CHARLESTON, W.Va. — As an energy rally took place outside the Capitol on Wednesday, a couple of pieces of legislation affecting the natural gas industry were under consideration.
A bill that would require at least 75 percent of owners on a single tract of property to sign off on drilling was discussed and passed Wednesday morning by the Senate’s energy committee. It now goes to the Judiciary Committee. The bill already passed the House.
Meanwhile, on Wednesday morning, the House Judiciary Committee took up a bill dealing with post-production expenses on drilling projects. The bill passed out of committee on a voice vote.
That bill is a response to a state Supreme Court decision last year, allowing natural gas production companies to subtract “reasonable post-production expenses” from royalties rights on drilling projects.
In comments after the rally, Anne Blankenship, executive director of the West Virginia Oil and Natural Gas Association, said her organization is keeping an eye on both pieces of legislation.
On the first, often called co-tenancy, Blankenship said natural gas companies are watching for any potential changes to the bill. She described the bill as a balancing act among natural gas companies, land owners and royalty owners.
“You hear stuff every day, every few minutes things change and the rumor mill is active,” Blankenship said. “But the hope is that it stays very similar to how it is now so we don’t have problems on the other side.
“If there are substantive changes at all to the bill, obviously it’ll have to cross back over to the House side. We’re at a delicate tipping point, I think. We’ve all given as much as we can give. The different stakeholders will probably say the same. It’s not a perfect bill, but we’re willing to stop by it now.”
Holdouts or those who can’t be located would still have some rights under the bill.
Non-consentors would have two options. They could receive a production royalty equal to the highest percentage royalty paid to one of the consenting parties. Or, they could opt to share in revenue and cost of development — essentially winding up as a participant.
Work has been done to cobble the bill together since before the legislative session even started, as Gov. Jim Justice gathered those on various sides of the issue to try to find some common ground.
Bills dealing with natural gas drilling and property rights have fallen apart many times over the years, either failing to balance the rights of the various players or being weighed down by a variety of inter-related issues.
The other prominent bill that deals with energy is popular among land and royalties owners — but much less so with the natural gas industry.
The bill dealing with post-production expenses has been moving on two tracks in the Legislature.
It has passed through the Senate’s Committee on Energy, Industry, and Mining and is awaiting a look by Senate Judiciary. It has also been passed by House Energy. And today the House Judiciary Committee considered it and passed it.
The Supreme Court ruled last May that state law allows natural gas production companies to subtract “reasonable post-production expenses” from royalties it pays to people with royalties rights on drilling projects.
A ruling the prior year by the Court said a 1982 state law didn’t allow for the expenses to be subtracted. The court voted to rehear the question and came up with a different interpretation in the Leggett vs. EQT case.
“That’s just not something we can support,” Blankenship said today. “It basically is against the Leggett decision, and we supported the Leggett decision and felt like it was the right decision, so it’s not something we support.”