UPDATE: Advice from WV Surface Owners Rights Organization

IF YOU GET AN EQT CLASS ACTION BENEFIT NOTICE, DO NOT SIGN FOR THE “OPTIONAL POOLING BENEFITS!”

West Virginia Surface Owners’ Rights Organization, October 7, 2019

Some 9500 people are getting a “Tawney [Non-]Compliant Flat Rate Claim Form and Benefit Notice” regarding the settlement of the royalty class action case of Kay Co., v. EQT Production Co.

If you got that, WVSORO recommends that you DO NOT SIGN ON PAGE THREE for the optional pooling benefits provided in section “B” beginning on page 2 for leases in Wetzel, Doddridge, Harrison, Marion, Marshall, Monongalia, Ritchie, Taylor and Tyler Counties.

WVSORO recommends that most mineral/royalty owners should sign on page 2 to get the benefits of the class action. The only exception would be if you owned hundreds and hundreds of acres — maybe thousands — and wanted to bring your own suit with our own lawyers.

However, in addition to signing up for the benefits on page 2 for the “SETTLEMENT PAYMENT AMOUNT” on page 1 in section A. etc., the claim form also allows you to modify the underlying lease that is giving you royalties by adding a pooling provision amendment to the lease.

WVSORO believes that a good pooling provision amendment is a good idea. Such a provision would modernize the lease to allow for the drilling of long horizontal well bores through “unitized” or “pooled” bunches of lease tracts. That would mean more efficient removal of the gas and using somewhat fewer surface well pads. But what is being offered in the notice is not a good pooling provision amendment — it is a terrible pooling provision amendment.

Yes, signing on page 3, raises the royalty amount by 2%, from 12.5% to 14.5% in exchange for agreeing to the pooling amendment set out on page 3. But a modern royalty is at least 15%, more like 18% and sometimes even 20%. So agreeing to a “modern” pooling amendment should only be done for a “modern” royalty percentage increase. But to get the modest royalty increase in the notice you also have to agree to the bad pooling provision amendment!

And the boiler plate language of the pooling amendment on page 3 includes four terrible provisions.

The first bad provision says that your share of the royalty will be based on your share of the total acreage in a unit, “OR (2) any other method . . . that Lessee [that’s EQT — not you] believes to be fair and appropriate.” What EQT thinks is fair may be way different from what you or judge or jury thinks is fair, but it would now be EQT’s opinion of what is fair that counts.

A second bad provision says that the maximum pool or unit size should not exceed 1,280 acres, but “. . . if larger pools or units are . . . allowed by law . . .” then pools or units “may conform to such size.” There is no limit in the law on the size of pools or units, “allowed by law”. So EQT can create huge units and pay royalties from gas taken out of your land to an unlimited number of other mineral tract owners whose land may not be being drained to pay you royalties on gas taken from the other mineral owners gas. In addition the lease on your land can be held by production of gas on an unlimited number of other tracts of minerals which would stop you from signing a better lease with another company. Read more about this on our web page.

A third bad provision says you, the “Lessor waives rights to notice” if there is forced pooling of your leased mineral tract. And forced pooling could apply to the Utica and Rogersville shales that may be under you land but not drilled yet. If a government commission was forcing pooling your leased tract, you would want to know about it.

Finally, and worst of all, if you also own the surface, EQT might try to say that the last sentence means that you have just said that the well pad “may” be located on you. The West Virginia Supreme Court has just said that, as a practical matter, the surface location for a horizontal well cannot be placed on you unless you specifically authorize it — and if you sign on the third page then EQT may just say that signing this will authorize it. WVSORO says that to agree to a well pad on you, you should be paid the value of the use of your surface to the driller, and WVSORO believes that you should be paid between something like $640,000 and $1.7 Million to use your surface for a horizontal well pad. Go to our web page on the subject for a better explanation. And EQT may argue that you have just authorized that for nothing.

So our advice is — you should probably go ahead and sign on page 2, but you should not sign on page 3.