Mineral rights owners in Mora County could be forced to allow drilling on their land, even if they don't voluntarily agree to lease the rights.

That's just one of the provisions of the state's oil and gas statutes that residents find confusing.

Mark Fesmire, director of the Oil Conservation Division of the state's Energy, Minerals and Natural Resources Department, which regulates oil, gas and geothermal activity in New Mexico, shed light on the leasing lingo and various possible drilling scenarios.

When a company approaches an owner to lease the minerals, it agrees to pay an annual fee for a specified number of years, he said. In Mora County, KHL Inc. is reportedly offering residents with mineral rights a 10-year lease at $1 an acre per year.

Fesmire said a company also pays an annual rental fee to the mineral rights owner if it isn't going to drill for a couple of years.

In addition, the company pays a royalty on any oil and gas extracted, usually one-eighth of the revenues from what is produced, Fesmire said. Mineral rights owners can negotiate for higher royalties.

But here's the kicker for people who don't want to lease their mineral rights, such as Rose Josefa in Ojo Feliz. She might have no choice but to allow mineral extraction from under her land — although she could make some money from it.

One way is through forced pooling of mineral leases within a spacing unit. The state determines how many wells are allowed per spacing unit, Fesmire said. The spacing unit varies depending on the depth of the hydrocarbons, whether the well is for oil or gas, and whether the area is controlled by any special rules. In New Mexico, those units vary from 40 acres up to 320 acres. In California, spacing units are as small as one well per acre, according to the Oil and Gas Accountability Project, a nonprofit dedicated to educating property owners about hydrocarbon development.

If Josefa's property falls within the same spacing unit as neighbors who agree to lease their mineral rights, she can be forced to join in the well and the lease pool, Fesmire said.

Fesmire said state law allows this forced pooling to avoid wasting oil or gas supplies by pulling as much of the minerals as possible from a single reservoir.

If a company hits a dry hole, it loses all the money invested in the drilling. If it finds hydrocarbons, it begins paying the royalty to mineral rights owners who signed leases up front. But people who were forced into the lease do not begin receiving royalties until the company has recouped drilling costs, plus up to 200 percent more, Fesmire said.

Holdouts also can be impacted through forced "unitization," which involves more than one spacing unit, Fesmire said. If at least 75 percent of the mineral rights owners within these pooled units agree voluntarily to lease, then the holdouts are forced to join. In New Mexico, forced unitization can only occur where oil production has been established, and only for the recovery of secondary oil, which is oil recovered from almost-depleted wells using injected water to force it out.

The OCD has to approve a company's request for forced pooling and forced unitization. Mineral rights owners can protest to the state.

Contact Staci Matlock at 470-9843 or smatlock@sfnewmexican.com.