Should we try to have the unitization clause taken out of our draft lease in Weld County? I understand that our property could be unitized without us taking part in production. Does this ever happen in Weld County? Is this something worth asking, possibly giving up something else for?
Thank you
Hi,
I’m a Weld County mineral rights owner too and although our property has been under lease since 1970 I’m just learning about how it all works. I thought I’d answer you the best of my knowledge until someone with a better understanding comes along. Despite the language in the lease oil producers are allowed by statute to pool acreage into a larger unit. This can work to your advantage or the other way around. Wells drilled on our land were pooled into larger units so we received only a third of our percentage of the production. More recently new wells were drilled on property we don’t own but were pooled into and now we’re receiving a portion of that.
I think Jenna has a good piece on her blog on this forum on the topic of forced pooling in Colorado that you might find helpful. But the bottom line is we’re kind of stuck with it. Colorado is allowing the state to override the contract for reasons of policy. It doesn’t line up with basic contract law principals but it’s hard to fight in court.
Hope that helps.
I understand pooling. I believe under unitization, our rights can be tied up without any development of our assets.
I’d always heard the terms used interchangeably but you’re correct there is a technical difference. Here’s a link to information on the topic though it’s not state specific.
https://oilandgas.uslegal.com/pooling-unitization-and-joint-leases/
One point it makes is that parties to a unitization agreement are considered joint venturers who stand in a fiduciary relationship to each other. That seems to indicate that actions that were averse to your interests couldn’t be taken legally.
Hopefully someone with some helpful legal experience will weigh in.
Thank you. JUST what I needed.
Consider the nuances between the concepts of "spacing" and "unitization." Spacing tends to refer to the idea of how many acres per a spacing unit which within Weld County range from 40 acres to 1280 most commonly. Unitization tends to refer to field wide type acreage focused on where the resource pool is located. Unitization might be at state level that was very common in the 1960's in Colorado or federally where there are federal BLM or forest services land (more common in western Colorado). Unitization can have unintended consequences such as being part of any a unit that only as minimal development. Consider a unitization clause carefully.