Compulsory Integration?

I was wandering around a few of the websites I frequent for info about natural gas and came across this term. “Compulsory Integration”. I was completely unfamiliar with it so I thought I’d look into a bit and see what I could find, and if the findings were interesting enough, share them with all of you.

Compulsory Integration is what happens when multiple land owners in an area sign leases with a gas company and someone in the middle of this block chooses not to sign a lease. It is sometimes referred to as ” eminent domain”.  At this point the drilling companies are given the ability by the state to take the gas from under a plot of land that the owner does not wish to sell.

I found a lot on this topic for NY state but very little for PA. As far as I can tell from what I did read, eminent domain is not being used in the state of PA at this time, but it is in NY state. If anyone has more information about this topic, especially in regards to PA, please let me know. I did post a few links that had good info on the topic and land lease agreements below.

This link is to an article from a magazine that includes an interview with an agriculture expert in NY state. They discuss this topic a bit in the article.

http://magissues.farmprogress.com/AMA/AM07Jul09/ama008.pdf

This link offers a good overview of what the land leases may or may not include and concerns to think about and consider prior to signing a lease. It does talk about compulsory integration.

http://www.docstoc.com/docs/2133197/gas-leases

3 Responses

  1. Liz –

    I think you’re right that the state would not be okay with gas companies trying to take mineral rights by suggesting any eminent domain action. PA’s laws are *significantly* tighter than what’s permitted by _Kelo v. New London_. However, because the drilling is so far underground, it’s hard for any landowner to police where the wells are drilled, especially for horizontal ones.

    Keep up the great work! This is so valuable!

    • I find the difference in the laws between PA and NY confusing. I think because we are located so close to NY state, that whatever decisions happen in north central PA or south central NY…they will effect people in both states. NY has done a much better job of making the energy companies comply to some strict standards but some of the laws, like eminent domain, sort of backfire on the land owners where as PA has welcomed them with open arms and asked questions later, but the land owners seem to have more rights over their minerals.

  2. Compulsory Integration in N.Y. State as an npo is the only way to go.

    1- Gas Companies come in and lease up your 50 acres for 6000 per acre @ 20% royalty with 5 yr term
    2- After paying taxes on 300,000 you are left with approximately half and you have a partner who is getting 80% of you mineral rights while you incur all transport costs to transmission line.
    3- Form an LLC and get a liability policy for 20M. As a non participating owner you will recieve royalty’s (1/16th )imedatley & once each well in your unit pays for it self 3x’s you will receive 100% royalty for the portion of your acfreae in the particular unit.
    4- It safe guards your property with regards to surface rights and gives you the most return without intrusion
    5- Go to geology.com and look for a royalty calculator. Plug in your number’s both as a leased participant and npo. Big difference.. In my opinion it is all about your protections and your dillegence to do the math.

    Good Luck

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