1. Definition and Purpose Generally
The following provides a general guide and explanation of the concepts of how pooling and unitization principles have developed and currently operate.
The terms pooling and unitization are often used interchangeably. However, a pooling agreement is any agreement that brings together separately owned, usually small, mineral or leasehold interests in order to comply with state regulatory laws to drill a single well. Specifically in Texas, the purpose is to accumulate sufficient surface acreage to permit drilling operations on a proration unit that is proscribed by the Railroad Commission of the state of Texas. Unitization, on the other hand, describes larger operations that involve combining working and royalty interests over the productive limits of an entire field or reservoir.
While pooling provides an efficient means of developing the mineral interests in different sized tracts within the confines of applicable regulatory requirements, unitization permits the efficient development of an entire field or reservoir in addition to the benefits that pooling provides. Combining these small tracts lowers the costs for exploration, development, and production.
2. Forms of Pooling
A pooled unit can be accomplished in two general ways, either through a voluntary pooling agreement in which both lessor and lessee agree to pool or compulsory pooling by a conservation agency.
A voluntary pooling agreement provision is typically found in the oil and gas lease but may also be found in pooling amendments and royalty pooling agreements. Lessees are not permitted to pool acreage without the express consent of the lessor absent a pooling clause. Additionally, the owner of a royalty interest conveyed prior to the lease must ratify the lease and agree to similar terms, usually through a pooling agreement or amendment. Most declarations contain requirements for the lessee that mandate filing for record in the county where the lands contained in the pooling agreement are located.
Pooling is only valid if done “in accordance with the method and purposes specified in the lease.” The court will usually interpret these pooling provisions broadly, but it will also require strict compliance by lessees with an express conditions or limitations contained in the least. Additionally, the lessee must also exercise its pooling power in good faith. Lessor must show that the lessee failed to act like a reasonably prudent operator and that the pooling was not done for a valid business, geological or regulatory reason.
Production from the pooled unit is usually allocated to and shared by the various pooled interests on a surface acre basis. Royalty is paid without regard to location of the unit well. However, an important note to make regards non-participating royalty interest owners. A non-participating royalty is an interest that arises from a deed and survives any lease. A non-participating royalty interest (NPRI) owner can have their interests pooled without express consent, but Texas courts have held that an NPRI owner is entitled to her full royalty interest instead of a proportionate share of the pooled unit, absent an NPRI owner joining in or ratifying the lease. Other states have varying rules for whether the non-participating royalty owner is bound by the pooling clause.
In addition to voluntary pooling by lessees, pooling may result when parties create a community lease. In Texas, a lease that is executed by owners of two or more separated tracts or mineral owners with varying interests in different tracts is considered a community lease. The lessee is entitled to treat all tracts covered by the instrument as a single “leased premises” so that drilling operations production or other activities anywhere on the land are deemed to relate to the entire area. The community lease also negates the non-apportionment rule with respect to the payment of royalty so that all lessors receive their proportionate part of the royalty from any wells drilled upon the community lease or other leases pooled with the community lease.
Forced pooling or compulsory pooling is a form of governmental regulation used in junction with conservation laws. Texas was one of the last states to enact a compulsory pooling statute. The purpose of these acts is to prevent waste and protect correlative rights. They in effect, force mineral owners who may not wish the mineral resources beneath their land to become part of a drilling unit. In part to mitigate the effect of “rule of capture” whereby landowners raced to extract as much of the natural resource before their neighbors which ultimately resulted in over-drilling. Lastly, these laws also serve as anti-holdout mechanisms, to allow landowners whose ownership of land may be insufficient to drill to still benefit from the mineral resources beneath their land.
Forced pooling statutes vary greatly around the country and are often a source of contention. In Texas, the forced pooling statute, the Mineral Interest Pooling Act (MIPA) is similar to that of majority states and heavily encourages voluntary pooling instead. The Texas Railroad Commission was granted the authority to issue forced pooling orders. However, both the Texas courts and legislature are strongly against compulsory pooling and attempt to limit the practice. The Texas statute subjects the operator to more preconditions and to greater limitations in forced pooling situation than do other states. The statute does not apply to any reservoir in which well is being drilled was discovered before March 9, 1961. Additionally, the Railroad Commission may not compel compulsory pooling on its own motion but instead must wait for initiation by the mineral interest owners. An applicant must also demonstrate in detail that it made fair and reasonable offers and exhausted all efforts to reach voluntary pooling agreements. The statute also permits a small tract owner, who has no other options for small tracts to pool with, to force into a pooled unit.
Unitization typically works on a much larger scale than pooling, allowing an operator greater access to resources without regard to lease or property boundaries. Fieldwide unitization is typically done for secondary or tertiary recovery operations rather than for primary production.
Similar to pooling, a lessee’s authority to unitize stems from a provision in the oil and gas lease, which may be interwoven with a pooling clause or appear separately. Unitization involves combining both royalty and working interests. The royalty and working interest owners will sign a Unit Agreement that provides details such as a geographical description of the field and formation to be unitized, the shares of productions, and the substance and method that will be injected. The duty of good faith and fair dealing is similarly implied in unitization clauses. However, unlike with pooling, Texas is one of the only states without a compulsory unitization statute.
4. The Unit Tool in Tracts
Click here to see our guide on the Unit Tool in Tracts:
 See Whelan v. Manziel, 314 S.W.2d 126 (Tex. Civ. App. Texarkana 1958).
 Bruce M. Kramer, Oil and Gas Leases and Pooling: A Look Back and A Peek Ahead, 45 Tex. Tech L. Rev. 877 (2013).
 Id. at 878.
 See Samson Exploration, LLC v. T.S. Reed Properties, Inc., 521 S.W.3d 766 (Tex. 2017) (an oil and gas lessee’s authority to pool requires the lessor’s consent, which is typically furnished via a pooling provision in the mineral lease. See also Jones v. Killingsworth, 403 S.W.2d 325 (Tex. 1965).
 Id. at 774.
 See Sauder v. Frye, 613 S.W.2d 63, 64 (Tex.Civ.App.1981, no writ). See also Pampell Interests, Inc. v. Wolle, 797 S.W.2d 392, 394 (Tex. App. 1990).
 Vela v. Pennzoil Producing Co., 723 S.W.2d 199 (Tex. App.—San Antonio 1986, writ ref’d n.r.e.).
 Montgomery v. Rittersbacher, 424 S.W.2d 210, 213 (Tex. 1968). See also Brown v. Smith, 141 Tex. 425, 174 S.W.2d 43, 46 (1943) (lease could not be enforced against lessee because lease was executed pursuant to a contract that required all royalty interest holders to join the lease, NPRI holder did not join the lease, and executive did not have the right to pool the NPRI; consequently, “the lease tendered was…not the lease that petitioners contracted to acquire”).
 James E. Key, The Right to Royalty: Pooling and the Capture of Unburdened Interests, 17 Tex. Wesleyan L. Rev. 69, 73 (2010).
 Id. at 74.
 Matthew K. Trawick, Cooperative Mineral Interest Development in the Lone Star State: It’s Time to Mess with Texas, 4 Mich. J. Envtl. & Admin. L. 385, 386 (2015).
 Id. See also Tex. Nat. Res. § 102.011 (West).
 Tex. Nat. Res. § 102.011 (West).
 Tex. Nat. Res. Code Ann. § 102.003 (West).
 Tex. Nat. Res. § 102.011 (West).
 Tex. Nat. Res. Code Ann. § 102.013 (West).
 See Trawick supra note 9, at 387.