Court Partition of Mineral Lease sought by gas company

My family has 130 acres of mineral rights in WV. In 2012 some, but not all, signed a lease with gas company X. Since signing the lease in 2012 we have had other dealings with gas company X, on another property, which have not been favorable: 35%+ deductions (even though our lease prohibits deductions), no payments of royalties for NGLs or oil.

The lease we signed in 2012 expires in 2 years and that is what we would like to happen. We do not want to do further business with gas company X.

Recently we received a letter from gas company X stating that they were going to take us to court to: "partition the oil and gas estate pursuant to WV Code 37-4-1, et seq."

The letter from company X states that the Court has the authority to partition the minerals or sell the minerals to the highest bidder.

Any thoughts on this?

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0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on December 5, 2015 at 7:41am

Read the law and then find a lawyer to explain any part of it you don't understand.

I'm betting you are being Strong Armed by this company who thinks they have another non-thinking landowner on the hook.

As a side note for WV Real Estate & Mineral Owners with tax issues: 

Always Remember This,  In WV if your Real Estate or Mineral Rights are sold at a WV Sheriffs Sale, you have 18 months to pay the tax before title transfers to the buyer.

Permalink Reply by Marcus Huey on December 5, 2015 at 7:44am

Thank you Ron!

Permalink Reply by Nancy Mosley on December 7, 2015 at 1:56pm

As I understand it (not a lawyer) those served notice in a partition suit include those leased as well as those who have not yet signed a lease. So as I understand what you wrote, you are already leased but some family members are not. Those are the ones who are really being sued, but all parties are named. If you are in Judge Sweeney's jurisdiction, that is good because he seems to be a really good judge and looks favorably on mineral owner rights. Some other judges, as I have heard, will tend to side with the companies.

If you have access to the local paper for the county, you can read the legal notices and see what is posted. If you don't get it, I recommend subscribing to the local paper.

Permalink Reply by Marcus Huey on December 7, 2015 at 2:51pm

Thank you Nancy, very much appreciated! And your analysis of the situation is correct, I have signed the lease but now prefer that it expire so I am hoping the the gas company is not successful in court. 

Permalink Reply by Christian E. Turak on December 7, 2015 at 8:34pm

A partition suit is what you think it means.  What the oil and gas company will do if they cannot get the rights it needs to produce a tract (whether that's a lease or a lease modification to allow for pooling) is buy a relatively minor interest in the tract so that they are then a co-owner.  As a co-owner, they then commence the partition suit to have all non-leased or non-modifed co-owners' interests sold at auction.  What the oil and gas company will do is attend the auction and be the winning bidder.  Antero and EQT are particularly aggressive in doing this.  It's basically an end run around WV not having forced pooling.  

Though the oil and gas company needs to "sue" all co-owners (whether they are consenting or not) only the interests of the "holdout" co-owners will be sold.  You would want to be sure that you are not one of the "holdouts" and have your interest sold at auction.  

Permalink Reply by Heidlebergman on December 8, 2015 at 3:59am
One cannot lose their mineral rights unless the taxes are not paid. That's a misconception. Hold outs cannot be legally sold.. not in West Virginia. If this goes to court more than likely what would occur is the 130 acres of minerals would be cut up proportionally and create divided interest. If you own 10 percent or 13 net acres then you would now own a 13 acre divided 100% net tract somewhere inside the original 130 acres. The rest of the heirs would be divided up proportionally as well. It's fairly common. In the past companies would partition then put a vertical well on the partitioned property. Walla..100% net working interest. Companies like EQT, Consol, Mike Ross, Dominion, and whatever became of East resources have a lot of fee mineral oil and gas undivided property in WV. Their title lawyers didn't go to Harvard so they aren't going to out maneuver a fairly average WV attorney.
Permalink Reply by Marcus Huey on December 8, 2015 at 5:48am

Thank you so much for the information!

Permalink Reply by Marcus Huey on December 8, 2015 at 5:53am

Heidlebergman...how do you think the court would respond if almost all of those named in the suit are opposed to a partition? Even those that did sign the lease are now in opposition because of  very bad dealings with this company on another lease. Our desire is to let the lease expire.

Permalink Reply by Christian E. Turak on December 8, 2015 at 6:39am

This just isn't true.  Mineral interests are sold all of the time on the "courthouse steps."  

I've been appointed to represent persons involved in partition suits in WV, and this is not how the law works.  What you're referring to is partition in kind--when you physically divide the property in a partition suit.  So if it's a 100-acre tract with 10 co-owners, each would receive 10 acre tracts.  

However, the way these partition suits work in the oil and gas context is that the plaintiff will claim that the partition in kind is not feasible/in the best interest of co-owners because oil and gas, by its nature is a "fugacious" mineral interest--i.e. it can move freely from property to property underground and is not fixed in place.  

There is ample caselaw on this point, but it is all in reference to vertical drilling.  That is why I disagree with that caselaw.  Shale oil and gas is more or less fixed in place and is amenable to partition in kind.  The flipside of that is that you can have fractional interests that amount to less than 1 net mineral acre.  I can't see a judge ordering partition in kind in the event it would result in several different parcels of around an acre. 

Still, the fact is that partition suits result in the sale of mineral interests all of the time.  Landowners who are involved in a partition suit need to make sure their rights are protected by contacting an attorney.  

Permalink Reply by Heidlebergman on December 8, 2015 at 7:58am
WV law favors a partition in kind. Yes, mineral interest are sold all the time at courthouse steps. These are tax sales, I was unaware that partitioned property was sold at the courthouse steps. If it is I stand corrected. I don't know how selling partitioned property to the public at auction would resolve any differences between the owners...who is to guarantee the purchaser is going to corporate? I assumed these instances are for tax purposes, but ill stand corrected. Mike Ross is notorious for buying up property at the tax sales. Mike Ross is not going to turn around and sign a lease to satisfy a partition suit, and I doubt he ever will.
Permalink Reply by Marcus Huey on December 9, 2015 at 5:58am

Mike Ross purchased an interest in these mineral rights at a tax sale. I think Ross sold his interest to Company X and that is how they became a co-owner in these mineral rights. So, they are both a co-owner of the minerals and have the lease on the minerals.

Permalink Reply by Christian E. Turak on December 9, 2015 at 6:40am

WV not only favors partition in kind, the plaintiff must prove that the property cannot be conveniently partitioned in kind.  The WV partition statute is WV Code 37-4-1 et seq. if you're interested.  WV Code 37-4-3 specifically provides for partition by sale. 

And, I agree with you that the partitioning partial interests in a property can be problematic for the reason you stated, among many others.  However, in practice, the oil and gas company is usually the only bidder at auction.  That solves the problem as far as the co-owners of that tract are concerned: the company will have leased all other co-owners and own the minerals for the ones it successfully partitioned.  

Courts are catching on to this and are now setting minimum bids at the auctions which, depending on the circumstances, could offer fair value to the mineral rights owner whose interest is being auctioned.  

Mineral owners can fight these suits, and courts are beginning to take a closer look at some issues present in them.  Obviously, an experienced attorney is key.  

The original poster may find the case Elder v. Diehl, 3rd Judicial District (which includes Doddridge Co.) of interest.  There, the mineral owner successfully defended a partition suit.  

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