West Virginia SB-694 is Forced Pooling by Another Name ~ “Oil & Gas Conservation”

Gas well pads in rough terrain damage the landscape

From an Article by Chris Dickerson, West Virginia Record, May 19, 2022

WHEELING – Two Northern Panhandle property owners have sued Gov. Jim Justice over a gas pooling bill set to go into effect because they say it endangers the constitutional rights of royalty owners.

Scott Sonda and Brian Corwin filed their complaint May 13 against Justice in U.S. District Court for the Northern District of West Virginia. Senate Bill 694 was passed this past legislative session and signed into law March 30. It is scheduled to go into effect June 7. It changes the share of gas and oil production a royalty owner is entitled.

The law would force landowners to participate in an oil or gas producing unit. It would set application requirements for horizontal well unit controllers seeking to combine oil and gas tracts to drill wells, expand the state body that regulates deep well drilling and give options for compensation to nonconsenting owners entitled to lease and oil and gas estate.

Total support of royalty owners wouldn’t be required to unitize wells in a formation. Unitization is the combining of two or more tracts to form a well unit. Supporters of the bill say it brings together groups that have long fought over provisions to establish unitization, and they say it balances the interests among operators and property owners. Opponents, such as Scuda and Corwin, say it will mean less compensation for royalty owners, comparing it to theft. They say the people who negotiated the bill do not represent them.

The bill “might in fact be noble in its origins,” the complaint states. “However, the language contained in SB 694 in operation is antithetical to those protections of individual property rights, and from the behaviors the antitrust laws were designed to protect against.”

Scuda, who owns more than 500 acres of land, and Corwin say the law would violate their Fifth Amendment protection against the taking of private property without just compensation. They say it also violates the Fifth and Fourteenth Amendment protections against the state depriving any person of property without due process of law. And, they say it violates West Virginia Constitution provisions regarding the taking of private property.

In addition, they say the law would violate both U.S. and state constitutional provisions against passing ex post facto law as well as U.S. antitrust laws.

During a March public hearing before the House Energy Committee, Sonda said the bill “is more or less a Trojan horse saying that it’s protecting the people that are force pooled.” At the hearing, Corwin said it was wrong for the West Virginia Farm Bureau to back the measure.

“So we’re all standing here saying ‘Well, the Farm Bureau supports the bill so it’s got to be a good bill,” he said. “As far as I’m concerned, we can do a whole lot better than what this bill is.” The 22-page complaint is almost as detailed and technical as the 40-page bill itself, discussing percentages, ownership, consolidations, pools, royalties and the like.

Sonda and Corwin seek to have SB 694 declared illegal for violating their U.S. and West Virginia Constitutional rights as well as U.S. antitrust laws. They also seek to have the bill enjoined from becoming law on June 7 or to keep from having it enforced. They also seek a waiver requiring for the posting of a bond as security for entry of temporary or preliminary injunctive relief.

They also seek court costs, expenses, attorney fees and other relief. They are being represented by J. Anthony Edward Jr. and Michael B. Baum of Edmond & Baum in Wheeling. U.S. District Court for the Northern District of West Virginia case number 5:22-cv-00124.

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WEST VIRGINIA LEGISLATURE 2022 REGULAR SESSION
ENROLLED Committee Substitute for Senate Bill 694
BY SENATORS TARR AND NELSON
Title: “Relating to oil and gas conservation”
[Passed March 09, 2022; in effect 90 days from passage]