Proposed Legislation for Forced Pooling in WV Gaining Steam - Beware Mineral Owners

Have been following this closely and it appears the proposed Forced Pooling Legislation in the State of West Virginia is getting pushed along by the Oil and Gas Industry. There is already a law in place that covers formations below the Marcellus, but it appears now, the Oil and Gas Industry would like to take more from Land and Mineral Owners. The Legislation proposed by Industry Lawyers would put in place a 5 person committee, made up of an Industry Shills no doubt, to decided what "Fair and Just" bonus payments and royalty amounts will be paid to Land / Mineral Owners. This committee will base it's ruling on evidence that the O&G companies present, including what other minerals in the proximity of the mineral in question, were leased for. So if a mineral was leased for $10 per acre 20 years ago at the base rate of 12.5%, this could be used as evidence and what you could be paid under the proposed law. Keep in mind that this is being proposed because O&G Operators have such a hard time of tracking down the thousands of mineral owners required to be profitable and have abandoned massive amounts of mineral because they couldn't locate a mineral owner who's 10 acres blocked them from fully producing the 640 acre production unit and because many Land / Mineral Owners refuse to negotiate. I say that with the most sarcastic tone possible because that's what the O&G PR machine was churning out on Inside Shale (WAJR) this morning... a radio show that is paid for by the WV Oil and Natural Gas Association (WVONGA).

If you own mineral in the State of West Virginia and don't feel that your mineral should be stolen from you because you decide to decline the "Fair and Just" offer made to you by the Oil and Gas Industry, better start calling and writing letters to your state and local politicians to have your voice heard. Right now they are proposing a requirement of 67% be leased before they can Force Pool your minerals. A mineral owner group has proposed their own legislation with a 90% requirement but it will no doubt be negotiated down.

You can read more about the proposed legislation or google forced pooling in wv.

http://wvpublic.org/term/forced-pooling

Anybody out there for Forced Pooling? I'm not convinced as I've sat in negotiations where landmen have threatened my family to sign for cheap or they will drill our mineral and hold it in an account until we sign their cheap offer. I think this will be another tool they use to force folks into signing bad leases that benefit their own pockets.

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Permalink Reply by Tim on February 25, 2015 at 3:12pm
Dan,

Can you provide a summary and your thoughts?

Ty
Permalink Reply by Dan Warner on February 25, 2015 at 4:27pm

I gave up and left to run errands when the meeting didn't start on time.  When I returned, the meeting was well underway.

I have more of it recorded, but I haven't had a chance to review it.  It may be too lengthy to upload here, but, as time allows, I will see if I can organize it into a folder that I can zip.

If I do, I will be happy to e-mail a copy to anyone who would like it.

Generally, I was disappointed at the lack of knowledge of many of the delegates, as well as that of some of the 'experts', on some important details.

There seemed to be a lack of understanding by some of the delegates of court processes already available to the industry, e.g. partition/quiet title suits.  I consider this to be an important argument against the industry's assertion of necessity for the bill.

Without giving examples here, I would say that partisanship was evident in much of the delegates' line of questioning on the Republican side.

Not surprisingly, Mr. Ireland was, by far, the most outspoken proponent of the bill, and the most outspoken against all of the amendments that I heard discussed.

Sorry, that's the best I can do at this point.

I'll try to add to as time passes.

Permalink Reply by Nancy Mosley on February 25, 2015 at 3:33pm

Thanks a lot for that. Any idea who said what? The delegate who expressed opposition because the lessor being forced was not provided with the best possible lease is speaking about one of my concerns.

Permalink Reply by Dan Warner on February 25, 2015 at 4:03pm

I believe that the delegate you are referring to was either Mr. Caputo or Mr. Manchin from Marion county.

As best I could tell, Mr. Manchin was by far the most outspoken in opposition, eventually incurring the ridicule, if not the ire of the chairman.

It was difficult to tell one from the other, as the chairman generally recognized them both as "the gentleman from the 50th".

Permalink Reply by Nancy Mosley on February 25, 2015 at 4:16pm

Thanks Dan!

Permalink Reply by sally on February 25, 2015 at 5:02pm

It looks like this may pass.  My question is: Does being part of a land group give you some protection if you want to lease?

Permalink Reply by Dan Warner on February 25, 2015 at 5:39pm

With the 80% threshold requirement. you would have some insulation, particularly if you are toward the center of a contiguous group.

Those around the fringes of the group would be a little more vulnerable to 'unitization' from the outside.

Permalink Reply by Todd on February 25, 2015 at 5:16pm

Sally,
No doubt that a land group increases your negotiating power but this bill reduces that increased power of being in a landowners group. Gas industry is getting very excited to expand eminent domain over your privately held mineral rights.
Y'all might want to spread the word regarding the WV Royalty Owner Association's organizer and president being accused of defrauding Mr. Moore out of over 1200 acres in Marshall County and then turning around and selling his minerals in a $16 million lawsuit.
The House and Legislature need to consider this court case in regards to the WVROA's support of this bill -- discredits the organization in my book. No mineral owner's organization should support forced pooling.

Todd

Permalink Reply by Todd on February 25, 2015 at 6:14pm

The mineral owner is out of luck with regards to their remaining acreage that is not force pooled:

(9) "Unitization consideration" means consideration provided as set forth in subsection (f)

5 of this section. Unitization consideration relates to the net acreage of the nonconsenting royalty

6 owner included in a horizontal well unit and is as determined to be just and reasonable by the

7 commission;

Hence, whatever property that you own not included in the drafted unit will just sit there uneconomically and un-leased as your negotiation power will be gone at that point. 

Permalink Reply by gasoholic on February 26, 2015 at 3:30pm
How does the Forced Pooling Bill HB2688 improve on the following ?

1- You will lose your right to lease your minerals on your terms. All tax paying mineral owners in West Virginia should reserve the ''Right to a Fair Lease'' !

2- Billions of dollars will be lost to the State and the Mineral Owners during the coming years of leasing and drilling !

3- The companies will be able to ''Force Pool'' any acreage (leased or unleased). For the unleased, pay no bonus monies and also they may only have to pay the state minimum 12.5% royalty. For the the leased, you will never get the chance to negotiate a more favorable and fair lease on your terms with addendums and separate leases for multipul parcels and formations if your poorly executed lease expires. If ''Forced Pooling'' is enacted, your chances of seeing your poorly executed leases expire greatly diminish.

4- The companies will also be able to Hold By Production millions of acres by including only a portion of large and small parcels in a drilling unit ! Also, the companies have taken advantage of many unknowing mineral owners by getting them to sign over multiple parcels within the same county on a single lease, allowing the companies to ''Hold By Production'' all parcels that have been included in the lease, once a well is drilled on any one parcel. If Forced Pooling is enacted, the companies will likely start applying for and drilling hundreds of verticals throughout the state so as to ''HBP'' as much acreage as possible before leases expire.


5- The companies will be able to take all gas producing formations from the mineral owners. Mineral owners should reserve the right to lease each formation separately.

6- The companies will be able to drill based on all the poorly executed early leases and the unsigned will not be able to add in addendums for protections.
Permalink Reply by Philip Brutz on March 4, 2015 at 2:21am

West Virginia Farm Bureau endorses forced pooling bill

Saturday, February 28, 2015 by Katie Woods

West Virginia House Bill 2688, the proposed legislation that would allow forced pooling/unitization of oil and gas interests in horizontal drilling, has been endorsed by West Virginia Farm Bureau, according to The Inter-Mountain.

West Virginia Farm Bureau recognizes that even though the bill doesn’t satisfy all of the interests of any group, it provides some gains to those involved. For instance, there won’t be deductions from royalty payments and there won’t be any surface disturbance unless an agreement is made with the surface owner.

Via: The Inter-Mountain > W. Va. Farm Bureau endorses oil and gas bill

Permalink Reply by Dan Warner on March 4, 2015 at 2:55am

Considering that this bill explicitly disallows forcible surface activity on force-pooled tracts, the opinion of an organization related to surface issues, e.g. farming, should have no horse in the race. 

If the bill is enacted, should a farmer's minerals be force-pooled, it will have no effect on his/her farming activities.

On the other hand, what is true, is if the same farmer wants to lease his minerals, the forced pooling legislation will help protect his ability to do just that by forcing his neighbors to either lease or have their minerals seized.

In that case, the farmer would have everything to gain from supporting the bill.

As to the deductions, a free market already allows royalty owners to negotiate a deduction free lease, as many. myself included, already have. 

The widespread description of this bill as being some sort of a compromise is misleading.  It has clearly been fashioned by the industry to ingratiate the public by making owners believe that the industry has graciously and unselfishly given ground.  The truth is, they are simply asking to be allowed to steal less from the citizens of WV than they were asking a year ago.  

 

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