CHARLESTON, W.Va. — Debate has started on key pieces of natural gas legislation, particularly co-tenancy policy that would allow drilling on a tract if three quarters of property owners are agreeable.
The co-tenancy bill was introduced in the House Energy Committee on Thursday but there won’t be a vote on the matter until next week. Democrats on the committee made it clear they intend to caucus.
Lawmakers were working out some details over the rights of those who disagree or who can’t be located.
Non-consentors would have two options, as the bill was introduced. 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.
“It’s clearly one of the more important pieces of legislation under consideration as we begin to try to modernize our mineral laws in this state,” said Bill Anderson, R-Wood, the chairman of the House Energy Committee.
“I’m comfortable that we have the votes together to move the bill forward, I believe on a bipartisan basis. And I would hope to complete action on the bill no later than next Tuesday.”
The committee on Thursday unanimously passed a bill that would produce greater financial detail on royalties. The bill, which is sometimes called the check stub bill or the transparency bill, now goes to House Judiciary.
Natural gas legislation was the focus of two days of stakeholder meetings led by the Justice administration prior to the start of the regular legislative session.
Those involved in the meetings decided to unbundle legislation related to natural gas and let each stand on its own.
Last year, a bill that dealt with several aspects of natural gas drilling stalled out in the House Energy Committee.
“This is the first year it’s come up basically as a stand-alone thing,” Anderson said of the co-tenancy bill. “Senate Bill 756 last year brought in both what’s commonly called forced pooling or lease integration along with co-tenancy.
“The lease integration or forced pooling will never pass the House of Delegates in present format or, I believe, in the foreseeable future.”
Anderson is among the supporters of the co-tenancy legislation that would allow a supermajority of those with rights in a lease to reach an agreement with drillers.
“This would allow the overwhelming majority — if at least 75 percent of the mineral ownership wants to proceed with a lease, they could enter a lease and proceed forward,” Anderson said during an interview on the House floor.
The minority chairman of the committee is Dave Pethtel, D-Wetzel.
Pethtel said Democrats may get on board but need time to go over the details of the bill.
“I know that there’s concerns about the surface owners agreement. We’re trying to work with the Farm Bureau and the surface owners organization to try to get those straightened out,” Pethtel said in a conversation prior to the Energy Committee meeting.
Those groups have been involved in shaping the bill, each part of the balancing act that also includes industry representatives.
Dwayne O’Dell, the director of government affairs for the West Virginia Farm Bureau, said he has a positive first impression of the bill but added that he’d like to see some tweaks.
O’Dell said an agreement among 75 percent of the rights holders is the minimum his organization would accept. He said the bill generally includes acceptable protections for minority rights holders.
“We need to think in a complete package,” he said. “We have certain tracts of land in this state that our oil and gas friends have not been able to develop because the majority wanted to develop; a minority held up development.
“So you have to look at private property aspects from that point of view as well — but we also wanted the minority to be well-cared for in this process.”
Tom Huber, president of the West Virginia Royalty Owners Association, expressed satisfaction with both the co-tenancy bill as it was introduced and the check stub bill.
“I think both bills balance the rights of the royalty owners and the land owners as well as the necessity to facilitate drilling and production in the state for the good of everybody,” Huber said.
“I think we did a good job of producing a co-tenancy bill that balances the rights of the majority against the rights of the minority in a mineral tract that facilitates development. That means more money for royalty owners, more money for the state, less surface impact in general.”
He said his group loves the transparency bill that was being taken up.
“You can see a whole lot of information to kind of determine if you’re being paid correctly,” Huber said. “You can determine if you’re being treated fairly rather than just having a number without any explanation.”
The West Virginia Surface Owners Rights Organization planned to push for a couple of amendments, said David McMahon, who represents the group.
“We’re against it unless two amendments are made,” McMahon said before today’s meeting.
One, McMahon said, would protect the rights of surface owners whose property winds up in heavy use by machinery — no matter which adjacent tract winds up producing the natural gas.
“You’re going to be spending more time on my surface with more trucks and more light and more noise,” McMahon said.
The second provision has to do with the minority that doesn’t sign a lease, he said.
“I don’t think I should get stuck with the terms of the other 75 percenters,” he said, describing a possible situation where a family of four cousins might be presented with an agreement with three consenting to the terms and the fourth thinking it’s awful.