CHARLESTON, W.Va. — The Senate Judiciary Committee approved the cotenancy bill HB 4268 — unamended Tuesday evening and sent it to the full Senate.
Industry representatives and House Energy Committee members were there to watch. Many expressed relief because the governor had minutes before reversed his Monday statements that he would veto the bill in favor of a special session package combining cotenancy, forced pooling and a severance tax hike designed to pay for teacher and state employee raises.
Justice said Tuesday he’d come up with a different raise plan and won’t veto the bill.
Cotenancy deals with a single mineral tract owned by more than one person. HB 4268 allows an operator to move ahead with development once its strikes agreeable lease arrangements with at least 75 percent of the tract’s owners.
It requires that nonconsenting owners receive the highest royalty paid to the majority owners. Royalties for unknown and unlocatable owners are placed into an account. After seven years, if unclaimed, half goes into a state fund to cap abandoned wells and half goes to support PEIA.
Also after seven years, surface owners may take action to acquire the title to the interests of unknown or unlocatable owners. Surface owner agreements are required if the law is used to acquire any parcel along a lateral and the owner’s surface will be disturbed.
Sen. Mike Romano, D-Harrison, is known for his lengthy, incisive questioning of bills, especially those he opposes, and was expected to lead the opposition in committee.
He opened with, “What if you’ve got an idiot who agreed to the lease?”
His contention was that if you’re in the 25 percent, you have no means to negotiate a better deal. Even if you want to negotiate, at some point the producer can end talks and force you in with the 75 percent.
He was also concerned with the issue of producers holding leases by developing a small part of a property and leaving the rest untouched. He proposed an amendment for what’s called a Pugh clause, which would limit the rights of the producer and preserve the rights of the nonconsenting cotenants for any undeveloped portion of the tract.
It was a conceptual amendment and not precisely worded. A version of this appeared in an early draft of the House Judiciary committee substitute, but was removed before the committee took it up.
Sen. Randy Smith, R-Tucker and Senate Energy chair, opposed the amendment saying the bill as is was the result of months of negotiations among diverse stakeholder groups and any unwanted changes could undermine the fragile coalition. “Any time you can get this many groups together, it shouldn’t even be an issue.”
Romano responded that they wouldn’t be doing their duty if they didn’t scrutinize an agreed-to bill. And he’s gotten hundreds of emails opposing it.
The amendment failed in a voice vote. The bill then passed in a voice vote, but not unanimously.
Story courtesy David Beard/The Dominion Post