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Royalty owners group hopes to improve bill moving through House

CHARLESTON, W.Va. — A group representing royalty owners says it’s not pleased with how a bill ended up coming out of a House of Delegates committee this week.

The bill, HB 2802, is intended to protect mineral owners from losing their property in partition suits.

Delegate Scott Cadle

However, the leaders accepted an amendment that, in the view of the mineral owners present, removed the intended protections. The bill went on to pass the House Energy Committee back on Thursday.

HB 2802 is a mid-size bill at 11 pages, but complex. We can break the major points into bite-size pieces to explain it as it started and how it was changed.

Partition suits are used when a mineral tract has multiple owners (called cotenants) and one owner wants to acquire all the interest via court action – either to reap all the value or to sell off the whole tract.

There are two kinds of partition actions: partition in kind, in which the tract is broken into separate parcels according to each owner’s share of the parcel; and partition by sale, in which the tract is sold and the proceeds are divided according to the former owner’s share.

As explained in committee, natural gas development companies will frequently buy small shares of a tract and use that to force a partition sale, often paying less then market value for the full tract.

The bill set up a multi-step due-process procedure for partition suits. It would apply only to severed estates, where the minerals and surface ownership are separated, and are co-owned by heirs who acquired the property from a relative and have no partition agreement in place. This would rule out purchases of small slivers by industry in order to force sale of tracts.

John Kelly

The cotenant or cotenants filing the suit would have to serve adequate notice to the other cotenants. The parcel would be independently appraised and value established.

Once the value was established, any cotenant other than those who filed the suit would be eligible to buy out the interest of the plaintiffs.

If that didn’t occur, the tract would go up first for private auction among all the relatives who are heirs; failing that, for commercial real estate sale (not a public auction on the courthouse steps as in current code).

Delegate Scott Cadle, R-Mason, offered an amendment so that the bill would apply only to estates where the surface and mineral rights are not severed – a small minority of estates in West Virginia.

Committee vice chair John Kelly, R-Wood, is lead sponsor and said the amendment would do no harm to the bill.

Delegate Mike Caputo, D-Marion, said it appeared to him that the amendment gutted the bill, and was one of the few to vote against it.

Apart from Caputo’s comment, there was no discussion of the amendment or the amended bill, which then passed in a voice vote with even less dissent than what was offered to the amendment.

Phil Reale

Industry interests hadn’t been pleased with the bill in its original form and viewed the amendment as an improvement by limiting its effects.

Speaking for the Independent Oil and Gas Association-West Virginia, attorney Phil Reale said, “Frankly, I think it probably avoids the sterilization of a lot of property, in the oil and gas sense, that could be put into production over a long period of time.”

The West Virginia Royalty Owners Association had supported the bill in its original form and isn’t happy with the change.

Association President Tom Huber said, “The change was tragic for mineral owners. The royalty owners in north-central West Virginia that have been subject to these abusive lawsuits filed by the oil and gas industry have been pushing for reform to the statute. The amendment offered and adopted by the Energy Committee has gutted the bill and made it no longer protective of oil and gas royalty owner.”

The bill goes next to Judiciary before hitting the House floor, and Huber said he’ll keep working to undo the changes made in Energy and restore its protections.

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