The House of Delegates has passed an important but controversial bill that provides a fair and equitable way for the natural gas industry and mineral rights holders to take advantage of the state’s massive gas reserves.

HB 2688 creates “lease integration” (or “forced pooling” as many call it) for deep and shallow wells. A driller who gets permission from the owners of 80 percent of the mineral rights on a tract of land can petition the seven-member Oil and Gas Commission to force the holdouts into the pool. Currently, a single holdout can block horizontal drilling into the Marcellus Shale.

The bill includes important protections for the holdouts.

The gas company must first make a good faith effort to negotiate with the holdouts. They must be paid “just and reasonable” royalties based on comparable payments in the region. The gas company cannot deduct any production and post-production costs from the royalties. (Those deductions are a sore spot with mineral rights holders.) There can be no surface disturbance on the forced pool tracts. Holdouts who are dissatisfied with the commission’s findings can appeal to circuit court.

The oil and gas industry has failed several times in recent years to pass forced pooling, but proponents took a different approach this year. Del. Woody Ireland (R-Ritchie), who has a long history of working with—and sometimes fighting with—the gas industry brought all the stakeholders together for meeting after meeting to reach a compromise.

The West Virginia Farm Bureau eventually signed on, saying the bill balances the importance of private property rights with the desire of farmers to capitalize on their gas and oil mineral rights. The West Virginia Royalty Owners Association, which historically opposed forced pooling bills, supported this bill. Spokesman Tom Huber says HB 2688 is a fair bill that “addresses both the needs of the oil and gas industry and the legitimate concerns of West Virginia property owners.”

Not everyone is happy. Among the 40 opponents in the House—the bill passed Wednesday 60-40—was a coalition of conservative Republicans and liberal Democrats. They argued forcing a property owner into a deal he objects to amounts to an illegal taking of property.

Historically, the courts have disagreed. Most states have some form of forced pooling law and the doctrine has been tested many times.  An American Law Reports review of state and federal court rulings concerning laws in a dozen states found that “compulsory pooling… ordinances are valid” and do no violate due process.

The opponents to HB 2688 chose to ignore that West Virginia already has forced pooling for all deep vertical wells into the Utica Shale and the current statute provides little protection for those mineral owners. This bill provides assurances for them, as well as the rights holders of the Marcellus deposits.

The stakeholders worked long and hard to write a reasonable bill and it appears they have done just that.

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Comments

  • Ritchie County 'Eer

    It should be no surprise that the lead sponsor of this bill, Woody Ireland, recently leased several hundred acres of his land to Antero Resources for several thousand dollars per acre.

    Moreover, Antero's VP is the one who originally drafted this legislation and presented it to the legislature at the November 2014 interim sessions.

    Delegate Ireland professed during debate on HB 2688 that he was a "little man" and did not receive any campaign donations from oil and gas companies. He also stated that he had only received a few hundred dollars in royalty.

    But who really needs campaign donations when you already received 7 figures from Antero?

    Who do you think he is beholden to? He knows who is buttering his bread!!!

  • Robert C. Byrd

    100 years ago the rugged mountaineers in southern counties were raped by the coal barons. Their coal was taken for pennies.

    Now the northern counties are getting their turn to get bent over by the energy industry's gas and oil barons.

    Read "Night Comes to the Cumberlands" and see why the southern coalfields are so depressed.

    FORCED pooling is taking the oil and gas of another without consent. If this was sexual, it would be rape. If this was typical property, it would be theft. Now it is made perfectly legal with this terrible legislation.

    Oil and gas companies are getting something for nothing! They are nothing more than thieves!!!!

    • Steve

      I did a little research. The current price of natural gas is $2.90/mcf. An average horizontal Marcellus well produces 45,000 mcf/month which translates to $130,500/month. A royalty owner receives a 1/8 share which would be $16,312.50. If the unit was 600 acres and you had 50 acres of it you would receive 8.33% of that which is $1,359.38/month. Most sites have multiple legs so if you had 4 legs you are now talking about $5,437.52/month. I would hardly call that nothing. This is just one scenario but it gives you an idea of why someone would want their oil and gas produced.

      • Bayard

        This might sound good to some but you need to realize that most contracts contain wording that companies can subtract "post-production costs" before your share is paid. These costs include building gas lines and compressor stations which cost millions of dollars. Your 1/8 share just got reduced by half.

      • The bookman

        The EIA puts NG prices increasing to $5/mBtu by 2025, and $7.50/mBtuby 2040. As a future fuel that will be in high demand, consider the impact on the rights holder in allowing them to decide WHEN to sell. It should be an individual decision, not an industry decision facilitated by the government.

        • Steve

          Might not be alive by then. Some might choose to get it while the gettin's good. Besides, if you believe the rhetoric, the world will be powered by alternative energy in just a few years.

          • The bookman

            I don't believe the rhetoric, and it should be the choice of the rights holder whether they should hold on to their investment, sell it before the die, or not develop it at all.

      • Andrew

        Great analysis Steve. Not mention the intial lump sum for the gas company to secure the lease. Some being thousands per acre.

  • Aaron

    For those making the argument that majority rules and that you had and American concept, I disagree. This country is not a democracy, we are a constitutional republic and the goal of our republic has been to protect the minority from the oppressive reach of the majority. This bill goes against the very foundation of this country as general Welfarw does not apply. That's my 2 cents.

    • Steve

      I think the republic was actually created to protect the majority from the oppressive reach of the minority. The royal elite class ruled over the masses and the system was set up to allow the majority to choose/elect who represents them.

      • Aaron

        And here I was under the impression that prior to our government, we were ruled by a Monarchy.

        The Articles of Confederation were replaced at the Philadelphia Convention because they knew the AOC would not work. A Constitutional Republic with 3 equal branches of government was chosen over a democracy because they knew that would not work either. A bicameral legislature was chosen to vastly reduce the possibility of majority rules legislation being shoved through.

        This bill is not reflective of any of those principals.

  • Jack Crab

    More Kerchival shilling for big bizz.

    If these properties were owned by his boss, Hop-Frog would be singing a different tune.

    Corporate theft.

    Private property? Why that is old school thinking. Get with the money is god mentality like Hop.

  • Sam

    West Virginia has always been controlled by certain big businesses. We were founded because of the railroad. Our politics have been dictated by coal and timber industry. Now with natural gas we see a new contributor to the system. If this bill should pass what is to say that ALL of our natural resources are not going to be included with this bill. For example, will I be forced to sell my coal rights because it is between another coal tract? Will I be forced to allow a timber company to build roads through my property to get to timber land? I know some will say this will never happen but if this bill passes we are giving up our rights as a property owner. Maybe gas and oil companies should pay the taxes and maintain our land since they are profiting from our mineral rights

  • GregG

    Now, now.....everyone just calm down. We shouldn't be so selfish. Our individual rights should never supersede the profits of big business.

  • Shadow

    How far underground do Mineral Rights go? Ponder, Ponder? They get pretty small at the Center of the Earth.

    • Aaron

      Shouldn't the industry have made that claim if they felt mineral rights did not extend into where they want to drill?

      • Shadow

        When they invented Mineral Rights, where ever or when ever, I wonder if they discussed how deep? Does anyone know? An interesting history is located at: http://www.swiftenergy.com/PUBLICATIONS/PAPERS-AND-ARTICLES/1999/gruy081199.htm

  • Marion

    I assume all the Republicans on here will leave the party. I know they won't stand for the government taking peoples property from them. You just watch how they raise heck with their party. It won't be pretty. Or, do they really care about such things?

  • Ron from Morgantown

    One thing you fail to point out . And thats the environmental concerns . We have 25 acres in a county w mineral rights . Our concern had less to do with royalties and more to do with how the natural gas companies were going to conduct their business . We wanted to protect near-by streams and other underground water so our neighbors source of well water wouldn't be adversely affected . We were also concerned about other things related to production like how the company would clean up the site post production . We never came to an agreement . That's business - sometimes things don't work out . Now you tell me this company can come back and conduct their business on my land on their terms and conditions ? See you in court .

    • Wow

      Not that i agree with the bill but it says that if you are a hold out, they can't conduct operations on your land or deduct expenses toward you. I don't agree with the bill but at least they can't come on your land to do it.

  • Hop'sHip

    Well they certainly gave more consideration to those impacted with this bill than they did for that abortion law. Seems like a reasonable compromise between disparate interests but it is likely to offend the Tea Party segment of the voting public. To make amends they should have given those people some more raw meat - maybe a ban on sharia law.

  • The bookman

    Hoppy, Hoppy, Hoppy!

    The Natural Rights of Man are at issue here, Hoppy. It is the purpose and responsibility of the Government of a free people to secure the innate rights of Life, Liberty, and Property.

    I recognize the validity of the public welfare in questions that arise between citizens whose right to property may affect another's right to property. Please explain the relevant point of public welfare here, where there exists an abundance of NG, so much so that industry is stifled by the price of the commodity as a result of the abundant supply and lack of distributive demand.

    In such an environment, the greater good would best be served by an increase in price. Forced pooling places downward pressure on price, both by increasing the supply and reducing the competition for royalties to mineral rights holders.

    In one commentary, you have managed to place yourself opposite of both John Locke and Adam Smith. Is that where your philosophy resides?

    • Hop'sHip

      Bookie: In regards to inconsistent positions, did you not dismiss concerns about TransCanada being allowed to use eminent domain to facilitate their corporate pipeline vision?

      • The bookman

        I believe there is a real public interest being served by promoting reliable, safe energy infrastructure in this country. I also support the development of NG pipeline distribution throughout WV that delivers our product to markets. I own property in the potential path of one of these projects, so I may be personally impacted. If you have read my comments, I don't think you'll find them to be incompatible.

        • Hop'sHip

          You get to decide what is "real" public interest? After consultation with John Locke and Adam Smith? Does God weigh in? BTW I have observed in the past that these right away decisions usually seek the path of least resistance, i.e. that which primarily impacts the political powerless. I doubt you meet that description so I suspect your property concerns will be addressed.

          • The bookman

            No, I don't get to decide. I have asked for someone to present the compelling public interest that justifies taking personal property. So far, all that has been presented is the interest of industry and a collection of willing participants in search of a payday. That is certainly their right, but doesn't meet the threshold of benefitting the public at large. In fact, by keeping prices low, it actually hurts the collection potential of the resource to the state.

            I don't claim to be the arbiter. I simply have an opinion. Given that I have given it careful consideration, and that I now see we have come to a different conclusion, I feel even more certain in the direction I've chosen.

    • Hop'sHip

      That is surprising coming from Hoppy who in the past has spoken of life, liberty and property rather than life, liberty and the pursuit of happiness, presumably because the latter allowed too broad an interpretation. Maybe with his coal friends struggling, Hoppy is looking for a new BFF.

  • The bookman

    Hoppy, Hoppy, Hoppy!

    The Natural Rights of Man are at issue here, Hoppy. It is the purpose and responsibility of the Government of a free people to secure the innate rights of Life, Liberty, and Property. I recognize the validity of the public welfare in questions that arise between citizens whose right to property may affect another's right to property. Please explain the relevant point of public welfare here, where there exists an abundance of NG, so much so that industry is stifled by the price of the commodity as a result of the abundant supply and lack of distributive demand.

    In such an environment, the greater good would best be served by an increase in price. Forced pooling places downward pressure on price, both by increasing the supply and reducing the competition for royalties to mineral rights holders.

    • The bookman

      Duplicate post. Sorry folks.

  • Wirerowe

    Hoppy I am opposed to the government facilitating the forced taking of private property for solely private purpose. What problem is the forced pooling bill supposed to correct? Stagnant productions? EIA indicates that between 2097 and 2014 natural gas production in the Marsllius( West Virginia and Pa) grew from around 1.5 billion a day to 15 billion a day. That is a astronaucal growth rate of around 900 % in only 7 years. All of this without forced pooling in West Virginia. Forced pooling is a solution in seek of a problem that takes away the rights of private property owners.

    • Jason

      Did you r read the article? "A driller who gets permission from 80 percent of the mineral rights owners on a tract of land". In this case 20% of the owners are preventing the 80% from developing their property.

      • Wirerowe

        The developer is not paying the 20 % what they need to make the deal. the Government is forcing the 20% to sign a lease because they know how to negotiate better than the 80%. please explain what the lack of forced pooling is causing. We have dramatically increased production in natural gas in West Virginia without this law. Now with historic lows in natural gas, oil and liquids what we need is less production not more. The industry has not made the case for why this legislation is needed,

        • Wirerowe

          Sorry ahoukd read the developer through the land person,

      • Ron from Morgantown

        Right . But it's still my 20 per cent . Drill all you want on the 80 , just leave my 20 alone . What's not to understand ? I own the land , I own the mineral rights . My family has owned the land for 3 generations . And you want me to submit to an out of state greedy natural gas company ? Get off my land .

        • Jason

          Currently you cannot drill on the 80%, or even the 99%. Gas is "pooled under all of the land. You cannot extract gas from the 80% without also extracting from the 20%. If I drill on my land, it will take the gas from under your land whether you allow drilling or not. Why try to make everything about "out of state", it is about one neighbor stopping another neighbor from selling an asset.

          • The bookman

            Disagrees with what? Cushing is the delivery point for WTI. WTI is the benchmark light sweet grade that is US oil. Cushing is also the crossroads of the major pipelines that come from Northern Production areas toward the Gulf. Is there a surprise that Cushing is overwhelmed with oil of any variety given we are producing or importing a million barrels every day more than what we are consuming?

            Should be no surprise. Here is another link you should read.

            https://rbnenergy.com/they-did-it-seaway-canadian-heavy-crude-starts-to-compete-at-gulf-coast-refineries

            The world is awash in oil. The trick is having it in the right place, at the right time.

          • Aaron

            Pennsylvania does a bettrr job of protecting their citizens. When permit fees came up at the beginnig of this boom, they raised their fees significantly to cover cost of inspectors and oversight. WV tried but industry bullied our legislature with similar tactics used in this bill. WV fees remained minimal despite the hundreds of millions being made and the State can't hire inspectors because they can't come close to industry pay.

          • Hop'sHip

            Bookie: Are you sure? Here is someone who disagrees:

            http://www.forbes.com/sites/christopherhelman/2015/03/04/u-s-running-out-of-oil-storage-blame-canada/2/

          • Wirerowe

            Hops traveling . What Bookamn said. have a great weekend.

          • The bookman

            We have a glut of light sweet crude. We have a demand from domestic refiners on the gulf for heavy sour crude. The Tar Sand Crude is heavy and sour. You cannot make light and sweet heavy and sour. What is so hard about this issue?

          • Hop'sHip

            Wire: Maybe you haven't noticed but we also have a glut of crude oil. But you seem to think it necessary to trample Nebaska property owner's rights to aid TransCanada's financial interests. Is it just the Obama factor that makes the difference?

          • Wirerowe

            Andrew who is going to make an invesment without all the leases tied up. You say possibly. I do not believe in taking property owners rights away for possibly. We are producing natural gas at very high levels without forced pooling . What is the specific lost due to lack of forced pooling by any metric ?Say lost production as a percentage of total production. Laws should be written to address a specific problem that has occurred not a possibility. I am a 100 percent chamber/ fossil fuel guy but I think this a bad bill.

          • Andrew

            Hey Ron – think about these companies that spend millions on leases to extract oil and natural gas. With the possibility to have a handful of mineral owners stop them from recovering their investments. Let’s just tell these operation and drilling companies to stay in Pennsylvania and keep their thousands of jobs. Also keep the millions of dollars in royalties and taxes revenues. We’re good down here in WV don’t have any problems with jobs or tax deficits.

          • The bookman

            So if you drill on the 100%, how do they currently manage to extract only within the unit. Your assumption is that they are sticking a straw in the ground and sucking out the contents of the reservoir. There is much more control over the scale of the extraction.

            It is about the efficiency of the operation. Private property rights should stand above profit margin. I agree that they may be compromised in the name of the greater public good, but I am not convinced that this is about the public's interest.

          • Ron from Morgantown

            Couldn't it also be described as one neighbor forcing another neighbor to do business against their will ?

  • David McKain

    Thought I read "Fair and Balanced" - watch out, Fox News has to have trademarked that phrase.

    Of course, fair and balance is in the eye of the beholder.

  • CaptainQ

    Hoppy, with all due respect, I fail to see anything 'fair' about a method that takes something that belongs to someone else without their permission. I don't care if other states do this, it doesn't make it fair or just.

    To me, this sets a very bad precedent, a legal foundation for further expansion of eminent domain. I know there will be those who will argue that this new potential law is necessary for progress, but it doesn't seem like progress when it sacrifices individual rights.

    Anyway, I am stunned that the GOP majority in Charleston is pushing for this. I realize that the voters who put the Republicans in charge in November wanted change, but is THIS the kind of 'change' the public is demanding?

    • wvu999

      Shocked.... Really???
      The speak of the house works for a natural gas company