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Federal Judge: Issues With W.Va. Forced Pooling Law Must Be Heard in State Court First

AP Photo - A natural gas well is seen across the Monongahela River from Morgantown in this 2011 file photo.

CHARLESTON – In another setback for opponents of West Virginia’s oil and natural gas unitization/forced pooling law, a federal judge put a pause on a legal challenge and encouraged opponents to file suit against the law in the state courts.

In an order issued Dec. 1, U.S. District Judge John Bailey issued a stay of a court case first brought by Bethany residents Scott Sonda and Brian Corwin in May challenging Senate Bill 694, dealing with the property rights of surface owners as it relates to drilling for natural gas and horizontal wells.

According to the order, Bailey stayed the court case to give attorneys for Sonda and Corwin time to file a lawsuit against the West Virginia Oil and Natural Gas Conservation Commission in Kanawha County Circuit Court to address the issues Sonda and Corwin have with the state law.

“… This Court will abstain from ruling on the issues presented by this case,” Bailey wrote. “This action will be stayed so that plaintiffs may present their state law issues to state court. In the event that the state courts do not resolve this case under state law, plaintiffs will be permitted to seek a ruling on the federal issues in the Court.”

As part of the ruling, Bailey granted a motion by West Virginia Attorney General Patrick Morrisey to dismiss his office from the lawsuit. Sonda and Corwin filed an amended lawsuit in September in the U.S. District Court for the Northern District of West Virginia against the state Department of Environmental Protection, the Oil and Gas Conservation Commission and Attorney General Patrick Morrisey.

Sonda and Corwin had originally filed their lawsuit against Gov. Jim Justice as the person who appointed members of the Oil and Natural Gas Conservation Commission. But Bailey issued an order Sept. 9 granting a motion to dismiss the lawsuit against Justice, stating that the Governor’s Office was the wrong agency to be sued. In his Dec. 1 order, Bailey also said that Morrisey should not be sued.

“… The Attorney General Contends that inasmuch as he has no authority to enforce Senate Bill 694 … he is not a proper defendant in this case,” Bailey wrote. “This Court must agree. Accordingly, Attorney General Morrisey will be dismissed from this action.”

Bailey also dismissed counts III, and IV of Sonda and Corwin’s amended complaint alleging that SB 694 violates state Constitution; and count V, alleging a violation of U.S. anti-trust laws. But Bailey said that the state can’t be in violation of anti-trust laws.

“… Defendants … are categorically exempt from federal antitrust laws under the ‘state action’ doctrine,” Bailey said. “Under the doctrine, antitrust laws do ‘not apply to anticompetitive restraints imposed by States as an act of government.'”

In an email Monday afternoon, Sonda said they are conferring with their attorney and deciding their next steps in the case.

“Our attorney is reviewing the order from Judge Bailey,” Sonda said. “We plan on meeting soon and discussing our options. We will take whatever steps are necessary to continue to move forward with the case.”

SB 694, signed into law in March, sets new application requirements for the combination of the tracts for oil and natural gas drilling by operators of horizontal well units. Among other provisions, it requires horizontal well units consisting of two or more tracts to get agreements from the mineral rights owners for at least 75% of the net acreage when it comes to interest from the royalties collected.

The law also sets requirements for how non-consenting royalty holders get paid. Decisions and disputes between property owners would be heard by the Oil and Gas Conservation Commission.

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