Forced Pooling Push Finds New Energy
Whether one wants to call it “forced pooling” or “unitization,” Tim Greene said allowing Marcellus and Utica shale natural gas producers to drill on unleased land will give the industry an unfair advantage in dealing with mineral owners.
Identical bills, both introduced Friday, are now up for committee debate in both the West Virginia House and Senate. The House bill – H.B. 4558 – is sponsored by Speaker Tim Miley, D-Harrison, among others. The Senate bill – S.B. 578 – is sponsored by President Jeff Kessler, D-Marshall, and Senator Larry Edgell, D-Wetzel, among others.
In both 2011 and 2013, similar bills that would have allowed frackers to include unleased minerals in horizontal drilling pads failed to pass in the state Legislature.
Reached late Wednesday, Edgell said the pooling bill is “not going to pass,” adding that he had asked his name to be removed from its list of sponsors.
“The way this is crafted, it just is not fair to a bunch of landowners I know back home,” Edgell said. “There is a lot of opposition to this.”
Meanwhile, Greene is a former West Virginia Department of Environmental Protection oil and gas inspector who now owns Land and Mineral Management of Appalachia. He said “small” mineral owners throughout the Mountain State will suffer if legislators approve the practice he calls forced pooling.
“I just hate to see it being used as a hammer against the small mineral owner. They deserve the right to negotiate a fair lease,” Greene said. “There are landmen now going around the state telling mineral owners, ‘You either sign this or we are going to force pool you.’ And it is not even the law yet.”
Under the legislation, if surrounding property owners have signed leases with a particular drilling company but one property owner has not, that property owner could be forced to allow their land to be used by gas drillers for the development of the neighbors’ gas. The pooling provision would require gas companies to pay pooled property owners royalties comparable to those paid to neighbors.
Corky Demarco, executive director of the West Virginia Oil and Natural Gas Association, said any royalties paid to an absent property owner would be placed into an escrow account.
In the case of a mineral owner who refuses to sign, he said the bill would require drillers to lease a “supermajority” of the adjoining acreage before they can act on pooling.
Three years ago, Demarco and other industry leaders advocated a bill that would have permitted the practice, which is now illegal for horizontal shale drilling in West Virginia, though it is legal for conventional vertical drilling.
“Pennsylvania and Ohio have statutes allowing this,” he said. “If we are going to maximize our opportunity with the shale industry, we need some certainty. We can’t allow one mineral owner who wants to hold out to shut down a drilling operation.”
The Legislature ultimately decided against forced pooling in 2011 after many landowners voiced concerns about losing their ability to negotiate better lease deals from the gas companies. The industry tried to pass a similar bill last year without much success.
“There is a lot of acreage in this state that is just not going to be developed unless we get this,” Demarco said.
As with Demarco, Greene is not sure of the bill’s destiny, but said companies should not be able to “bully” mineral owners.