Forced Pooling Story Archives - West Virginia Public Broadcasting

House Passes Landowner Rights Bill Known As Co-tenancy

The West Virginia House of Delegates has passed a controversial bill dealing with landowner and mineral rights.

House Bill 4268 would require — in the case of seven or more landowners of a single tract of land — the approval of 75 percent of owners to allow natural gas drilling on the property.

The bill passed on a 60-40 vote after more than an hour and a half of debate.

Supporters said the measure is key to further development of the natural gas industry in West Virginia.

“The passage of this legislation will allow us to, in my opinion, increase the production — which will increase the wealth the citizens and the mineral owners of this state — which will increase the tax revenue of our state, allowing us to better deal with the problems facing our state,” said Del. Bill Anderson, the lead sponsor of the bill.

Democrats — and some Republicans who opposed the bill — argued the legislation forces non-consenting landowners to allow drilling when it is unwanted.

“Now I’ve heard a lot of people here yell and scream, ‘How can just a handful of people hold up development?’ Because it’s their land. It’s a constitutional right to hold land,” Del. Issac Sponaugle said.

Sponaugle went on to argue that legal arrangements can already be made to transfer ownership to those who would want to authorize drilling through partitions suits. He and other Democrats like Del.Joe Canestrano acknowledged the bill’s history in the Legislature in recent sessions.

“You can call this bill whatever you want. Co-tenancy, lease integration, joint development, forced pooling. What it really is — it’s a watered down version of the bill that was defeated on this floor in 2015,” Canestrano said.

“Instead of pitting neighbor against neighbor — like you all did that here in ’15 — now you’re just going to pit brother against brother on one parcel of property,” he added.

An amendment to the bill Wednesday would place revenues from unknown or unlocatable owners in a stability fund for PEIA if those owners could not be found in seven years. The other half would go to an oil and gas reclamation fund.

The bill now heads to the Senate.

Justice Lends Support to Controversial Mineral-Leasing Bills

Gov. Jim Justice joined energy workers from across West Virginia for a rally at the Capitol Tuesday morning to promote the natural gas industry in the state.

Justice lent his support to a type of legislation that lawmakers have been unable to settle during the past several sessions — laws that allow mineral producers to extract oil and gas from large tracts of mineral deposits with a majority of mineral owners’ permission, while bypassing any hold-out mineral owners or owners who can’t be found.

These laws have been called “forced pooling” laws. Proponents say they allow oil and gas to be developed more efficiently, especially when mineral rights owners can’t be contacted. Opponents say it amounts to a taking of private property.

A hotly contested version of this kind of legislation called lease integration died at the end of last year’s legislative session.

A similar kind of bill called co-tenancy, however, has resurfaced in the Senate’s Judiciary Committee this year.

The rally was sponsored by the West Virginia Oil and Natural Gas Association, the Independent Oil and Gas Association of West Virginia and the West Virginia Chamber of Commerce, and drew hundreds of oil and gas workers.

Governor Jim Justice spoke on the steps of the state Capitol on Tuesday, March 21, 2017, to address supporters of West Virginia’s oil and natural gas industry and gave West Virginians an update on the budget.

“Here you are, wanting to go to work aren’t you?” Gov. Justice said addressing the crowd. “Wanting to develop a resource that God has given us in West Virginia to create thousands of jobs and do lots and lots and lots of goodness. Now, I commend you and I will not hinder, I will not stand in your way.”

Justice said he understands that the industry needs co-tenancy and joint development laws in order to continue to develop in the state’s shale plays and create more jobs.

Those terms, co-tenancy and joint development, are industry terms that reference certain practices employed in negotiating leases for mineral development, including horizontal drilling, or fracking, for natural gas.

Co-tenancy would allow companies to drill a well and drain the gas in a given area if the owners of 51 percent of the mineral rights agree to the drilling. Joint development would allow companies to access gas on adjoining parcels of land where leases have already been signed.

The two practices are not forced pooling, according to the state’s oil and natural gas association, but a surface owners rights group still refers to the legislation that way.

Justice says he knows this kind of legislation is necessary to increase drilling in the Marcellus and Utica shale regions.

Lawmakers have considered several pieces of similar legislation at the statehouse since 2015, and each year, those bill have failed to make it through the process. Democrats and members of the Republican Liberty caucus argue those practices constitute a taking of personal property for private gain.

“Now, I know that you’re not wanting to take something away from anybody,” Justice said, who disagrees with lawmakers who oppose the issue, “but sometimes it becomes an effort that is absolutely worthless because you’re trying to track down landowners that have 15 lost cousin Eddies and you can’t find them.”

The Senate Judiciary Committee is currently taking up similar legislation and has spent hours so far discussing its implications. The bill would have to be approved before cross over day on March 29, the final day for lawmakers to approve bills in their originating chambers.

Justice repeated that he stands ready to support the industry in any way he can, but he also presented the crowd with his plan to increase taxes in order to balance the 2018 budget and asked for their support as well.

“I need you. I need you. I need you to let your voice be heard not just right here, but in these people’s offices and tell them to get off their hind end and do the right thing,” he said.

Editor’s Note: This story was changed on 03/22/17 to clarify descriptions of current and previous mineral lease laws in the West Virginia Legislature and to provide more context for those bills.

The Legislature Today: Forced Pooling Could Be Stalled for Session

Several bills being considered at the statehouse would give gas companies an option when a mineral rights owner refuses to sell. The bill negotiated over several months by the House Energy Committee Chair has stalled in the chamber though.

Tom Huber, Vice President of the West Virginia Royalty Owners Association, discusses the failed bill and the others lawmakers may still put to a vote this session.

In the House, members spend hours debating a bill to repeal the Common Core based education standards and assessments, making several changes before the final vote Friday.

Delegates will also put a bill to a vote Friday to give Advanced Practice Registered Nurses, or nurse practitioners, the ability to prescribe medications in the state.

Three Major Bills Coming in 2016

While Governor Earl Ray Tomblin’s legislative proposals this session focus largely on the budget, it will be legislators who make the final decisions on what gets approved. And members of both the House and the Senate have some pretty big issues they want brought to the table.

While proceedings for the first day mostly deal with housekeeping issues, nearly 300 bills were introduced between both the House and Senate, many that contained the Republican majority’s top legislative priorities.

1. Charter Schools

Newly appointed House Education Chair, Paul Espinosa of Jefferson County, says the way to a successful charter schools bill is through good quality legislation and strong accountability.

“I really see a good strong public charter school bill of not only being to establish public charter schools that will fit the unique needs of school districts around our state, but it will provide that engine for change that I think’s very important to our students,” Espinosa said.

2. Forced Pooling

A bill that caused a major fuss on the final night of the 2015 session is already generating a lot of discussion around the rotunda.

Forced pooling allows companies to force owners to sell their minerals if they can get 80 percent of the owners in a specified land area to agree to the drilling. Last year’s bill died on a tie vote.

“We already have forced pooling on the books today,” said House Energy Chair Delegate Woody Ireland of Richie County, “If we don’t do something to modify that, we are leaving millions and millions of dollars on the table that will flow out of state as opposed to come to the mineral owners of the state.”

Ireland noted lawmakers didn’t understand what last year’s bill was attempting to do, and he said he hopes lawmakers hear him out this year.

3. Right to Work

Right to Work laws prohibit certain types of agreements between labor unions and employers. The most commonly used example would prohibit a union from collecting dues from people in a workplace who do not wish to be part of the union.

“I don’t see the real reason for controversy,” said Senate President Bill Cole, “I mean we’re looking for solutions; we’re looking for ways to put people to work in West Virginia. We lead the nation in unemployment; we’re last in workforce participation at 48 percent of our adult able-bodied workforce working, so, you know, if this is an opportunity to induce companies to want to be here and bring jobs here, then I think it’s something we ought to look at.”

Lawmakers have sixty days to pass bills during the 2016 legislative session.

Forced Pooling in W.Va.: The Plot Thickens with Industrial Proposals

In a dramatic turn of events last year at the statehouse, a bill died on a tie vote during the last night of the 2015 legislative session. The issue was whether companies should be allowed to force mineral owners to sell their gas if the majority of their neighbors have already agreed to sell. Forced pooling. The topic resurfaced during interim meetings last month and is expected to be a priority this legislative session.

Death by Tie Vote

The controversial 2015 bill would have allowed drillers to force owners to sell their minerals if a company could get “80 percent of the net acreage proposed to be included in the horizontal well unit.” The bill also specified that the mineral owners of the remaining 20 percent of property would still get paid for their proportion of gas drilled. The terms of the sale would be decided by the existing, but modified Oil and Gas Conservation Commission. A board comprised of industry, government, and community stakeholders.***

Industry representatives have been pushing forced pooling legislation at the Capitol since the Horizontal Well Control Act was passed in 2011. They say pooling is necessary to make sure gas resources aren’t wasted (§22C-9-6.). Opponents say it amounts to an illegal property grab. The West Virginia Royalty Owner’s Association used to be the loudest of opponents, but Vice President Thomas Huber joined statehouse delegate Woody Ireland in promoting forced pooling legislation last year. Huber says he was involved in shaping that legislation.

“Those negotiations were tense, they were difficult,” Huber recalled, “but we actually came out of that with an impressive bill that protected property owner rights while giving gas companies the ability to efficiently develop the gas in this state.”

But that bill died during the last hours of the session when some legislators pulled support at the last minute, resulting in a tie vote.

Pro-Forced Pooling Bill

A revised bill has since been written, which Huber says is even better for surface and mineral owners than last year’s bill was. Huber organized and moderated discussions around the state over the past several months to collect ideas and discuss possible implications of new legislation.

The main thrust of his argument is that in exchange for providing companies with a legal pooling method, property owners get protections and rights to negotiate the terms of developing the gas.

“I think we want the minerals developed responsibly, efficiently, and with as minimal disturbance of surface property as possible, and the maximum amount of money coming back into the state in the form of royalties, severance taxes, and jobs,” Huber said.

But plenty of people still oppose the revised bill.

Anti-Forced Pooling Bill

“There are two basic groups. One that is opposed to developing natural resources and do not like the idea of oil and gas being developed and oppose it on any grounds, and then there’s a group who are opposing the forced pooling bill, of which I am one, because we feel it takes unfair advantage of property or mineral rights owners,” said President of the Brooke-Ohio County Farm Bureau John Smith.

Smith campaigned hard against the pooling bill during the last legislative session.

“They have rewritten the bill. Two or three of the more objectionable things have been taken out, but there are still a lot of problems with that bill.”

Smith talks about tax concerns, constitutional and legal concerns, a lack of transparency and control regarding lease deals and restricted access to industry knowledge when he talks about the current draft of forced pooling legislation– just to name some of the major issues he has.

Smith admits he’s not opposed to pooling altogether, but he worries that the legislative process may take what he considers an already unsatisfactory bill and make it worse.

But the number of those who oppose the legislation alongside Smith has dwindled some. That is partly because there’s talk now about completely different legislation that would, for all sakes and purposes, make forced pooling a much simpler matter.

EQT’s Pooling Bill: “Lease Integration”

“There’s a competing proposal from a single gas company – EQT – that they call ‘lease integration,’” said Thomas Huber of the West Virginia Royalty Owner’s Association. “They passed this proposal in Pennsylvania in 2013 and it’s been pretty devastating for many mineral owners and surface owners alike.”

The language in the Pennsylvania bill is a brief paragraph (section 2.1). It essentially allows companies to pool gas without consent from mineral owners as long as some kind of lease already exists, and as long as that lease doesn’t expressly prohibit pooling. The paragraph doesn’t mention surface owners, and it leaves royalty payments to the discretion of drillers. Some Pennsylvanians say the law has become a tool companies use “to beat down non-consenting property owners.”

“Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontal drilling unless expressly prohibited by a lease. In determining the royalty where multiple contiguous leases are developed, in absence of an agreement by all affected royalty owners, the production shall be allocated to each lease in such proportions as the operator reasonably determines to be attributable to each lease.”

In a phone conversation with West Virginia Public Broadcasting, an EQT spokesman said lease integration is a different and more efficient approach to developing gas, and that lawmakers would be wise to consider it in these days of low gas prices as industry needs incentive to continue to develop gas in West Virginia.

***Editor’s note: This graph has been modified from the original report to clarify that “80 percent” refers to a given land parcel, as opposed to property owners.

Forced Pooling Resurfaces in W.Va. Legislature

Two bills that both died on the final night of the 2015 legislative session, resurfaced Monday during interim meetings – forced pooling and public charter schools. Both ideas erupted in debate in 2015, but Monday’s discussions were calm and reflective – but not without some concerns.

The separate discussions Monday on forced pooling and charter schools were mostly on how to make these controversial pieces of legislation work for lawmakers and interested parties on both sides of the issues.

First, forced pooling –

Delegate Woody Ireland chairs the House Energy Committee and sponsored the forced pooling legislation during the 2015 session. He told his fellow lawmakers Monday they must do something about pooling, even if they don’t all agree.

Forced pooling works like this – When companies prepare to drill a well, they create a giant rectangle of land parcels and then negotiate with the mineral owners within that rectangle for their gas rights.

The 2015 bill would have allowed companies to force owners to sell their minerals if they could get 80 percent of the owners in their parcel to agree to the drilling. However, the 20 percent forced to sell would still get paid for their proportion of gas drilled.

Democrats and some tea party Republicans were strongly against the bill, even showing their discontent through demonstrations on the floor. On the final night, the bill died on a tie vote in the House.

Now, Delegate Ireland has proposed a new pooling bill.

“With the passage of this bill, it would create a lot of land owner protections that currently aren’t available,” explained Seth Gaskins, counsel to the committees on Energy, “and the new title for the bill is the Horizontal Well Unitization of Landowner Protection Act. We wanted to make sure that this bill is known as a protection bill as well as a pooling bill.”

One aspect of this new bill would clarify the royalty rights of mineral owners. It would protect owners from deductions if they are included in a pool without their consent.

But there’s more – Ireland is also proposing what he calls a companion bill to compliment the Horizontal Well Unitization of Landowner Protection Act.

“This bill attempts to create some transparency,” Gaskins said, “in the royalty payment process as well as institute or establish rather, reporting more frequent report of production…reporting of production data to the office of oil and gas.”

While there was little debate during the meeting, a couple lawmakers did express some concern over the two new draft bills, but Ireland says the legislature has to make pooling a priority.

“I think what we have currently is an opportunity to really improve on personal property rights,” Ireland said, “If you look at the statutes that includes forced pooling from the deep strata, and you look at what’s going on in the industry with a movement towards the Utica shale, which is a deep strata, so if we don’t do something, we basically have forced pooling already.”

The second controversial piece of legislation taken up during November interims Monday – public charter schools.

The 2015 bill on charter schools also died on the final night but not quite as loudly as forced pooling.

Public Charter Schools receive state and county funds just like regular public schools, but charter schools are not held to the same regulations as regular public schools. This in turn would give teachers at charter schools more flexibility in the way they deliver their curriculum, but they would still be subject to state education standards.

Lawmakers in the Joint Standing Committee on Education revisited the idea Monday and were presented statistics that showed increased test scores and creativity. Other studies, however, show charter schools do not increase student achievement and actually hurt low income and minority students. But Monday, lawmakers were presented with a new concern; lower rates of pay for educators.

“I’d say our teacher with twenty-eight years experience all-together is probably gonna make $38,000 and the teacher at the traditional public school is probably gonna make $58,000,” Susie Pierce said, the principal of the Rural Community Academy; a charter school in Graysville, Indiana.

Some lawmakers expressed concerns over how to attract and keep teachers in charter schools if they’re going to be paid less than traditional public school teachers.

Delegate Amanda Pasdon, a Co-Chair on the Joint Education Committee, says she’s looking forward to continuing the discussion in 2016.

“I’m glad that they were honest about their challenges,” Pasdon noted, “because what we’d like to do in West Virginia is take note of the challenges that other states have faced. We’re not reinventing the wheel, so we can learn from their successes and then also be aware of their challenges, so we know how to navigate them a little better.”