Bethany Residents File Lawsuit Challenging West Virginia’s ‘Forced Pooling’ Law
CHARLESTON – A federal lawsuit by property owners in the Northern Panhandle seeks to stop West Virginia’s new natural gas unitization law before it goes into effect in June.
Scott Sonda and Brian Corwin, both of Bethany, filed suit May 13 in the U.S. District Court for the Northern District of West Virginia against Gov. Jim Justice to block Senate Bill 694, relating to oil and natural gas conservation, from going into effect June 7. Sonda and Corwin are represented by J. Anthony Edmond Jr. of the Wheeling law firm Edmond and Baum PLLC.
Sonda and Corwin are asking the court to declare SB 694 violates their U.S. and state constitutional rights against taking their private property without just compensation and against depriving them of their property without due process. They also are asking the court to determine whether SB 694 violates U.S antitrust laws and for a temporary or permanent injunction blocking the law.
SB 694, which the Legislature passed in 17 days after opposing special interest groups came to compromise after years of failed efforts, deals with the property rights of surface owners and farmers as it relates to drilling for natural gas and horizontal wells.
The law sets new application requirements for the combination of the tracts for oil and natural gas drilling by operators of horizontal well units. It requires horizontal well units consisting of two or more tracts to get agreements from the mineral rights owners for at least 75 percent of the net acreage when it comes to interest from the royalties collected.
SB 694 caps horizontal well units at 640 acres per unit and a unit cannot contain more than 128 net acres controlled by non-consenting royalty owners. The law gives options to non-consenting royalty owners with valid leases, but no utilization provisions for how they wish to be paid: either 25% of the weighted average bonuses or 80% of the average royalty rate percentage.
Non-consenting owners without valid leases can either sell their minerals, participate in the well subject to a 200% payout penalty or elect to receive royalty payments three different ways. They could choose to receive 100% of the weighted average bonus received by owners inside the unit within the previous 24 months, the highest royalty rate received by the owners in the unit within 24 months, or mineral owners could be paid through a weighted average sales price or the local monthly index price.
Edmond, in his filing on behalf of Sonda and Corwin, argued that SB 694 is weighted toward large natural gas producers instead of the non-consenting owners, putting too much power in the hands of the Oil and Gas Conservation Commission.
“…If the applicant itself determines whether it meets the requisite criteria, and the commission SHALL authorize unitization of tracts…there is no recourse for said outstanding 25% of executory interest owners in a given unit and/or 45% of operators in a given unit (depending upon the circumstances). Since the commission SHALL authorize, then the state is authorizing, by statute, the taking of property without just compensation,” Edmond wrote.
“Further, if SB 694 provides that compensation for said taking is defined by the applicant (i.e. the operators) themselves, then the compensation cannot be determined to be just by any reasonable measure since the definition of what that means is created by the very individual and/or entity doing the taking; ergo such a taking violates the U.S. Constitution’s Fifth Amendment protection against the taking of property without just compensation,” Edmond continued.
Edmond argues that while SB 694 provides a mechanism for non-consenting owners to appeal decisions of the Oil and Gas Conservation Commission, the requirements within SB 694 largely tie the hands of the commission to the benefit of larger natural gas producers.
“Although a hearing may be had – within the plain language of the statute – the commission has no ability to provide any remedy whatsoever, for the statute requires that the commission SHALL provide approval of the unit if the applicant meets all of the specifications, which the applicant itself certifies that it does indeed satisfy all requirements,” Edmond wrote. “…The language of SB 694…by its construction in a plain reading of the language, violates the U.S. Constitution’s Fourteenth Amendment protections against the State depriving any person of property without due process of law.”
SB 694 was the result of a compromise between the Gas and Oil Association of West Virginia, the West Virginia Royalty Owners Association and the West Virginia Farm Bureau. The West Virginia Surface Owners Rights Organization also didn’t oppose the bill during the 2022 legislative session.
Disagreements between these organizations led to years of failed attempts to create a forced pooling or unitization law in the state. A similar bill to SB 694, House Bill 2688, died in a 49-49 tie vote in 2015.