SOUTH CHARLESTON, W.Va. - Delegate Tim Manchin believes the West Virginia Legislature may be willing to bargain with the natural gas industry on the issue of forced pooling - and one possible negotiating point could be a higher natural gas severance tax.
The industry now pays a 5-percent severance tax on produced natural gas. Manchin offered a scenario Thursday in which the severance tax would increase to 5.5 percent or 6 percent, with the additional revenue being directed toward the state's highways and other infrastructure. Manchin said the state could match that additional money to grow the infrastructure fund and convince the public that forced pooling is a good idea.
"I don't advocate a severance tax increase right now," said Manchin, D-Marion, who served as co-chairman of the Joint Select Committee on Marcellus Shale. "But I would propose (a severance tax increase) to get the industry what it wants."
Rob Alsop, chief of staff for Gov. Earl Ray Tomblin, made it clear, however, that there is no plan to raise any taxes during the upcoming legislative session. He said no legislation that would raise taxes will be offered by the governor.
If the Legislature would vote to allow forced pooling, gas extractors would be permitted to combine properties where owners refuse to lease their mineral rights with adjoining properties where leases have been obtained. The companies could then remove gas from all the properties in that unit, even if some property owners refused lease agreements.
Manchin stressed that under any forced pooling provision passed by the Legislature, gas companies would not be permitted to build roads or pipelines on properties taken to complete a unit, and they also would not be allowed to drill wells on those sites. He said the Legislature also could provide a mechanism to require the industry to pay landowners that are forced pooled at the "top end" for the right to remove the gas and for production royalties.
Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, acknowledged forced pooling is a priority for the industry, but he objected to any increase in severance rates as a way to make it politically feasible.
"Yes, it is necessary if we are going to get the best use of our acreage and maximize what we do," he said. "But can we get people on board?"
He said West Virginia is competing with neighboring states in the gas drilling rush including Pennsylvania, Ohio, New York, Kentucky, Virginia and Maryland. He said these other states have lower severance taxes or no severance tax at all.
Manchin believes the industry has "held back doing things" while it lobbied for forced pooling in West Virginia. But he believes the Legislature can come up with a solution "that is politically viable" and that an increase in the severance tax is an option.
Manchin said the Marcellus Shale bill passed last month by West Virginia lawmakers was "a good bill - a bill worth voting for," but said the bill should have required drillers to report how many of their employees are West Virginia residents.
DeMarco disagreed and noted industry leaders believe they are being "picked on," as no other business, university or even gambling interests must provide such data.
But Manchin believes the industry doesn't want to provide labor statistics because "they know how bad the numbers are."
"They just don't want to report them," he said. "The workers have this information on their W-2s - it's not an inconvenience to provide it. They always tell us, 'We know there are difficulties with this (drilling in local communities), but you will get jobs.' But they're not telling us how many jobs.
"I still feel there is not training for the specialized jobs that bring the higher pay," he added. "What do we need to do? Do we have too many people on drugs? Do we have people who don't want to work?"
Manchin acknowledged the Legislature can't force industry to provide labor statistics unless there are government jobs involved.
