WV Governor Planning Special Session at Legislature for ‘Grand Bargain’

Justice promotes grand bargain on teacher pay and natural gas drilling

From an Article by Brad McElhinney, WV MetroNews, February 26, 2018

CHARLESTON, W.Va. — Gov. Jim Justice, who has EQT board member Bray Cary as a volunteer on his staff, today promoted a grand bargain on natural gas drilling and teacher pay — frustrating several participants on the gas issue.

During three stops around West Virginia, Justice urged that a co-tenancy drilling bill be killed in the state Senate so that it — plus another drilling policy known as joint development — may be brought up in special session.

The governor then suggested that both issues would be intertwined with the pay and health care issues that have caused thousands of West Virginia educators to walk out of schools and rally at the Capitol.

Justice said the severance tax could be raised to provide more revenue for teacher pay and healthcare.

The governor’s proposals, which were first made at a town hall appearance in Wheeling, frustrated delegates who have been involved with the co-tenancy bill as well as segments of the natural gas industry and the royalties and land organizations that have been shepherding the bill.

Several of them pointed fingers at EQT, which did not immediately respond to the criticism. “I’m pretty disappointed about the whole thing,” said Delegate John Kelly, R-Wood, vice chairman of the House Energy Committee.

“Joint development is a program that has no chance of passage in the House of Delegates. It’s failed every year since I’ve been here and I believe it’s going to continue to fail. It’s a taking and right now there’s only one company in the state of West Virginia — that I’m aware of — that even wants a joint development law passed.

“The other companies, this law actually goes against their current business practices.”

An organization called Shale Energy Alliance has been using targeted social media ads for the past week to suggest drilling legislation could be the path toward raises and stable health care for teachers.

The campaign seems to be aimed at generating teacher support and aiming it at lawmakers.

The governor, today in Wheeling, echoed those comments. The governor’s official Twitter account also put out the message:

JUSTICE—- I will call us into special session to find a way out through co-tenancy and joint development and the mineral rights people … you’ve got to find a way that satisfies everybody and raises the severance tax on gas.

JUSTICE—- I am the guy that said let’s tier the severance tax on coal and natural gas at the State of the State a year ago.

JUSTICE —- You have two trump cards. You’ve got co-tenancy and joint development. I’m telling you point blank, where you can help, don’t let co-tenancy pass. Make us go to a special session on gas.

JUSTICE —- If co-tenancy does not pass the Senate … I will call for a special session.

Controversy swirled in December over revelations that Cary, an EQT board member since 2008, had been serving as a volunteer in the governor’s office, focusing on communications and some policy issues.

EQT’s corporate governance policy says it is the duty of the board of directors to serve as a fiduciary of the company.

Cary bought several rounds of shares of EQT stock over the latter part of last year. The largest was a purchase in June of 22,627 shares valued at $1,209,186.

“It makes me wonder,” Delegate Kelly said.

Co-tenancy, which passed the House of Delegates and now is in Senate Judiciary, requires at least 75 percent of rights holders on a single piece of property to OK drilling. Advocates say it’s a way to allow the majority to go ahead if a few holdouts don’t want drilling or can’t be located.

Joint development would allow an operator that already has old leases, signed before modern shale drilling began, to combine into a single drilling unit. It’s significantly more controversial.

Bills dealing with natural gas drilling and property rights have fallen apart many times over the years, either failing to balance the rights of the various players or being weighed down by a variety of inter-related issues.

Governor Justice earlier this year brought together executives from the big natural gas drilling companies, as well as representatives from the land and royalties groups. They, along with delegates, decided to move forward with co-tenancy on its own.

Tom Huber, president of the West Virginia Royalty Owners Association, said the governor’s proposal on natural gas doesn’t stand a chance of helping teachers.

“It’s unfortunate the governor would try to manipulate teachers into going home with a false promise of forced pooling for a severance tax,” Huber said.

“Let’s call joint development what it is — it’s forced pooling,” Huber said. “Co-tenancy is a carefully negotiated bill to try to resolve disputes between mineral owners in the same tract. It’s kind of sad that he would try to trick the teachers like this.”

Huber said the governor’s position, combined with Cary’s presence in the office, looks funny.

“Obviously we, as the Royalty Owners Association, feel it is highly inappropriate to have someone who is on the board and collecting the salary of a major out-of-state corporation in the governor’s office, advising him on these issues,” Huber said. “There’s got to be something wrong with that, ethically or legally.”

Also critical of the governor’s call for a special session on drilling issues was Jason Webb, a lobbyist who represents the West Virginia Land and Mineral Owners Association.

“The WV Land & Mineral Owners Association has real concerns about a bundled bill. We believe that the Governor should sign the co-tenancy bill to help move our state forward,” Webb said

“If he wants to address joint development for EQT in a special session then we will be at the table to protect mineral owners interests.”

The West Virginia Farm Bureau, which has been a part of negotiations on drilling issues, also was critical of the governor.

“This is an effort to really submarine a lot of really good legislation,” said Dwyane O’Dell, the director of government affairs for the Farm Bureau. “A lot of hard work has been done with agreement with most of the industry. This idea of joint development is a special carve out for one company, that company being EQT.”

O’Dell also argued, more generally, against raising the severance tax on natural gas. “If he chooses to raise the severance tax, in many ways he would put West Virginia in a less competitive situation,” O’Dell said.

The West Virginia Surface Owners Rights Organization is also frustrated by the governor’s comments, said David McMahon, a lawyer who represents the group.

“We are deeply disappointed that the governor would try to tie joint development and co-tenancy to any other issues,” McMahon said. “Co-tenancy has been a four-year battle. It’s now got something that everybody can live with and is only very, very indirectly related to the severance taxes and those other issues.

“Joint development, lease integration — whatever they’re calling it this time — we call it the invisible ink bill. This is clearly an EQT move.”

The Independent Oil and Gas Association of West Virginia was very surprised by the governor’s comments, said Phil Reale, a lobbyist for the group. He said after years of negotiation, there is finally consensus among groups dealing with co-tenancy.

Reale described co-tenancy as a way to make West Virginia more competitive with Pennsylvania and Ohio. “Increasing the severance tax — when West Virginia’s severance tax is already higher than Ohio and there is none in Pennsylvania — would only make us less competitive, less attractive to those who have large opportunities in West Virginia.”

Those who deal with natural gas issues were caught by surprise by the governor’s announcement, Reale said. “Frankly, it’s a little bit disappointing that we’re here at the 11th hour when we’re about to have a progessive piece of legislation, embraced by every stakeholder with full consensus, to have this sort of a problem inserted into the mix, where he believes there ought to be something else other than has been developed.”

The West Virginia Oil and Natural Gas Association put out a statement of concern about Justice’s remarks. “WVONGA is very concerned with the Governor’s statements regarding a severance tax increase and a possible veto of House Bill 4268, the cotenancy bill,” stated Anne Blankenship, the organization’s director.

“Great progress has been made by stakeholders on this cotenancy bill to ensure that investment in West Virginia by the oil and gas industry continues to boost the state’s economy and create family-sustaining jobs that support schools and teachers. His plans to disrupt that progress will only hurt all of us, including our teachers, by keeping West Virginia’s laws uncompetitive and discouraging development in this state.”

JUSTICE —- The gas companies want two things from you — co-tenancy and joint development … I said to them, I won’t be a proponent of co-tenancy or joint development to help you without raising your severance tax. You know what they said? “We’re OK with that.”

Democrats in the House argued against the co-tenancy bill, arguing that the rights of minority rights holders were being trampled.

They’re no more likely to support the bill in a special session, especially if joint development is added in, suggested Delegate Isaac Sponaugle, D-Pendleton.

“I didn’t know the Republicans were in the business of stealing both property rights and raising taxes for a special session but apparently that’s their game plan going forward,” Sponaugle said.

“I can only speak for myself — our caucus hasn’t met on it — in regards to severance tax, but I do believe that should be raised. But I don’t believe you should be stealing people’s property rights as a way so oil and gas will lay down when you go to raise the severance tax.”

Joint development stands no chance of passing the House of Delegates, even if intertwined with co-tenancy and educator pay and healthcare issues, said Delegate Bill Anderson, R-Wood and chairman of the House Energy Committee.

“In my judgement lease integration will not pass the House of Delegates. We tried that three years ago in House Bill 2688, which failed,” Anderson said.

Anderson said the lesson of the past has been dealing with the drilling issues independently. “Co-tenancy has the horsepower to pass this year,” Anderson said.

Anderson declined to criticize Justice, though. “The governor’s going to have to make his judgments about how he runs his office,” Anderson said. “I believe we have a bill in the House now that would require people that are employed in the government, even on a volunteer basis, not receiving pay, to have to file the same ethics forms that all members of the Legislature and elected and appointed officials do that are receiving compensation. I believe that bill should pass.”

Tagged as: drilling, EQT, forced pooling, fracking, lease integration, marcellus shale, severance tax, WV Governor, WV Legislature, WVSORO