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Pooling and Unitization for the Title Examiner By K. Anne Bullen, Kerry A. Kilburn and Charlotte M. Meyer

Presented by Charlotte M. Meyer

Copyright © by the Kilburn Law Firm, PLLC 2013. All rights reserved. No part of this presentation may be used or reproduced in any manner whatsoever without written permission from the Kilburn Law Firm, PLLC. For information,

please address Kilburn Law Firm, PLLC, 1001 W. Loop South, Suite 400, Houston, Texas 77027

§1.01. Pooling Power in General

Pooling is essentially the aggregation of multiple tracts of land to form a single area around a well for exploration and/or production purposes.1 Frequently, the terms “pool” and “unit” are used interchangeably. However, they do not always refer to the same thing.2 Unitization is the joint operation of part or all of a producing reservoir without regard to surface boundary lines, for the purpose of operational efficiency.3 Usually, pooling occurs during the primary stage of production or recovery, while unitization occurs during secondary recovery to produce oil and gas that is more difficult to recover.4 The objective of this paper is to outline fundamental aspects of the pooling power while analyzing issues stemming from recent Texas case law dealing with the pooling of mineral and royalty interests.

[1] Purposes of Pooling

Because the rule of capture does not apply to production from land within

a pool,5 pooling serves to mitigate the rule. The rule of capture is a fundamental principle of oil and gas law in Texas providing that a landowner who extracts oil or gas from a well that bottoms within the subsurface of his land acquires absolute ownership of the substance, even if it is drained from beneath another’s land.6 This rule of non-liability is limited by the doctrine of correlative rights, which dictates that every oil and gas owner has a right to a fair opportunity to produce oil and gas from a common reservoir underlying their property.7

[2] Types of Pooling

In Texas, pooling may be either compulsory or voluntary. Compulsory

pooling is done pursuant to the Mineral Interest Pooling Act (MIPA).8 Section 102.011 of MIPA provides that a unit must not exceed 160 acres for an oil well and 640 acres for a gas well, with a 10% tolerance. Although the Railroad Commission of Texas (RRC) may order the formation of a unit under certain limited conditions, because MIPA has not yet become a pervasively utilized tool, the remainder of this paper focuses on precedent resulting from voluntary pooling.

1 Allen D. Cummings, Pooling Issues-Avoiding Pitfalls, presented at Advanced Oil, Gas & Mineral Law Course, State Bar

of Texas, September 1995, at E-3. 2 Ernest E. Smith & Jacqueline Lang Weaver, Texas Law of Oil and Gas §9.3(C) (2d ed.1999). 3 James E. Key, The Right to Royalty: Pooling and the Capture of Unburdened Interests 17 Tex. Wesleyan L. Rev. 69, at

72. 4 Id. 5 See Tex. Nat. Res. Code § 102.051; Russell v. City of Bryan, 846 S.W.2d 389, 391-392 (Tex. App.--Houston [14th Dist.]

1992). 6 Smith & Weaver, supra note 2, § 11.1(B). 7 Smith & Weaver, supra note 2, § 1.1(B)(2). 8 Texas Natural Resources Code, Chapter 102, hereinafter referred to as “MIPA”.

Voluntary pooling can be achieved in a few ways: through a pooling clause within an oil and gas lease, a pooling agreement, or a community lease. Pooling Agreements are used when a lease contains: (i) no lease pooling clauses; or (ii) restrictive or limited lease pooling clauses. A community lease is executed by owners of separately owned tracts of land, as lessors, in a single oil and gas lease.9 Separate tracts and all mineral and royalty interests within them are treated as pooled as a matter of law, on a surface acreage basis for the duration of the lease, without an express contrary provision.10

[3] Effects of Pooling

There are numerous consequences of pooling, which may expressly derive

from the relevant pooling agreement or be implied via case law.11 However, there are two main effects of pooling, the first of which is a cross-conveyance among mineral or royalty owners of multiple tracts, such that each owns an undivided interest of production, and each shares in the costs of exploration and production, in proportion to their contribution of interest to the pooled unit.12 The second principal effect of pooling is that production and drilling operations are treated as if they had occurred on each individual tract within the unit, regardless of the actual location of the well.13 Therefore, extension of the lease beyond the primary term applies to all tracts within the unit.14 Further, once relieved of the implied covenant for reasonable development of one tract through pooling, the lessee is excused of said covenant with respect to other tracts within the pooled unit.15 Moreover, the location of wells may be drilled without regard to internal property lines, and once drilling occurs, the lessee has fulfilled its obligation to drill offset wells on other tracts within the pool to prevent drainage by a well on any one or more of the included tracts.16 With respect to lessors, pooling relinquishes the right to individual tract development, as well as the right to receive full royalty from production of a well drilled on their property.17 In exchange, by pooling, lessors earn the right to their proportionate share of royalties from any well within the pooled unit.18

[4] Authority of Lessee

9 French v George, 159 S.W. 2D 566 (Tex. Civ. App. 1942); Southland Royalty Co. v. Humble Oil & Refining Co., 151

Tex. 324, 249 S.W.2d 914, 916 (1952). 10 Id. 11 Southland, supra note 9. 12 Montgomery v. Rittersbacher, 424 S.W.2d 210, 213 (Tex. 1968); Minchen v. Fields, 345 S.W.2d 282, 285 (Tex. 1961);

Brown v. Smith, 174 S.W.2d 43, 46 (Tex. 1943); Veal v. Thomason, 159 S.W.2d 472, 475-76 (Tex. 1942); Smith & Weaver, supra, note 2 § 11.1(B). 13 Southland, supra note 9; Southeastern Pipe Line Co. v. Tichacek, 997 S.W.2d 166, 170 (Tex. 1999). 14 18-283 Dorsaneo, Texas Litigation Guide § 283.03 - Section 11. 15 Id. 16 Id. 17 Id. 18 Id.

There is no implied right to pool, and so without express authority, a lessee has no power to pool lessor interests.19 A pooling provision gives authority to the lessee to engage in pooling or unitization agreements, but does not oblige the lessee to do so.20 Under certain circumstances, the lessee may have an affirmative duty to pool.21

Though the pooling clause may not expressly require the lessee to exercise

its pooling power, pooling may be necessary to avoid liability for breaching implied covenants of the lease, such as preventing drainage, developing the land, and acting as a reasonably prudent operator.22 Pooling may only be done with lands or leases in the immediate vicinity of the lessor’s, and must not be executed in bad faith.23

[5] Lessee’s Implied Duty of Good Faith

One way courts have attempted to constrain the lessee's pooling power is

through the implied good faith obligation.24 The good faith standard of conduct is that of a reasonably prudent operator under the same or similar circumstances,25 and governs the exercise of pooling and unitization, as well as the performance of implied covenants.26 In Circle Dot Ranch v. Sidwell Oil and Gas, the court determined that whether a lessee has exercised its pooling power in good faith in any given instance is fact-specific and therefore must be determined by the trier of fact.27 Texas common law indicates that lessees must take into account the surrounding circumstances and the reasonable development of the property.28 Moreover, the lessee is not required to subordinate its interest to that of the lessor, but it must also consider the interests of the lessor in deciding whether and how to pool.29 In Amoco Production Co. v. Underwood, the lessee pooled together eight tracts approximately two days before the expiration of several of the leases' primary terms, deliberately excluding property that was productive.30 Based on the timing of the pool and its configuration, the court affirmed the trial court's decision and held that the lessee established the unit in bad faith, and cancelled

19 Jones v. Killingsworth, 403 S.W.2d 325, 328 (Tex. 1965); see Hunt Oil Co. v. Moore, 656 S.W.2d 634, 638 (Tex. App.-

-Tyler 1983) (even Railroad Commission may not compel pooling not agreed to by parties). 20 Waters v. Bruner, 355 S.W.2d 230, 235 (Civ. App.--San Antonio 1962); Kinnear v. Scurlock Oil Co., 334 S.W.2d 521,

524 (Civ. App.--Beaumont 1960). 21 Id. 22 Id. 23 Tiller v. Fields, 301 S.W.2d 185, 190 (Civ. App.--Texarkana 1957). 24 See 3 Williams & Meyers, § 670.2. 25 Circle Dot Ranch v. Sidwell Oil and Gas, 891 S.W.2d 342, 346-347 (Tex. App.--Amarillo 1995). 26 Bruce M. Kramer, Keeping Leases Alive in the Era of Horizontal Drilling and Hydraulic Fracturing: Are the Old

Workhorses (Shut-in, Continuous Operations, and Pooling Provisions) Up to the Task?, 49 Washburn L.J. 283, 293 (Winter 2010) analyzing Tittizer v. Union Gas Corp., 171 S.W.3d 857, 861 (Tex. 2005). 27 Circle Dot Ranch v. Sidwell Oil and Gas, supra note 25. 28 Richard W. Hemingway, The Law of Oil and Gas, Third Ed.(1991) (citing Elliott, 553 S.W.2d at 226-27). 29 Vela v. Pennzoil Producing Co., 723 S.W.2d 199, 203 (Tex. App.--1986). 30 See, e.g. Amoco Prod. Co. v. Underwood, 558 S.W.2d 509, 512 (Tex. Civ. App. 1977).

the unit, thereby terminating some of the leases.31 Unless the lease so precludes or bad faith is shown, the lessee may pool more than once32 during or after the expiration of the primary term, may reduce the size of a pool, and may even enlarge a unit.33

[6] Lessor’s Implied Duty of Good Faith

The holder of the executive right to lease owes a duty of the utmost good

faith to non-executive interest holders, arising from the relationship of the parties.34 The duty is fiduciary in nature, so the holder must acquire for the nonexecutive every benefit that the executive personally obtains by exercise of the right, and punitive damages may be available if an executive maliciously breaches the duty towards the non-executive.35110 With respect to the pooling power, this implied duty does not come into play because non-executive interest owners do not have to rely on the executive’s good faith alone; rather, Texas case law requires non-executive interest/royalty owners to execute or ratify any pooling provision or agreement in order to pool their interests validly. §1.02 Improper Use of Pooling Power

[1] Subsurface Trespass

One of the consequences of ineffective pooling is subsurface trespass. Simply put, a trespasser is one who wrongfully enters and possesses another's mineral estate; for example, the drilling of a directional well that bottoms out beneath neighboring property that is not part of the drilling unit for that well constitutes a subsurface trespass.36 Such trespasser is liable to the rightful owner of the mineral estate for damages, the extent of which depends on whether or not the trespasser entered on the land in good faith, having an honest and reasonable belief that they were not trespassing.37

A trespasser bears the burden of proving good faith, and as noted above, a

good faith trespasser is liable for the value of oil produced from the land, with a credit for any costs incurred in production, so long as those costs conferred a benefit on the owners of the mineral interest.38

31 Id. at 513. See Mission Res., Inc., v. Garza Energy Trust, 166 S.W.3d 301, 316 (Tex. App.--Corpus Christi 2005), aff'd

in part, rev'd in part on other grounds, 268 S.W.3d 1 (Tex. 2008) (evidence favoring jury's finding of bad faith pooling tended to prove lessee did not adequately consider lessors' financial interests when lessee exercised pooling power). 32 Texaco, Inc. v. Lettermann, 343 S.W.2d 726, 731-732 (Civ. App.--Amarillo 1961). 33 Expando Prod. Co. v. Marshall, 407 S.W.2d 254, 259 (Civ. App.--Fort Worth 1966) ; see also Southeastern Pipe Line

Co. v. Tichacek, supra note 13 (affirming jury finding of pooling in good faith even though unit was created four days before expiration of lease and after lessor refused to extend lease). 34 Lesley v. Veterans Land Bd., 352 S.W.3d 479, 54 Tex. Sup. Ct. J. 1705, 1712 (Tex. 2011); Manges v. Guerra, 673

S.W.2d 180, 183 (Tex. 1984); Schlittler v. Smith, 128 Tex. 628, 101 S.W.2d 543, 545 (Tex. 1937). 35 Dearing, Inc. v. Spiller, 824 S.W.2d 728, 734 (Tex. App.--Fort Worth 1992). 36 Id. 37 See Hemingway, supra note 28, at 19. 38 Id.

On the other hand, a "bad faith" trespasser may be enjoined from trespassing, and will be liable for the gross value of the production from the well without any deduction for costs, although some of the oil and gas may have been drained from beneath the trespasser's own land.39 The court examined and then declined to apply the doctrine of subsurface trespass to hydraulic fracturing in Coastal Oil & Gas Corp. v. Garza Energy Trust.40

[2] Anti-dilution Provisions & Horizontal Drilling

The difficulty of not having a pooling or unitization clause that is written

with horizontal wells in mind is illustrated in Browning Oil Company, Inc. v.

Luecke.41 The issue presented in that case was how the anti-dilution clauses affect pooling of land traversed by horizontal drainholes.42 The Lueckes executed three oil and gas leases with Humble Exploration Company, Inc., which were subsequently assigned to Browning.43 Jimmie and his mother Leona Luecke together owned 100% of the minerals under tracts one and three, and Jimmie Luecke owned 50% of the tract two minerals.44

The operative provisions of the leases were identical, providing for a 1/8th

royalty on production from minerals owned on each of the tracts, and authorizing lessees “to pool or combine the acreage covered by this lease or any portion thereof as to oil and gas, or either of them, with any other land covered by this lease, and/or with any other land, lease or leases in the immediate vicinity thereof to the extent hereinafter stipulated….Royalties hereunder shall be computed on the portion of such production, whether it be oil and gas, or either of them, so allocated to the land covered by this lease and included in the unit just as though such production were from such land.”45 The leases also included an anti-dilution provision, providing that “if any pooled unit is created with respect to any well drilled on the land covered hereby, at least sixty percent (60%) of such pooled unit shall consist of the land covered hereby.”46 The anti-dilution provision was amended in 1984 to provide for the contingency that if a pooled unit became too large for the covered tract to constitute 60% of the unit, the unit must be filled “only [with] other lessor owned land” until the adjacent Luecke-owned land was exhausted.47 Another provision allowed lessees to include non-Luecke land in the pooled units only to the extent necessary to satisfy the RRC field rules, and stipulated that if the applicable RRC field rules offered a choice between spacing

39 See, e.g. Pan Am. Petroleum Corp. v. Long, 340 F.2d 211, 220 (5th Cir. 1964) (construing Texas law). 40 Coastal Oil & Gas Corp. v. Garza Energy Trust et al., 268 S.W.3d 1, 4 (Tex. 2008). 41 38 S.W.3d 625 (Tex. App. 2000). See generally Stephen Taylor Dennis, Browning Oil Co. v. Luecke: Has Texas

Illuminated a Dark Distinction Between Vertical and Horizontal Drilling, 34 St. Mary's L.J. 215 (2002). 42 Browning Oil Company, Inc. and Marathon Oil Company v. Jimmie M. Luecke and Leona M. Luecke, 38 S.W.3d 625,

640 (2000). 43

Id. 44 Id. 45 Id. at 637. 46 Id. 47 Id.

requirements of different sizes, lessees must choose the one permitting smaller units to be formed, minimizing the chance that any unit would ever need to include non-Luecke land.48 Marathon sent a letter to the Lueckes in 1994 seeking to amend the leases "to clarify" the pooling authority for horizontal wells.49 The proposed amendment would have nullified the anti-dilution provisions, allowing the lessees sole discretion to pool any portion of the Lueckes' land to create a unit with a horizontal well.50 Although the Lueckes refused to execute the proposed amendment, in 1995 lessees completed the Jennifer-Medusa Well No. 1, a horizontal well traversing seven separate tracts of land, only one of which belonged to the Lueckes.51 268.68 acres of the 839.18-acre unit were owned by the Lueckes, accounting for 32% of the entire unit, though tract two, the only Luecke tract traversed by the well, comprised only 10.44% of the total purported unit.52

An additional well was drilled, the Weyand-Hays Unit Well No. 1. Although the vertical portion of the Weyand-Hays Unit Well No. 1 was not located on the Lueckes' land, portions of the horizontal drainhole crossed the Lueckes’ tracts one and three, totaling approximately 30% of the unit.53 Asserting that the pooled units violated the pooling provisions in the leases, the Lueckes filed suit in October 1995, claiming that because their tracts were not validly pooled, they were entitled to royalty on all production resulting from the two pooled units.54 Because the Weyand-Hays well crossed two separate tracts of Luecke land, they argued that they were entitled to a double full royalty for the total production from that well.55 Based on these calculations, the total royalties sought by the Lueckes totaled $1,283,242. Lessees proposed to allocate royalties to the Lueckes based on the share of production from the wells that could be attributed to the Lueckes' tracts based on the fractures underlying their land.56 According to appellants' expert, the Lueckes' share of production would result in royalties totaling $202,421.05, less than the Lueckes would have received if they had ratified the purported pooled units, which would have totaled $392,675.79.57 Lessees appealed the jury damages award of $833,256.58 The Appellate Court recognized that nothing in the pooling provisions limited their applicability to vertical wells, and that in construing an unambiguous oil and gas lease, such as the one at issue here, the intention of the parties must be respected.59 The writing alone is ordinarily deemed to express the intention of the parties; accordingly, the

48 Id. 49 Id. at 638. 50 Id. 51 Id. 52 Id. 53 Id. at 639. 54 Id. 55 Id. at 640. 56 Id. 57 Id. at 641. 58 Id. 59 See Hitzelberger v. Samedan Oil Corp., 948 S.W.2d 497, 503 (Tex. App.--Waco 1997).

court enforced the unambiguous lease as written.60 The court then determined that the intent of the parties was to prevent the dilution of the Lueckes' royalties from either vertical or horizontal wells, and held that the anti-dilution provisions applied to horizontal wells.61

Although lessees argued that no reasonably prudent operator would have

drilled a horizontal well on an 80-acre unit, the court recognized that lessees could have attempted to expand their pooling authority, sought field-wide regulatory action, or attempted to convince the RRC that providing an optional 80-acre spacing requirement for horizontal wells was imprudent.62

Failing that, they could have exercised the option of not drilling a well on

the Lueckes' tracts, but they could not pool the Lueckes' interests beyond their contractual authority.63

Although the court held that the lessees failed to comply with the pooling

provisions, it disagreed with the damages awarded by the jury, noting that an oil and gas lease is both a contract64 and a conveyance of an interest in real property.65 Consequently, the court stated that the proper remedy for a breach of the pooling provisions may not ignore or exceed the ownership interests conveyed under the leases.66 Because the Lueckes contracted for a share in royalties based on total production from their land, the breach of the pooling provisions rendered the pooled units invalid with respect to the Lueckes' land.67 Absent valid pooling, there was no cross-conveyance, and the Lueckes were not entitled to royalties on oil and gas produced from lands they did not own. While the Lueckes relied on the remedy appropriate to vertical wells in arguing that "where pooling is not valid, a landowner with a wellbore drilled on his land receives the full royalty promised in his lease, and landowners with no wellbore receive nothing,"68 when pooling is invalid, production is considered to take place only on the actual tract upon which it occurs.69

In so ruling, the court noted the physical characteristics that distinguish

horizontal wells from vertical wells: horizontal wells traverse several tracts owned by different individuals, not all of which are contiguous; they include multiple

60 See Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). 61 Id. 62 Id. 63 Id. 64 See Amoco Prod. Co. v. Alexander, 622 S.W.2d 563, 571 (Tex. 1981) (rights and duties of lessor and lessee are

contractual); Hitzelberger v. Samedan Oil Corp., 948 S.W.2d 497, 503 (Tex. App.--Waco 1997) (oil and gas lease is contract). 65 See W. T. Waggoner Estate v. Sigler Oil Co., 118 Tex. 509, 19 S.W.2d 27, 28-29 (Tex. 1929) (oil and gas lease involves

property rights of lessor and lessee); Eastland Oil Co. v. Fenoglio, 102 S.W.2d 1092, 1099 (Tex. Civ. App.--Fort Worth 1937). 66 Browning v. Luecke, supra note 42, at 643. 67 Id. 68 Id. at 645. 69 See Tichacek, supra note 13, at 170.

points along the drainhole rather than a single drillsite; and they penetrate highly fractured formations that do not facilitate the natural migration of oil and gas.70 The court concluded that “[e]ven though the rule of capture and other principles of oil and gas law would afford the Lueckes royalties on all production if a vertical well were drilled on their land without valid pooling, these principles have no application in the case of horizontal wells that contain multiple drillsites on tracts owned by multiple landowners”71 In the end, although it was the lessee’s actions which led to the invalidation of the pooled unit, it was the lessors who had to bear the burdens of both proving damages, and receiving fewer royalties than they would have gotten from a validly pooled unit.

[3] Pooling Power Survives Lease Termination

In a case of first impression, the Texas Supreme Court shocked the oil and

gas industry with its decision in Wagner & Brown v. Sheppard.72 The plaintiff Jane Sheppard owned 1/8th of the minerals beneath a 62.72-acre tract that was part of a 112.15954-acre unit, constituting a 51.3% interest in the unit.73 Sheppard leased her 1/8th interest to C.W. Resources, Inc., and the owners of the remaining 7/8ths of the minerals leased their rights to Wagner & Brown, Ltd.74 Sheppard's 1994 lease stated: “Lessee shall have the right but not the obligation to pool all or any part of the leased premises or interest therein with any other lands or interest. ….In the absence of production in paying quantities from a unit, or upon permanent cessation thereof, Lessee may terminate the unit by filing of record a written declaration describing the unit and stating the date of termination. Pooling hereunder shall not constitute a cross-conveyance of interests.”75 On September 1, 1996, Wagner & Brown, C.W. Resources, and lessees of neighboring tracts entered into a pooling agreement which pooled Sheppard's tract to form the W.M. Landers Gas Unit, and named C.W. Resources as the unit operator.76

C.W. Resources drilled and produced the first gas well in October 1996

and the second gas well in September 1997, both of which were located on the tract containing Sheppard's minerals.77

In September 2000, after taking over as operator of the unit, Wagner &

Brown discovered that C.W. Resources had not satisfied Sheppard's lease provision stating that if the lessee did not pay Sheppard her royalties "within 120

70 Browning v. Luecke, supra note 42, at 645. 71 Id. at 646. 72 Shauna Fitzsimmons, A Life Beyond the Lease: The Pooling Power Survives The Termination of The Oil and Gas lease

in Texas 43 Tex. Tech L. Rev. 719, 720 (2011). 73 Wagner & Brown v. Sheppard, 282 S.W.3d 419, 424 (Tex. 2008). 74 Id. at 421. 75 Id. at 422. 76 Id. 77 Id.

days after first gas sales," the lease would terminate the following month.78 This oversight caused Sheppard's lease to terminate on March 1, 1997, making Sheppard an unleased cotenant with respect to other lessors in the pooled unit.79 Both parties agreed that as such, Sheppard was to receive a share of the proceeds less her proportionate share of production and marketing costs, but disagreed as to the amount of proceeds to which Sheppard was entitled and the costs for which she was responsible.80

Sheppard brought a declaratory judgment action against Wagner &

Brown, claiming that the termination of her lease terminated the pooling agreement, entitling her to the proceeds of 1/8th of all the production, less any production expenses after the lease expired, rather than her pooled share of production.81

The trial court granted summary judgment in favor of Sheppard, holding

that the termination of her lease ended her participation in the pooled unit, requiring her to pay only for costs pertaining to her individual lease incurred after termination.82 The court of appeals affirmed the trial court's decision.83

The Texas Supreme Court reversed the lower courts' decisions, stating that

a lease is not necessarily required for pooling since mineral owners can join in pooling even if no lease exists.84

The Court went on to state that although Sheppard's lease had terminated,

lease termination did not cause the unit to terminate because it was a pooling of lands, not just leases.85 The Court then distinguished Texaco, Inc. v. Lettermann

such that the lease in that case only authorized the pooling of the gas leasehold estate of adjacent lands, while the lease in Sheppard allowed the pooling of the leased premises or interest therein with any other lands or interests.86 Lastly, the court recognized that Sheppard's possibility of reverter upon lease termination was an interest in the leased premises that she had granted the lessee alongside the right to pool her interest.87

In essence, the Sheppard court made three crucial findings: (1) the pooling

agreement controlled the lessor's interest even after the lease authorizing the pooling terminated, (2) the lessor was liable for reasonable expenses regarding the

78 Id. 79 Id. at 421-22. 80 Id. at 422. 81

Id. 82

Id. 83 Id. 84

Id. at 424. 85 Id. at 425-27. 86 Id. at 423 (citing Texaco, Inc. v. Lettermann, 343 S.W.2d 726 (Tex. Civ. App. - Amarillo 1961). 87 Id. at 424.

unit incurred after the lease terminated, and (3) the lessor may be liable for drilling costs incurred prior to the expiration of the lease.88

Ostensibly, because the termination of one or more leases within a pooled

unit may or may not terminate the unit itself, attention should be given to the terms of the pooling agreement, including whether it pools the lands themselves, or only pools the leases on those lands.89 In contrast, when only leases are pooled, the termination of any lease necessarily terminates the unit as to that lessor's interest because there is no longer any lease that can be pooled.90

Prior to Sheppard, it was commonly believed that the lessee's pooling

power only authorized the pooling of the leasehold interests, i.e. the present interests created by the lease.91 The fact that the lessee now has the power to pool the lessors’ future interests means that even after the lease terminates, and the lessors automatically assume ownership of the minerals based on their possibility of reverter, the conditions of the pooled unit still bind the lessors.92

Moreover, if the former lessee is also the operator of the unit, it will be

able to maintain control over the former lessors and receive profits from any wells drilled on the unleased tract even though the underlying lease has ended.93

It has been argued that the Sheppard decision negatively impacts lessors

because even after their leases have expired, lessors will continue to be bound by the pooling clause in their lease, thereby decreasing the marketability of their minerals and making it more difficult to enter into new oil and gas leases.94 What's more, after the lease has expired, the former lessors become expense bearing mineral interest owners since the lessors must pay their share of unit expenses.95 It appears that by drafting pooling provisions to permit the pooling of “lands” or “interests” rather than “leases”, lessees can essentially gain a new ownership interest in the pooled unit that will survive lease termination and protect against liability for subsurface trespass.96 §1.03 Issues That Frequently Arise in Pooling

[1] Construction of Pooling Provisions

88 Wagner & Brown v. Sheppard, supra note 73, at 422. 89 E.g. Westbrook v. Atlantic Richfield Co., 502 S.W.2d 551, 554 (Tex. 1973) (mineral owners free of any lease ratified

unit agreement). 90 Texaco, Inc. v. Lettermann, 343 S.W.2d 726, 730 (Civ. App.--Amarillo 1961) (pooling unit was terminated when leases

covering part of land in unit terminated as result of lack of production). 91 Id. at 3-4. 92 Wagner & Brown v. Sheppard, supra note 73, at 424. 93 Fitzsimmons, supra note 72, at 744. 94 Id. at 745. 95 Id. at 743. 96 Id. at 745.

Case law is conflicting as to whether pooling clauses ought to be narrowly or liberally construed. Several decisions hold that because pooling provisions deal with the unknown future, they are drafted generally and should be liberally construed to give effect to the overall purposes of the pooling clause.97 However, many Texas cases indicate the need for strict compliance with the express terms of the pooling clause.98 These two positions may be reconciled with the proposition that “strict compliance with express conditions precedent to the exercise of the pooling power is required; however, the language of the pooling clause should not be narrowly construed when such language uses general or broad terms to describe the nature of the power granted.”99 Pooling clauses usually outline (1) the basis and the authority of the lessee to pool; (2) how the pooled acreage is designated; (3) effect of production on acreage both inside and outside the unit; and (4) allocation of production,100 permitting a lessee to pool the lessor's interests with any interest owners who have ratified the lease with the pooling provision, without the necessity of further consent. Pooling provisions generally divide unit royalties on a pro rata surface acreage basis among royalty interest owners.101

If the lease does allocate pooled royalties on the basis of surface acreage

within the pooled unit, any subsequent pooling agreement executed by the lessee calling for a divergent method of calculating royalties will not be binding on the lessor.102 Alternatively, a unit agreement may allocate royalties based on the volume of gas produced by each tract within the unit.103

Texas case law states that, unless provided otherwise, production obtained

from any lands within a pooled unit during the primary term of any of the pooled leases, will maintain any lands covered by said leases outside the pool.104

Therefore, a lessor may require a Pugh clause which would exclude non-

pooled lands from the lease once production is obtained from the pool at the end of the primary term.105 Anti-dilution provisions protect against the joinder of many small tracts to form large units,106 and are becoming more common as

97 Expando Prod. Co. v. Marshall, 407 S.W.2d 254, 260 (Tex. Civ. App. 1966) (quoting Tiller v. Fields, 301 S.W.2d 185

(Tex. Civ. App. 1957); see also Young v. Amoco Prod. Co., 610 F. Supp. 1479, 1484 (E.D. Tex. 1985); Mengden v. Peninsula Prod. Co., 544 S.W.2d 643, 647 (Tex. 1976); Sabre Oil & Gas Corp. v. Gibson, 72 S.W.3d 812, 816 (Tex. App. 2002); Texaco, Inc. v. Lettermann, 343 S.W.2d 726, 732 (Tex. Civ. App. 1961). 98 See, e.g., Tittizer v. Union Gas Corp., 171 S.W.3d 857, 861 (Tex. 2005); Se. Pipe Line Co., 997 S.W.2d at 171;

Browning Oil Co. v. Luecke, 38 S.W.3d 625, 640 (Tex. App. 2000); Circle Dot Ranch, Inc. v. Sidwell Oil & Gas, Inc., 891 S.W.2d 342, 346 (Tex. App. 1995); Humble Oil & Ref. Co. v. Kunkel, 366 S.W.2d 236, 239 (Tex. Civ. App. 1963). 99 Kramer, supra note 26, at 287. 100 Hemingway, supra note 28, at 430-431. 101 See, e.g. Brown, The Law of Oil and Gas Leases, § 8.04. 102 Leach v. Brown, 353 S.W.2d 920, 923 (Civ. App.--San Antonio 1962); see French v. George, 159 S.W.2d 566, 567-

569 (Civ. App.--Amarillo 1942). 103 See Exxon Corp. v. Middleton, 613 S.W.2d 240, 251-252 (Tex. 1981). 104 Scott v. Pure Oil Co., 194 F.2d 393, 395 (5th Cir. [Tex.] 1952); see Spradley v. Finley, 157 Tex. 260, 302 S.W.2d 409,

411-412 (1957). 105 Shown v. Getty Oil Co., 645 S.W.2d 555, 560 (Tex. App.--San Antonio 1982). 106 Sabre Oil & Gas Corp. v. Gibson, 72 S.W.3d 812, 816-17 (Tex. App.--Eastland 2002).

lessors seek to prevent their royalty income from being diluted by having only a small portion of their leasehold committed to a pooled unit.107

[2] Compliance with the Statute of Frauds

Stand-alone pooling agreements and leases are all conveyances of interests

in real property and, as such, must both be drafted and executed with the same formalities of any other conveyances of interests in real property such as deeds and deeds of trust. In Kuklies v. Reinert,108 the court followed the general rule for determining the sufficiency of a description contained in a conveyance of real property and noted that if there is enough of a description to enable a party familiar with the locality to identify the premises intended to be conveyed, to the exclusion of others, it will be sufficient. It is enough that the description points out and indicates the premises so that by applying it to the land it can be found and identified.

[3] Effective Date of the Unit

The courts have determined that the lessee's pooling power under the oil and

gas lease is essentially a matter of contract between the lessor and the lessee. The pooling clause of the lease furnishes the terms of that contract. Therefore, the effective date of a unit designation hinges upon the terms of the particular pooling clause.

In Sauder v. Frye,109 the relevant portion of the pooling clause stipulated that,

"[i]f lessee does create any such unit or units under the rights herein granted, then lessee shall execute in writing and record (emphasis added) in the county or counties in which each such unit or units created hereunder may be located an instrument identifying and describing each such unit or units so created."110

The Sauder court ruled that the lease, which covered a non-drill site tract, had terminated for lack of operations or production on the leased premises because the lessee had failed to file the unit designation of record, as required by the lease, before the end of the primary term.111

In contrast to Sauder v. Frye, in Tiller v. Fields,112 the court upheld the

pooling of an oil and gas lease although the lessee had not recorded the unit designation until three months after its execution because the court found that the lease's pooling clause did not require the lessee to file the unit designation of record.113

107 Kramer, supra note 26, at 291. 108 256 S.W.2d 435 (Tex. Civ.App.—Waco 1953, writ ref’d n.r.e.). 109 613 S.W.2d 63 (Tex. Civ. App. 1981). 110 Id. at 64. 111 Id. at 64. 112 301 S.W.2d 185 (Tex. Civ. App. 1957). 113

Id. at 91.

In Tittizer v. Union Gas Corporation,114 the court held that because a lease unambiguously provided for pooling to commence on the date of the pooling designation’s recordation and that the unitization can be effective only upon recordation, it did not authorize the lessee to execute a pooling designation with a retroactive effect.

[4] Execution of the Unit Designation

The principle of strict compliance with the terms of the pooling clause also

applies to the execution of the unit designation. In Pampell Interests, Inc. v.

Wolle,115 the court ruled that an oil and gas lease on a non-drillsite tract, which was beyond its primary term, had expired for lack of operations or production because a purported agent of the lessee had filed the unit designation of record in contravention of the pooling clause, which "required the 'lessee' to execute and record the unit designation."116 Therefore, in light of this decision, if the pooling clause requires the "lessee" to execute the unit designation, the lessee should execute the unit designation on his own behalf instead of relying upon an agent.

As a general rule, all lessees of record should execute the unit designation.117

As a precautionary measure, all owners of a reversionary interest in the leasehold estate, such as an "after payout" working interest, should also execute the unit designation.118

[5] Pooling After Production

The lessee must comply with the terms of the pooling clause in the lease

if the pooling clause stipulates when the lessee may exercise his pooling power. In the event that the pooling clause is silent on this issue, the lessee may pool after production if his exercise of the pooling power meets the standard articulated by the court in Tiller v. Fields.

119

The Tiller court stated that a lessee may pool after he has obtained

production if he pools (1) in good faith and (2) within a reasonable time. But, pooling after production is a delicate matter because the lessee may not reduce the royalty interest of the lessor in the drill site tract until the unit designation is effective. Thus, the lessor in the drill site tract will have two different royalty interests in production from the well, his royalty interest prior to the effectiveness of the unit designation and his proportionately reduced royalty interest after the unit designation has taken effect. The drill site lessor may balk at this

114 171 S.W.3d 857 (Tex. 2005). 115 797 S.W.2d 392 (Tex. App. 1990). 116

Id. at 394. 117 Cross, supra at 11. 118 Cross, supra at 11. 119 301 S.W.2d 185 (Tex. Civ. App. 1957).

reduction of his royalty interest. Therefore, as a practical matter, the lessee should have an effective unit designation in place prior to producing the well.

[6] Unpooling a Producing Unit

Samson Lone Star, Ltd. Partnership v. Hooks

120 addresses the ‘unpooling’

of a unit where the court held that a lessor can ratify the unpooling of a producing unit by accepting royalties from the amended unit. The court restated existing case law for the general principles that a pooling is a cross-conveyance of interests by agreement, an oil and gas lessee has no authority to pool except as provided in the lease, joinder by all interest owners is not necessary for a pooled unit to be valid, and a lessee cannot unilaterally terminate a unit that has a producing well. Under the doctrine of equitable estoppel, mineral interest owners cannot repudiate a unit designation after accepting royalties attributable to that unit. The court held that Hooks accepted and ratified the amendment and redesignation of the unit by accepting checks after notice of the amendment and redesignation.

[7] Successive Exercises of the Pooling Power

The pooling power is a contract between the lessor and the lessee.

Therefore, the lessee must examine the pooling clause of the lease to determine whether the pooling clause permits successive exercises of the pooling power. If the pooling clause clearly prohibits successive exercises of the pooling power, the lessee may not exercise its pooling power to form a second unit. If the pooling clause clearly permits successive exercises of the pooling power, the lessee may exercise its pooling power to form more than one unit to the extent permitted as long as the lessee meets its duty of good faith with each successive exercise of the pooling clause. But, what happens if the pooling clause is silent on whether the lessee may exercise its pooling power more than once?

In Texaco, Inc. v. Lettermann,121 the court upheld the lessee's multiple

exercises of its pooling power although the pooling provision in the lease was silent on the issue. The Texaco court stated that, "[i]n determining whether or not lessees' power to pool leases has been exhausted, the courts look to the good faith of the lessee as well as the lease pooling clause itself."122 The court found that the lessee had acted in good faith when it pooled the lessor's lease into two producing units because the lessor benefited from the resultant royalties, including royalties from an off-site well.

Leases frequently permit the lessee to pool the lease as to certain "stratum"

with a continuing right to pool other stratum into different units. In particular,

120 No. 01-09-00328-CV, 2012 WL 1951113 (Tex. App.—Houston [1st Dist.] May 31, 2012, no pet.). 121 343 S.W.2d 726 (Tex. Civ. App. 1961). 122 Id. at 731.

it is to the advantage of the lessee to pool specific stratum if the maximum size of the unit allowed varies depending on the depth of production.

[8] Dissolution of Unit

Dissolution of a unit, like its formation, is governed by the terms of the

lease. Typically, the dissolution of a unit may only take place if the well is a dry hole or has ceased to produce in paying quantities. Dissolution usually requires the filing of an instrument of record in the county where the land is located to be effective.

[9] The “Pugh” Clause

Leases frequently contain a clause, which is often referred to as a

"Pugh" clause, or a “Freestone Rider,” that segregates the leased acreage lying outside the unit from the acreage pooled into the unit so that operations and production on the unit will not perpetuate the lease as to the outside acreage. The typical Pugh clause becomes effective once the lessee has exercised the pooling power. Therefore, the lessee should be aware of how his exercise of the pooling power might affect the leased acreage lying outside the unit by triggering the Pugh clause.

[10] Anti-Dilution Clause

An anti-dilution clause will generally provide that a pooled unit must

contain a certain percentage of the lessor’s leased property. This type of provision will operate to insure the lessor from having his share of royalties diluted by the inclusion of only a small portion of his land within a pooled unit. It also limits the lessee’s right to pool. §1.04 Pooling For Gas Only or Oil Only and Changing Classifications

A change in Railroad Commission classification from gas well to oil well will result in the dissolution of the gas unit, absent savings provisions, and possible termination of non-drillsite leases unless the leases are within their primary terms or other production or operations are attributable to the non-drillsite tracts.

Issues arise when a well permitted by the Railroad Commission as a gas

well later turns out to be an oil well, or vice versa. In Sunac Petroleum Corp. v.

Parkes, the court made clear that the completion of a producing oil well on a unit authorized for gas only, but not located on a particular lessor’s land, will not prolong the life of the oil and gas lease.123

123 Sunac Petroleum Corp. v. Parkes, 416 S.W.2d 798, 802 (Tex. 1967).

§1.05 Changing an Existing Unit

[1] Unit Size

The lessee must comply with the express terms of the pooling clause in exercising the pooling power because the lessee's authority to pool an oil and gas lease stems directly from the pooling clause. The courts have ruled that a lessee has exceeded his pooling authority when he has created a unit larger than the pooling clause stipulates.124 Although the lessee may not create a unit larger than the pooling clause stipulates, he may create a smaller one provided that he exercises the pooling power in good faith; for example, in Banks v. Mecom,

125 the court upheld the pooling of an oil and gas lease into an approximately 20 acre oil unit, stating that the lessee had acted within the scope of his pooling power because the lease's pooling clause stipulated that, [u]nits pooled for oil. . . shall not substantially exceed 40 acres each in area."126

Leases frequently provide that the size of the unit is limited depending

on the depth of production. In such a case, in order to have a valid pooling, the production must be from a depth sufficient to permit a unit of the size pooled.

A lessee who intends to drill horizontal wells should be especially aware

of size restrictions on pooling because the standard pooling clause does not contemplate the formation of horizontal units, which are often larger than standard pooling clauses allow.127 However, since the Railroad Commission adopted Statewide Rule 86, effective June 1, 1990, if the pooling clause allows the pooling of units larger than the specific acreages set forth therein in the event the Railroad Commission authorizes larger units, a unit for a horizontal well, which conforms to Rule 86, would be valid.

[2] Alteration of a Pooled Unit

In Grimes v. La Gloria Corp.,128 the court stated that whether a lessee may

alter an existing unit is a matter of contract. Therefore, the lessee must examine the individual pooling clauses of every lease pooled into the unit that he wishes to modify to determine whether he has the authority to alter an existing unit. If a pooling clause does not expressly authorize the lessee to alter an existing unit, the lessee must seek the permission of the lessor to amend the unit. If a pooling clause does authorize the lessee to change the size or form of the unit, the lessee must respect any limitations that the clause imposes upon such changes to the existing unit; for example, only permitting an enlargement of the unit.129

124 Yelderman v. McCarthy, 474 S.W.2d 781 (Tex. Civ. App. 1971). 125 410 S.W.2d 300 (Tex. Civ. App. 1966). 126 Id. at 303. 127 Cummings, supra at E-13. 128 251 S.W.2d 755 (Tex. Civ. App. 1952). 129 Id. at 760.

Furthermore, as with the initial exercise of the pooling power, the lessee’s alteration of an existing unit must be done in good faith.

[3] Enlargement of the Pooled Unit

Many lease forms provide an express authorization to increase the size of

an existing pooled unit.130 Absent express authorization, issues arise as to whether a lessee has the authority to enlarge the pooled unit. In Expando Production

Company v. Marshall, the court held that an existing unit may be enlarged if the lessee invokes such authority in good faith.131 The court determined the good faith element was met when the enlargement would benefit both the lessor and the lessee, even though the lease did not provide express authorization to enlarge the pooled unit.132

[4] Reduction of the Pooled Unit

Generally, a lessee cannot reduce the size of the pooled unit unless all of

the leases included in the unit give express authorization or all lessors expressly consent to such reduction.133 Grimes v. La Gloria stands for the proposition that the language in the lease allowing for the reduction must be clear and unequivocal.134 In the Grimes case, the lease authorized the lessee “to enlarge or change the shape of existing units to such different size or shape as lessee may desire.” The court determined that while this language allowed the unit to be enlarged, it did not authorize the unit to be reduced in size by excluding previously pooled lands.135 §1.06 Authority of Executive and Non-Executive Interests

[1] Non-Executing Lessors

In Texas, a tenant in common has the right to lease his or her interest without joinder of other cotenants, and likewise has the right to incorporate a pooling agreement into an oil or gas lease without the consent or joinder of the cotenants.136 A lease executed by one cotenant is valid as between the parties, but ineffectual as to the cotenant of the lessor.137 But if the lessee drills for and finds oil or gas, it is required to account to nonparticipating cotenants for the latter's

130 Estate of Grimes v. Dorchester Gas Producing Company, 707 S.W.2d 196 (Tex. Civ. App. – Amarillo 1986); Grimes v.

La Gloria Corp., 251 S.W.2d 755 (Tex. Civ. App. – San Antonio 1952). 131 Expando Production Company v. Marshall, 407 S.W.2d 254 (Tex. Civ. App. – Fort Worth 1966). 132 Id. 133 Ladd Petroleum Corp. v. Eagle Oil & Gas Co., 695 S.W.2d 99 (Tex. App. – Fort Worth 1985). 134 Grimes v. La Gloria Corp., 251 S.W.2d 755, 760 (Tex. Civ. App. – Fort Worth 1966). 135 Id. 136 Burnham v. Hardy Oil Co., 147 S.W. 330, 334 (Civ. App.--San Antonio 1912), aff'd, 108 Tex. 555, 195 S.W. 1139

(1917). 137 Willson v. Superior Oil Co., 274 S.W.2d 947 (Tex.Civ.App. —Texarkana 1954).

interest in the product.138 Non-executing lessors have two courses open to them: either take their share of the oil or gas produced, less their pro rata share of the expenses of drilling and operating the well, or ratify the lease executed by their cotenant lessors and take their proportion of the royalty, placing the burden of paying all expenses upon the lessee.139 The unleased cotenant therefore has the option of either joining in on the full benefits of the lease along with the obligations thereof, or taking their fair share of net production. Superior Oil Co.

v. Roberts stands for the proposition that an unleased cotenant who refuses to ratify its cotenant's lease or the designation of a pooled unit is not entitled to share in production obtained from the pooled unit if the drill-site and wellbore are located on land other than that of the unleased cotenant.140

This ruling signifies that in order to profit from a pooled unit, one must

participate therein through ratification of the pooling provision or agreement. Ratification is the key that unlocks the royalty door for non-executive interest owners and owners of undivided, unleased mineral interests, and is defined as the adoption or confirmation by a person, with knowledge of all material facts, of a prior act which did not then legally bind that person and which that person had the right to repudiate.141 Ratification has the effect of prior authority,142 such that its effect is the same as executing the original lease.143

[2] Ratification by Non-Participating Royalty Owners

Even where pooling is authorized by a lease, it will not bind

nonparticipating royalty owners (NPRIs) who would not otherwise be necessary parties to the lease, absent their consent.144 In other words, royalty interests may not be unitized without the joinder or ratification of all of the royalty owners.145 In situations where a royalty reservation predates an oil and gas lease that contains a pooling clause, the lease constitutes a proposal or offer by the lessor to the outstanding non-participating royalty interest owner(s) to effect or create a community lease and to pool or unitize all of the royalties in all of the tracts described in said lease.146 If the nonparticipating royalty owners do ratify the lease, the lease effects a cross-conveyance of interests and a pooling or combining of royalty interests.147 Moreover, the owner of a nonparticipating royalty interest may consent to the establishment of one pooling unit without any obligation to consent to the establishment of another pooling unit on the remaining acreage in

138 Burnham v. Hardy Oil Co., supra note 129. 139 Texas & Pac. Coal & Oil Co. v. Kirtley, 288 S.W. 619, 622 (Civ. App.--Eastland 1926). 140 Superior Oil Co. v. Roberts, 398 S.W.2d 276 (Tex. 1966). 141 Vessels v. Anschutz Corp., 823 S.W.2d 762, 764 (Tex. App.--Texarkana 1992); Kunkel v. Kunkel, 515 S.W.2d 941,

948 (Tex. Civ. App.--Amarillo 1974). 142 Yelderman v. McCarthy, 474 S.W.2d 781, 784 (Tex. Civ. App.--Houston [1st Dist.] 1971). 143 Ruiz v. Martin, 559 S.W.2d 839, 844 (Tex. Civ. App.--San Antonio 1977). 144 Montgomery v. Rittersbacher, 424 S.W.2d 210, 213 (Tex. 1968); Ruiz v. Martin, 559 S.W.2d 839, 843 (Civ. App.--San

Antonio 1977). 145 Guaranty Nat'l Bank & Trust of Corpus Christi v. May, 395 S.W.2d 80, 82 (Civ. App.--Waco 1965). 146 Id. 147 London v. Merriman, 756 S.W.2d 736, 739 (Tex. App.--Corpus Christi 1988).

the same tract.148 Therefore, unless bound by the specific terms of a lease or other agreement, the nonparticipating royalty interest may selectively ratify pooling arrangements made by the owner of the executive right.149

Whereas the ratification power provides strong protection to NPRI owners

who would otherwise be at the mercy of lessors to convey pooling authority upon lessees, it has been somewhat mitigated by court-imposed implied ratification. A number of scenarios have been found to constitute implied ratification of the lessee’s pooling power. Acceptance by the royalty owners of an offer by the lessor to apportion all proceeds from the lease will be construed as ratification.150 A party may ratify a lease, as a matter of law, by filing suit to enforce the lease as written.151 Ratification can also occur through the acceptance of royalty payments even if the payments are accepted under protest or with a reservation of rights.152 Under Texas law, a ratifying party is only entitled to post-ratification royalties.153 Issues can arise whether a purported ratification is valid when there has been a long passage of time between the ratifying act and the date that production began, and at least one case stands for the proposition that a party seeking to ratify must exercise its right with diligence and without undue delay.154 That being said, it has been framed by Texas courts as an issue of laches, not estoppel, as stated in May v. Cities Serv. Oil Co.155 Under Texas law, without contractual language to the contrary, the owner of the lease can pool an overriding royalty owner's interests without its consent and thus dilute the overriding royalty owner's interest in production.156 The law treats such interests differently than non-executive interests because they stem from the same instrument that generally allows the lessee to pool the leased premises,157 and therefore do not require a ratification power in order to protect their interests. §1.07 Conclusion

This paper has highlighted essential elements of the pooling power and examined issues regarding recent precedent in Texas which addresses pooling of mineral and royalty interests. Pooling is a multi-faceted tool used to comply with lease provisions and regulatory requirements, provide for the conservation of oil and gas, the orderly development of the reservoir, and avoids the drilling of unnecessary wells. As lessees have engaged new technologies in developing drilling techniques to increase efficiency of accessing and producing

148 See MCZ, Inc. v. Triolo, 708 S.W.2d 49, 53-54 (Tex. App.--Houston [1st Dist.] 1986). 149 Id. 150 Verble v. Coffman, 680 S.W.2d 69, 70 (Tex. App.--Austin 1984). 151 Montgomery v. Rittersbacher, supra note 157, at 214. 152 Yelderman, supra note 160, at 784. 153 Montgomery v. Rittersbacher, supra note 157, at 215; May v. Cities Serv. Oil Co., 444 S.W.2d 822, 827 (Tex. Civ.

App.--Beaumont 1969). 154 Nugent v. Freeman, 306 S.W.2d 167, 170-71 (Tex. Civ. App.--Eastland 1957). 155 See May v. Cities Serv. Oil Co., supra note 167, at 826. 156 Union Pac. Res. Co. v. Hutchinson, 990 S.W.2d 368, 371 (Tex. App.--Austin 1999). 157 Id.

hydrocarbons in Texas, pooling has become invaluable in urban areas where mineral ownership tends to be divided into small parcels. Thus, tracking the trajectory of court decisions rendered on pooling has been an essential yet illuminating task.