A pooled unit is a device to combine a part or all of the lands covered by a mineral lease or leases with other land for drilling purposes.  Suppose White Acre has leased all property to Company X and Black Acre has done the same. Company X does not have a unilateral right to pool White Acre and Black Acre.  Private agreements or contracts of the parties involved usually determine the outcome of the unit designation so it is important to realize what you are dealing with when approached about your land being pooled with additional land(s).  After Company X has determined that a pooled unit is the best option to promote conservation of oil and gas or that pooling is required to properly operate the lease, they approach White Acre and Black Acre.

An important aspect to realize with your pooled unit is that royalty payments are based on your proportionate share of the pooled unit. Notice that White Acre has a bigger portion of the Pooled Unit, call it 75% of the unit.  For all of the production from Pooled Unit, White Acre will receive 75% of the unit’s production (royalty) and Black Acre will receive 25% of the unit’s production (royalty), so it is safe to say that White Acre’s royalty checks will be substantially higher than Black Acre’s.  Because a Pooled Unit Designation is an agreement b/w all parties involved, Black Acre would’ve had to agree to this, but for this purpose it is important to realize that angle.

After production has started and royalty payments are being sent out, the signed oil and gas lease is alive until the well stops producing in paying quantities.  For instance, the average Barnett Shale well produces for anywhere from 10-30 years, so it is possible that once you sign an oil and gas lease and as long as you are involved with a producing well, your property is under lease for 30 years.  This is where understanding a pooled unit is important.  Unless a provision is provided, a developing pooled unit will keep the entire lease alive for as long as the unit is paying out.  Suppose White Acre is 200 acres and its portion of the Pooled Unit is 40 acres.  Even though the Pooled Unit is only paying royalties on 40 acres of production, the remaining un-producing 160 acres is held under the same provisions of the lease because White Acre signed a lease for the entire 200 acre tract. So, in essence, White Acre has 160 acres of un-producing property under lease for as long as the Pooled Unit is paying out, which could be 30+ years.  That’s not to say that Company X cannot produce somewhere else on the remaining 160 acres, but it is wise to know your position here.

Pooling provisions, clauses, designations and agreements are pretty common and becoming more important because of its design for conservation.  This is a pretty basic article on pooling issues and a good place to start if ever approached.