CHARLESTON, W.Va. – One of the bills aimed at raising money to cap orphan oil and gas wells cleared the House of Delegates Wednesday and heads to the Senate.
HB 2779 provides a means for royalties due to unknown or unlocatable mineral owners to be transferred to the Oil and Gas Reclamation Fund after seven years. The fund, which has about $400,000 now, is used to cap abandoned and orphan wells.
The bill addresses two situations.
One deals with partition suits, where multiple mineral interests in a single tract are sold to a single buyer via a civil suit and the proceeds are divided among the previous owners.
For unknown and unlocatable owners in these cases, the sale proceeds are held in receivership in county courts. Under the bill, funds unclaimed after seven years will go into the reclamation fund.
The other concerns instances where, after seven years of unpaid property taxes, the surface owner has the option to buy the mineral rights. In these cases, the bill says royalties accumulated and held in the court up until the time the surface owner signs the deed will go to the reclamation fund. The surface owner will receive all subsequent royalties and rights to future development.
Explaining the bill on the House floor, Energy chair Bill Anderson, R-Wood, said it’s an environmental protection bill that could cap thousands of wells.
During consideration of a cousin bill, HB 2673, legislators learned that well capping can cost anywhere from $29,000 to $100,000 depending on the complexity of the job. The state Office of Oil and Gas averages the cost at $67,000 per well.
HB 2763, which was on Wednesday’s Finance Committee agenda but pulled just before the meeting, would provide a tax break for low-volume oil and gas wells by eliminating the 5 percent severance tax and substituting a 2.5 percent fee that would go into a new Oil and Gas Abandoned Well Plugging Fund.
That fund is intended to reach $4 million, which would cap about 60 wells based on the average cost.
There are 4,576 orphaned wells in the state, and virtually no capping is going on — about half a dozen in the last five years.