all remaining land and mineral rights from the others in a drilling unit, even if a landowner opposes the drilling
The laws are meant to encourage companies to invest in the state, Leach said. Before they were drafted, not much incentive was given to landowners to sign a lease, and one holdout could prevent a company from drilling.
“In order for companies to be successful, and benefit all of us, they need some kind of leverage. This is one way they can guarantee a return on their investment,” Leach said.
Oil companies must negotiate terms of a lease with a landowner before attempting to integrate landowners, but some companies send landowners a letter outlining a final, take-it-or-leave-it offer for oil leases.
Besides being required to pay for their share of drilling costs on oil wells that could cost upwards of $10 million, those who are forcefully integrated also may not see as favorable returns as others who have willingly signed a lease. They are penalized for not signing by being legally required to “share” a portion of the drilling costs, Leach said.
This has led to private property rights concerns. It is something other states have dealt with during fracking booms of their own.
The reasons landowners oppose signing a lease are varied, Harrison said. They could be waiting for a better offer, hoping the value of their land goes up if large reserves are found or oppose fracking altogether.
This is where the issue of private property rights has been raised in the past. Leach is well aware of the accusations, which opponents to force pooling characterize as eminent domain carried out by private industries.
“I sympathize with the public, but we are just following the law,” he said.
Some landowners wished to remain anonymous at the meeting for fear of reprisal by oil companies, which they say have bullied them in the past.
For her part, Harrison has no intention of going quietly into the night.
“I will take this to the state Legislature. I will do everything I can,” Harrison said. “I represent a lot of people out here in the county and we all feel that we are being taken advantage of. If this is supposed to benefit everyone and if it is being done in a fair and transparent manner, why in the world is it so secretive?”
