WV Legislature Panel on NatGas Dev Meets Tuesday, Forced Pooling?

The West Virginia Legislature has appointed a new Joint Committee on Natural Gas Development, composed of Senators and Delegates, to put their collective heads together to see how they can encourage more oil and gas development in the Mountain State. The committee will meet tomorrow for the first time. The effort is being supported by the West Virginia Oil and Natural Gas Association (WVONGA). In general, it certainly seems like a good idea–WV needs more drilling. However, WVONGA plans to use the committee as a platform to push its “modernized mineral efficiency laws”–i.e. forced pooling lite. As we reported last week, WVONGA is making an all-out push for new forced pooling laws in 2018 (see WVONGA Makes Plans to Push Forced Pooling Lite in 2018).

There are two components to WVONG’s agenda: (1) Co-tenancy. The concept of co-tenancy means if a majority of mineral rights owners of a property (75%) want to lease the property for drilling, they can–even if a small 25% minority doesn’t want to lease. This helps overcome an urgent problem in WV where sometimes not all mineral rights owners can be found–or where someone with a sliver of the rights wants to blackmail (our word) the other rights owners for a larger share of the profits. (2) Joint development. This is the one we have a problem with. Currently there are a number of existing old leases, signed before shale drilling began, that prevents drillers from drilling a horizontal well across an individual property boundary line–until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties that they want to combine into a drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. Although the topics of co-tenancy and joint development are sure to be raised tomorrow, the committee will look at more than just those issues. They will also consider how to attract more downstream (petrochemical) investment in the state…

The West Virginia Legislature’s new Joint Committee on Natural Gas Development will meet for the first time on Tuesday.

The committee, charged with studying ways to encourage development of the industry, is made up of senators and delegates who are either members of the judiciary or energy committees.

Among the members is Delegate John Kelly, R-Wood, who is vice chairman of the oil and gas component of the House Energy Committee.

“I think the people on the committee right now are pretty open minded,” Kelly said. “They want to see oil and gas development in this state.”

The Legislature will hold interim meetings Sunday, Monday and Tuesday. The committee will meet 4-6 p.m. Tuesday, its first meeting.

“I haven’t yet seen an agenda,” Kelly said.

The committee has the support of the West Virginia Oil and Natural Gas Association and commended Senate President Mitch Carmichael and House Speaker Tim Armstead for the foresight in creating the interim committee.

“We look forward to working with committee members during the interim sessions to explain how our state can further advance natural gas industry job creation and investment through modernized mineral efficiency laws, legislation and public support for pipeline projects and tax policies that do not discourage investment,” Anne Blankenship, executive director of the oil and gas group, said.

Among the issues to be addressed are new co-tenancy rules, she said. Co-tenancy rules allow a majority of the owners of a mineral property to determine whether those minerals can be developed.

“It’s time to stop letting the minority hold back the will of the majority,” she said.

Other potential issues are downstream development in the petrochemical sector and expanding infrastructure.

Multiple interstate natural gas pipeline projects awaiting approval from the Federal Energy Regulatory Commission represent more than $5 billion in pipeline construction investment in West Virginia, Blankenship said.

Eighteen senators and delegates are on the committee, four who are non-voting. Delegate Bill Anderson, R-Wood, chairman of the House Energy Committee, is a non-voting member.

The committee is chaired by Sen. Ryan Ferns, R-Ohio. Other members, including Kelly and Anderson, are Sen. Charles H. Clements, R-Wetzel, Ed Gaunch, R-Kanawha, Sen. Mark R. Maynard, R-Wayne, Sen. Jeff Mullins, R-Raleigh, Sen. Corey Palumbo, D-Kanawha, Sen. Roman Prezioso, D-Marion, Sen. Randy Smith, R-Tucker (nonvoting), Sen. Charles Trump, R-Morgan (nonvoting), Delegate Moore Capito, R-Kanawha, Delegate Tom Fast, R-Fayette, Delegate Jason Harshbarger, R-Ritchie, Delegate Tom Miley, D-Harrison, Delegate Dave Pethtel, D-Wetzel, Delegate Mark Zatezalo, R-Hancock, and Delegate John Shott, R-Mercer (nonvoting). (1)

The statement from WVONGA on the new committee:

The West Virginia Oil & Natural Gas Association (WVONGA) applauds West Virginia’s legislative leaders, Senate President Mitch Carmichael and House Speaker Tim Armstead, for their foresight in elevating natural gas issues through the formation of the new interim Joint Committee on Natural Gas Development. .

“President Carmichael and Speaker Armstead have demonstrated they understand the important role natural gas development has and will continue to play in West Virginia’s economy,” said Anne Blankenship, executive director of WVONGA.

The work of the committee aims to allow the Legislature to learn more about industry best practices, opportunities for economic expansion created by shale gas production, and challenges that West Virginia faces when competing for investment capital within the Appalachian Basin and other prolific oil and gas plays across the country.

“We look forward to working with committee members during the interim sessions to explain how our state can further advance natural gas industry job creation and investment through modernized mineral efficiency laws, legislation and public support for pipeline projects and tax policies that do not discourage investment,” said Blankenship. “New co-tenancy rules, for instance, would allow the majority of the owners of a mineral property to determine whether or not those minerals can be developed. It’s time to stop letting the minority hold back the will of the majority.”

Blankenship listed other potential items for the committee to explore, including more opportunities for downstream development in the petrochemical sector and expanding our infrastructure. With multiple interstate natural gas pipeline projects awaiting approval from the Federal Energy Regulatory Commission, West Virginia could realize more than $5 billion in pipeline construction investment in the state over the next several years.

The West Virginia Legislature meets in interim sessions each month before the regular session begins in January. (2)