Two Significant Natural Gas Bills Now Law in West Virginia

Governor Justice signs natural gas bills dealing with owners’ rights

From an Article by Brad McElhinny, WV MetroNews, March 09, 2018

CHARLESTON, W.Va. — Gov. Jim Justice has signed HB-4268, a bill dealing with the rights of multiple owners on a single piece of property. “This co-tenancy law will allow for oil and gas development while protecting the rights of surface, mineral and landowners,” Justice stated in a news release.

Justice at one point a couple of weeks ago indicated he might veto the bill — hoping to consider co-tenancy and another more controversial lease practice known as joint development in a special session that would also consider an increased severance tax on natural gas. The governor quickly backed off that position, though, and indicated he would sign the co-tenancy bill.

The bill is meant to deal with situations in which property has been divided many times over generations. The bill would require 75 percent of those with rights on a single tract to approve drilling. Holdouts or those who can’t be located would still have some rights under the bill.

Non-consentors would have two options. They could receive a production royalty equal to the highest percentage royalty paid to one of the consenting parties. Or, they could opt to share in revenue and cost of development — essentially winding up as a participant.

The co-tenancy bill has been shepherded through the legislative process by both natural gas companies and a coalition of West Virginia land owners and mineral owners organizations.

The West Virginia Oil and Natural Gas Association expressed pleasure that the co-tenancy bill was signed, saying it represents years of work, negotiation, and compromise. “It will allow access to the enormous amounts of oil and gas that we are sitting upon, make us competitive with our surrounding states,” said Anne Blankenship, director of the association.

The West Virginia Land and Mineral Owners Association expressed appreciation for the coalition that shepherded the legislation through. “We know that it will bring additional economic development and tax revenues to our state,” said Jason Webb, a lobbyist for the association.

Post-production expenses bill also now law

Justice also signed SB-360, a bill dealing with post-production expenses on drilling projects. The bill was a response to a state Supreme Court reversal last year on the policy.

The Supreme Court ruled last May that state law allows natural gas production companies to subtract “reasonable post-production expenses” from royalties it pays to people with royalties rights on drilling projects.

A ruling the prior year by the Court said a 1982 state law didn’t allow for the expenses to be subtracted. The court voted to rehear the question and came up with a different interpretation in the Leggett vs. EQT case.

The West Virginia Royalty Owners Association applauded the passage and signing of that bill and the co-tenancy bill. “These bills show that West Virginia is a leader in protecting landowners, mineral owners and economic development while updating our laws for the horizontal drilling era,” said Tom Huber, president of the royalty owners association.

Senator Charles Clements, R-Wetzel, was one of the first advocates for the bill on post-production expenses. “It wasn’t given much of a chance to pass. I worked that bill pretty hard and slowly started getting support for it. I’ve got to give a lot of credit to Senator Smith for getting that bill out of Mining and Energy Committee, and once it got out it started getting momentum,” Clements said.

“It was something we really needed. There were so many people in West Virginia who had these leases they were taking those post-production expenses on. They were just not getting the royalties they deserved.”

Tagged as: Co-tenancy, drilling, fracking, marcellus shale, mineral leases, mineral royalties, natural gas, post-production costs, west virginia