Forced Pooling is Forced Theft
Stealing is wrong. Most of us learned this years ago as young children. Unfortunately, it appears that some of our elected representatives in Charleston never learned this.
Why is that so? Earlier this month, members of both the state House and Senate introduced new forced pooling bills. While forced pooling bills have previously been introduced in years past, these bills are the most egregious ever introduced in West Virginia.
Both HB 2853 and SB 538 permit an oil and gas driller to force pool unleased acreage when it has obtained leases for 65% of the acreage in a production unit. When you consider that 65% is an extremely low threshold and oil and gas drillers routinely gerrymander their production units, it’s conceivable that any unleased acreage would be ripe for forced pooling.
But that’s not the worst part. When unleased acreage is force pooled, HB 2853 and SB 538 both mandate that the landowner receive the state minimum royalty of 12.5%. Market rate royalty rates in Ohio, Marshall, Wetzel, and neighboring counties are currently 18%-20% and have been for years.
The difference between a 12.5% royalty and an 18%-20% royalty is literally millions of dollars for many landowners in our community. If these bills pass, those millions and conceivably billions in oil and gas wealth now owned by everyday West Virginians will be stolen and given away to multi-million and billion, out-of-state oil and gas drillers.
Of course, the stealing doesn’t stop there. HB 2853 and SB 538 do not require that oil and gas drillers pay a bonus, which can range anywhere from $2,500-$7,500. The operational and other forced lease terms would be those contained in the driller’s standard lease. That invariably means royalty deductions for post-production expenses would be permitted. The West Virginia Oil and Gas Conservation Commission’s ability to re-write those terms to be fairer–even if they felt so inclined–would be significantly limited.
If HB 2853 and SB 538 pass, expect oil and gas drillers to make low-ball, take-it-or-leave it offers under the threat of forced pooling. Forget about getting a royalty higher than the state minimum of 12.5%. Forget about a lucrative bonus payment. Forget about negotiating at all really. Why would drillers when they can force pool at-will and obtain forced leases on their terms?
Supporting oil and gas development in our community is vital. We all support development, but it must be done in a fair manner. The fact that West Virginia does not have forced pooling is not preventing or impeding development. The oil and gas industry has invested billions of dollars in our community. They’re still here and not going anywhere. Rigs are still active, wells are being drilled, and pipelines are being put in the ground.
That’s not going to change if HB 2853 and SB 538 fail. What is going to change is that the vast wealth that lies underneath our feet will be stolen and given away to drillers. It’s state-sponsored stealing, plain and simple.