Eminent Domain of Gas Rights Discussed Around W.Va.

Eminent domain is when a government entity takes over private property for public use. A piece of legislation is forming that would essentially allow that to happen in the northern gas fields of West Virginia. Only the government entity is allowing private industry to take over property, which is in gas form, 6,000 feet below the surface. And it won’t benefit the public directly, unless you count severance taxes.

The practice is called “forced pooling,” and public meetings continue around the state to allow members of the public to learn more about it.

Under current state law, when gas companies attempt to drill a well, if a royalty owner in the area refuses to sell or lease rights, the company cannot drill the well. Forced pooling could change all that. Industry stakeholders have been pushing the idea with legislators since the Horizontal Well Control Act was passed in 2011.

Industry stakeholders say forced 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 now Vice President Tom Huber has organized and is moderating discussions around the state to explain what new legislation could mean for mineral owners.

“I helped negotiate the bill,” said Huber, “it’s kind of a part of me.”

Huber says his only objective in these meetings is to give people information so that they can make up their own minds about whether to support the bill.

“I think, personally – this is my belief — if people know what’s in the bill they will support it. This is a negotiating tool for royalty owners to get a better deal.”

During the meeting, Huber referred to the “deep well statute” in West Virginia code, which already allows for forced pooling of deeper shale rocks, like the Utica formation. A forced pooling law applied to the Marcellus formation would require owners of 80 percent of a land parcel, based on net acreage, to voluntarily lease rights. Owners of the remaining 20 percent would have to accept leasing terms if an expanded oil and gas conservation commission orders it.  

Reactions at meetings have varied, Huber says, from enthusiastic and inquisitive to hostile and suspicious; he says the reactions he gets often depend on the companies communities are encountering. Mostly, though, he says people just don’t want to be taken advantage of.

Huber says the West Virginia Royalty Owner’s Association will likely make a final draft of a forced pooling bill available for review later this month. While there has been talk of a special session to discuss the matter, Huber expects the bill will more likely be introduced during the 2016 legislative session.

Similar legislation died by a single vote during the final night of the 2015 session.

Royalty Group to Hold Meetings about Forced Pooling Bill

The West Virginia Royalty Owner’s Association will begin a round of public meetings across the state next week to talk about a piece of controversial legislation.

The meetings held across West Virginia will focus on forced pooling or lease unitization. It’s a practice in the natural gas industry where gas companies parcel of groups of land in an attempt to drill a well.

Under current state law, if a royalty owner refuses to sell their rights to the company, it can’t drill the gas well, but lawmakers attempted to change that during the last legislative session. 

Republican leaders attempted to pass a bill that said if 80 percent of the royalty owners agreed to the well, than the other 20 percent would be forced to sell.

The WVROA will be taking questions about the legislation that is expected to be introduced again in 2016. They’ll hold seven meetings before the end of August. All meetings begin at 6 p.m.:

August 10- Charleston Moose Lodge, Charleston

August 13- Upshur County Moose Lodge, Buckhannon

August 17- Marshall County American Legion, Cameron

August 20- Wood County Moose Lodge, Parkersburg

August 24- Fairmont Middletown Mall, Fairmont

August 27- Glenville Inn, Glenville

August 31- Hancock VFW, New Cumberland

House Passes Forced Pooling

After a session that lasted almost until midnight Tuesday night, members of the House got an early start Wednesday morning to pass a flurry of bills. Here’s a look at three of those bills, but first a look at a proposed constitutional amendment that passed protecting homeowners from creditors after the passing of a spouse.

House Joint Resolution 13 was first on the agenda. Delegate Eric Nelson of Kanawha County, the House Finance Chair, explains.

“This is dealing with the Homestead Exemption Increase,” Nelson said, “As amended yesterday, the $20,000 would increase to $40,000. And again, our Homestead line item has not been increased since 1982, and I believe that the amendment also took away the county option and made this option of the authority. Mr. Speaker, I urge passage.”

House Joint Resolution 13 passed 93 to 3. If this joint resolution passes the senate the question about increasing the homestead exemption would be on the ballot in the Fall of 2016.

House Bill 2148 relates to the state’s open container laws. It creates a misdemeanor offense for having an open container of alcohol in certain areas of a vehicle; specifically in the driver’s and passenger’s seats. The language is required by the federal government so the state can keep getting federal highway funds.

Delegate Gary Howell of Mineral County supported the bill, but was concerned about cars without traditional trunks, like SUVs. Howell questioned the Judiciary Chair, Delegate John Shott of Mercer County.

“Do we have anything in this if someone, say collects beer cans for the aluminum,” Howell asked, “and they put it inside the passenger compartment, and there’s residue in them, are they breaking the law or not?”

“I don’t think there’s anything specifically exempting that,” Shott answered, “and I assume that if there’s any residue of alcohol in them, they should put them in the trunk and not in the passenger compartment, otherwise they risk violating this statute.”

“So an SUV, where you don’t have a trunk, they would be risking breaking the law,” Howell asked.

“Once again, in an SUV, you have a luggage compartment. I think what this refers to is that the passenger compartments of, I have an SUV, there’s an area in the back of my SUV where I put all types of luggage, even trash, so that’s where I would recommend you put it to avoid any, any misunderstanding,” Shott said.

House Bill 2148 passed 92 to 4.

House Bill 2939 requires the mandatory reporting of sexual offenses on school premises involving students. The bill is in part a response to an incident at Capital High School in Charleston. The Principal there was accused of knowing about an incident on campus, but not reporting it within the current legal time limit.

The case against the principal, however, has been questioned because of confusion over the current law. The House Judiciary Committee discussed a loophole in state code where there is no specific requirement of certain personnel to report such incidents. The Committee also updated the definitions of sexual offense and sexual abuse.

The bill had bi-partisan support in the full House, but some Democrats had some concerns. The bill requires an incident to be reported “immediately,” and a handful of Democrats were concerned this term, immediately, left the reporting requirement open for interpretation. Another concern related to the pressures this bill might bring on teachers.

Democrat Peggy Smith of Lewis County told her colleagues it will be a nightmare.

“I’m gonna have to tell every teacher who comes to me, you gotta report it whatever it is, don’t risk not reporting it,” Smith noted, “I’m gonna have to tell every principal that. They’re gonna overwhelm law enforcement, they’re gonna overwhelm the state police. They’re gonna overwhelm the system, and it’s gonna take a lot of time, when they already have to report it. We already have a system that requires that we report, and it’s rarely abused, and I think this is a terrible mistake.”

Another Democrat, Delegate Shawn Fluharty of Ohio County, however fully supported the bill.

“This bill was fully, fully vetted in Judiciary,” Fluharty said, “Every scenario under the sun was brought up, many of which were repeated today on the floor, and the protections were weighed; protections of the students that attend our schools and the protections of the teachers that run them. And we understand the value of protecting both of them, and we fully vetted it. As the bill is right now, the teacher sees something, they have a duty to report; duty to report to law enforcement. Many law enforcement are actually on campuses throughout our state, so their duty to report ends there. They report it to law enforcement, law enforcement then puts it in their hands because they’re well trained, established and know what to do with the facts.”

House Bill 2939 passed 86 to 9.

House Bill 2688, a bill related to forced pooling, caused a storm on the floor. When companies prepare to drill a well they create a giant rectangle of land parcels and then negotiate with each mineral owner within that rectangle for their gas rights.

The bill allows companies to pool the mineral owners within that rectangle together to purchase their mineral rights. If they can get 80 percent of the owners in their parcel to agree to the drilling, the bill allows for the drilling to occur without the consent of the other 20 percent. Those 20 percent, however, are still required to be paid for their proportion of the gas drilled.

Democrats and some Republicans are heavily against this bill because they say it forces eminent domain for economic development.  Delegate Pat McGeehan of Hancock County strongly opposes the legislation and to make his point, requested the clerk of the House read through the entire 43 page bill this Wednesday morning.

After an hour of reading, Speaker Armstead gave the house four hours to debate it. But after two hours of debate, the House approved the bill, 2688, to a vote of 60 to 40.

Industry Backed Bill Could Force Mineral Owners to Sell

As lawmakers return to town this week for their final interim session of 2014, they’ll learn more about a practice in the natural gas industry companies want them to approve through legislation: forced pooling.

Kevin Ellis, president of the West Virginia Oil and Natural Gas Association, explained to lawmakers during a November meeting, when companies prepare to drill a well they create a giant rectangle of land parcels and then negotiate with each mineral owner within that rectangle for their gas rights.

By pooling these owners together, companies can drill a well and then pay out mineral owners proportionally by land acreage for the gas produced.

But Ellis said there are two common problems companies run into when trying to negotiate well contracts. The first is missing owners. Companies research to find mineral owners, but sometimes they just can’t track them down. The second are owners who refuse to negotiate.

When either of those situations occur, a company’s only recourse currently is to go to court, but forced pooling would give gas companies another option. 

The bill Ellis presented to legislators for their consideration states if two thirds of the landowners within that parcel can be found and agree to the drilling, forced pooling would allow companies to take their proposals to a state review board for approval and, if they get it, allow them to drill without all of the mineral owners’ permission.

The companies would still have to pay those mineral owners, but forced pooling allows the gas company a way around a difficult negotiation. 

clearly from a time perspective, it’s always preferable to be able to reach contractual voluntary negotiations and agreements with land and mineral owners to do this work,” Ellis said, but it’s not always possible.

David McMahon, a Charleston attorney and co-founder of the West Virginia Surface Rights organization, will appear before the same group of lawmakers Tuesday to share his opinion on the bill.

McMahon said forced pooling isn’t always bad, but certain provisions must be contained within such a piece of legislation in order to make it viable for surface and mineral owners.

  1. Forced polling should be part of a larger comprehensive bill that will address both environmental and health issues related to horizontal drilling. McMahon said lawmakers commissioned studies on both issues years ago, but have yet to address them.
  2. Royalties from missing owners should be turned over to the surface owner of that parcel instead of given to the state as the industry bill proposes.
  3. Surface owners may not be forced to have a well head located on their property if they refuse. McMahon said this provision is already in the industry bill.
  4. The make up of the gubernatorial appointed review board should include a surface or mineral owner to protect their interests.
  5. Companies should be required to pay mineral owners the fair market value price of the gas and be given access to information about how much their neighbors were paid in the negotiating process.

McMahon said such provisions help protect surface and mineral owners in a complicated negotiation process.

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