CHARLESTON, W.Va. — The Senate Energy Committee made quick work Thursday of approving two House bills to raise money to cap orphan oil and gas wells across the state.
Committee Chair Randy Smith, R-Tucker, said the two bills reflect the work of industry and the environmental community cooperating for a common goal.
“I want to tell all the stakeholders how much we appreciate your work on these bills,” he said.
House Bill 2673 will provide an exemption to the 5-percent severance tax for gas wells producing less than 60,000 cubic feet per day and oil wells producing less than 10 barrels per day. Instead of a tax, these wells will be charged a 2.5 percent fee on the value of product sold that will go into an Oil and Gas Abandoned Well Plugging Fund.
House Bill 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 bill addresses two situations; one issue is with partition suits, where multiple mineral interests in a single tract of land are sold to a single buyer via a civil suit and the proceeds are divided among the previous owners. The money is held in county courts for unknown and unlocatable owners in these cases. Under the bill, the court will appoint a guardian for the funds, and funds unclaimed for seven years will go into the reclamation fund.
The other deals with situations where, after seven years of unpaid property taxes, the surface owner has the option to buy the mineral rights. In these cases, 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.
There are 4,576 orphaned wells in the state and little capping is happening – about half a dozen in the past five years. Wells are considered orphaned if there is no owner on record and no one holds responsibility for it.
When the Oil and Gas Abandoned Well Plugging Fund reaches $4 million, fee collection will be suspended for the subsequent calendar year. It has been estimated $4 million could cap about 60 wells.
For HB 2779, it’s not known how much unclaimed money counties have accumulated. Committee counsel said some may have as much as $7 million.
Speaking on HB 2673, attorney Phil Reale, representing the Independent Oil and Gas Association of West Virginia, said the bill will help small operators of old vertical wells who face production challenges and competition with the vastly more productive Marcellus shale wells while also helping the environment.
Reale added since the state doesn’t cap wells, the state Department of Environmental Protection will have to contract with some IOGA members, which could create some new jobs.
“Frankly, it is a good day for us,” he added.
West Virginia Surface Owners Rights Organization co-founder Dave McMahon told the members that orphan wells are the most widespread environmental and property rights problem in the state.
Issues McMahon noted included leaking, damaging the soil and water table, as well as affecting property values.
He added are another 8,000 wells not producing gas that will soon be orphaned, additionally estimating HB 2779 will plug 200 wells in its first year and 30 per year after that.
From Energy, the bills take separate paths to the Senate floor; the Finance Committee will consider HB 2673, and the Judiciary Committee will take up HB 2779.