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West Virginia public weighs in on natural gas ‘forced pooling’ bill

CHARLESTON — Members of the public spoke in favor and in opposition Monday of a bill that could finally put in place a forced pooling plan for natural gas after years of failed efforts.

The House Energy and Manufacturing Committee held a public hearing Monday morning for Senate Bill 694, relating to oil and natural gas conservation, after recommending the bill for passage last Tuesday, followed by the House Judiciary Committee on Friday.

The bill is on third reading today in the House after first being introduced on Feb. 21 in the Senate, the final day for new bills to be introduced in the Senate just over two weeks ago. The bill went through the Senate Finance Committee on Feb. 23 and passed Feb. 25 in the Senate in a 26-7 vote.

SB 694 is a bill dealing with the property rights of surface owners and farmers as it relates to drilling for natural gas and horizontal wells, which can involve multiple property owners. Unitization, sometimes lumped into the term “forced pooling” is defined as combining separately owned mineral leases into one larger joint operation.

Representatives of the oil and gas industry, agriculture, and mineral owners said the bill is a compromise that they all support.

“This is a step in the right direction,” said Charlie Burd, executive director of the Gas and Oil Association of West Virginia. “Getting unitization in statute in West Virginia, whether imperfect or not, is indeed a step that makes West Virginia more competitive with other states and provides a clear pathway for future investment, good paying jobs, and taxes that benefit all of the citizens of West Virginia.”

“Senate Bill 694 is the product of months of stakeholder negotiations between industry and land owners and royalty owners,” said Tom Huber, president of the West Virginia Royalty Owners Association. “We arrived at this bill, which we believe is a fair compromise, to allow for the efficient development of our resources in this state, and to ensure that royalty owners are compensated fairly and that landowner surface owner rights are protected.”

“We believe this is a strong bill that provides private property protection,” said Dwayne O’Dell, director of government affairs for the West Virginia Farm Bureau. “We believe this provides a good balance between the 75% majority and the non-consenting owners of the development.”

The bill would add two seats to the state Oil and Natural Gas Commission; for someone in the agriculture industry not engaged in the oil and gas industry other than royalties, and mineral owners with no affiliations to oil and natural gas operators. The number of seats would expand from five to seven.

One of the things the complicated bill does is setting new application requirements for the combination of the tracts for oil and natural gas drilling by operators of horizontal well units. Those wishing to combine two or more tracts would need to create a new horizontal well unit.

The bill would require horizontal well units to get agreements from the mineral rights owners for at least 75% of the net acreage when it comes to interest from the royalties collected. It also caps horizontal well units at 640 acres per unit, but a unit cannot contain more than 128 net acres controlled by non-consenting royalty owners.

SB 694 gives non-consenting royalty owners with valid leases but lack utilization provisions options for how they wish to be paid: either 25% of the weighted average bonuses or 80% of the average royalty rate percentage.

Non-consenting owners without valid leases can either sell their minerals, participate in the well subject to a 200% payout penalty, or elect to receive royalty payments three different ways. They could choose to receive 100% of the weighted average bonus received by owners inside the unit within the previous 24 months, the highest royalty rate received by the owners in the unit within 24 months, or mineral owners could be paid through a weighted average sales price or the local monthly index price.

“We have always said that a good forced pulling, good unitization bill would be a good thing,” said David McMahon, co-founder of the West Virginia Surface Owners Rights Organization. “We would not call this one a good bill, but it is okay by us. If you enact it, there are good things in it for surface owners, which is why we say it’s okay.”

The bill didn’t have support of all speakers Monday. A few property owners from the Northern Panhandle traveled to Charleston to speak against the bill.

“As far as I’m concerned, we could do a whole lot better than what this bill is,” said Brian Corwin, owner of Green Mountain Land Ventures and Logan Hills Farm in Bethany. “There’s thousands and thousands of acres that are currently held by production that are not being drilled in this state. This bill has nothing to address those. There’s no way, even if you’re in an existing unit, that you can appeal to this commission that’s going to be established to have your unit reviewed.”

“What I’d really like to see in this bill that hasn’t been put in this bill is transparency,” said John Leonetti. A property owner in Brooke County. “There should be some sort of an amendment that goes forward that basically addresses the issue of transparency…hopefully that can be added, because we need it; because I’m just one person. There are thousands like me in this state.”

Steven Allen Adams can be reached at sadams@newsandsentinel.com.

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