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Forced Pooling Bill Introduced in West Virginia House of Delegates

WHEELING -Corky DeMarco said West Virginia’s Marcellus Shale drillers struggle to locate some landowners with whom they need lease agreements, but Delegate Pat McGeehan, R-Hancock, said forced pooling legislation allows big businesses to bully private property owners.

The bill that supporters refer to as “lease integration” or “horizontal well unitization” is now pending in the House of Delegates Committee on Energy, which the bill’s chief sponsor, Delegate Woody Ireland, R-Ritchie, chairs. McGeehan’s fellow Hancock County delegate, Republican Mark Zatezalo, is one of the bill’s co-sponsors, as is Delegate David Evans, R-Marshall.

Zatezalo and Evans could not immediately be reached for comment Thursday.

“To me, this is just government price-fixing and eminent domain,” McGeehan said. “Private companies realize it is cheaper to hire lobbyists to get laws like this passed than it is to pay people for what their property is worth on the free market.”

However, DeMarco, executive director of the West Virginia Oil and Natural Gas Association, disagrees, as he maintains certain mineral owners are not receiving the maximum amount of profit for their oil and natural gas because of drilling units that must exclude certain parcels of property.

“We’ve got a ton of these leases – some of them go clear back to the heirship of the king of England,” DeMarco said. “Some of them refer to the unknown heirs of someone. How do you find someone’s unknown heirs?”

This is the fifth year out of six, with 2012 being the exception, that some form of pooling legislation has been introduced in West Virginia. Each particular failed bill featured some unique elements, but the basic concept it that drillers claim there are wells that cannot be drilled because of one or two leases that cannot be obtained. Whether the mineral owner cannot be located or simply refuses to sign, the companies claim they cannot drill wells in certain areas without obtaining specific pieces of land.

Under the bill, forced pooling would be allowed if a driller owns or has leased the minerals beneath 80 percent of the acreage in the proposed unit. Unlike previous versions of the bill, however, the legislation would forbid companies from deducting “post-production expenses” such as transportation and compression of gas from the royalty checks of landowners who are force-pooled.

During the 2015 regular session, a bill to allow the practice failed to pass after 49-49 tie vote on the final day.

“It looks like the same old thing to me,” Tim Greene, owner of Land and Mineral Management of Appalachia and a former West Virginia Department of Environmental Protection inspector, said while reviewing the pooling bill. “I think it will probably pass. I’m not in favor of it.”

DeMarco said the issue is much more of a problem in the northern portion of the state because there are so many small parcels of land. Some lease agreements on record in Northern Panhandle courthouses are for tracts smaller than one-tenth of an acre.

“It’s not holding up that much development now because the price and supply are down,” DeMarco admitted. “But once the price goes back up, it will cause hold-ups.”

The legislation states as its goal to “safeguard, protect and enforce the private property rights of mineral owners in this state to the greatest extent practical while ensuring that private property owners who wish to develop their property have an opportunity to do so.”

However, Greene remains concerned that pooled landowners will get only a 12.5 percent royalty rate, with no lease payments on a per acre basis.

“We would have to certify to the West Virginia Oil and Gas Conservation Commission what we had paid for other tracts in that unit,” DeMarco said, adding the commission would then determine how much the pooled landowner would receive.

McGeehan declined to predict the outcome for the bill, but added, “There is stern opposition to the bill.”

“If it fails, we’ll just try again next year,” DeMarco said.

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