Legislature, Governor, make right call on co-tenancy drilling bill

The teacher and service worker strike and related issues have dominated the West Virginia Legislature for the last couple of weeks.  In the meantime, however, lawmakers have been working on other bills.

One of the most significant pieces of legislation this session that we didn’t hear much about during the strike is HB 4268, the Co-tenancy Modernization and Protection Act. The legislation finally resolves a long-standing issue with gas drilling.

It allows for owners of 75 percent of the interests in a single tract of land to permit the development of gas and oil.  Currently, all 100 percent of the owners have to agree to lease the mineral rights.

That is often an impossible standard to meet, especially with older leases that have been passed down through generations.  A single mineral tract might have dozens, even hundreds, of co-owners. Under the current system, even one objecting rights holder can block or delay the lease.

The House of Delegates worked diligently to craft a bill that was fair to all the stakeholders—the mineral rights owners, the surface owners and the gas companies. The bill passed the House 58-41 and cleared the Senate 23-11.

Most of the opposition came from Democrats, some of whom want to use it as an issue in this year’s election.

The opponents claimed the bill infringes on private property rights. That notion also registered with a few Republicans. But the bill actually protects the rights of the majority owners to profit from their investment.

The bill also requires that minority owners are fairly compensated. They are entitled to the highest royalty percentage paid to the majority owners. Surface owners who do not own the minerals below them are also protected through “surface use agreements” that create new rights on issues such as well pad locations and roads.

Some opponents also tried to misrepresent the bill by calling it “forced pooling,” knowing that phase would cause alarm.  That’s a much different process. Pooling would allow for separate tracts to be combined for horizontal drilling even if a majority of owners have not agreed.

Governor Jim Justice had been sending out mixed signals on the bill.  He has long wanted a combo bill of co-tenancy and pooling, along with a fluctuating severance tax rate.  However, the Governor said on Talkline Wednesday that he will sign the co-tenancy bill.

“There is a lot of positive benefit in co-tenancy,” Justice said. “If there’s more gas produced and there’s more opportunity within West Virginia, we’ll get a higher severance tax, I will sign it.”

That’s a smart move, and one that will benefit the state, West Virginians who own the mineral rights, the gas drillers and related industries.  This is not a campaign wedge issue, but rather reasonable legislation that was molded by public policy makers and stakeholders to meet a need.

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