By March 18, 2017 Read More →

Opinion: Surface owners group opposes forced pooling bill

From The Exponent Telegram of Clarksburg:

By David McMahon and Julie Archer

W.Va. Surface Owners’ Rights Association

SB 576 is the latest forced pooling bill introduced in the Legislature. While West Virginia Surface Owners’ Rights Organization has said that a good forced pooling bill would be a good thing, the devil is in the details, and this is one of the worst bills yet introduced.

The bill is bad for both surface and mineral owners, and WV SORO opposes this shameful attempt to take away the property rights of West Virginians.

Like the forced pooling bill (SB 244) that was introduced earlier in the session, SB 576 contains two parts: “Lease integration,” or what we call “invisible ink,” and “co-tenancy,” which we have dubbed “majority rules.

“Invisible Ink” (AKA: Lease Integration)

Where two neighboring tracts are held by old leases that do not have modern pooling clauses, the bill provides that the driller can force those two tracts into a pool for horizontal drilling. WV SORO will oppose this so-called “lease integration” provision of the bill.

Why? A third of WV SORO members also own their minerals. In most cases the minerals are subject to old-fashioned leases that do not have pooling clauses and only provide for a 1/8th (12.5 percent) royalty. Drillers try to get mineral owners to modernize these leases with pooling amendments, but EQT and some other drillers will not modernize the leases to modern royalty amounts of 15-18 percent or even 20 percent that are justified by the inflated economics of horizontal shale drilling. This so-called lease integration provision will stick many of our members with the old 1/8th (12.5 percent) royalties.

This so-called “lease integration” provision of the bill does protect surface owners by requiring that the driller have a surface use agreement with the owners of any surface that will be disturbed. WV SORO appreciates that, but WV SORO does not think the driller has the right without that provision to use one surface tract to drill into neighboring mineral tracts from these monstrous well pads that were not contemplated at the time of severance or leasing.

“Majority Rules” (AKA: Co-tenancy)

The worst part of the bill is the other part, the so-called “co-tenancy” provision. For years, WV SORO has advised that surface owners should try to buy some partial interest in the minerals underlying their surface, no matter how small. That is because under current law, every owner of a partial interest in the minerals has to sign a lease before the driller can drill, so surface owners can protect themselves in the leases that the driller needs from them. Also, we have advised people considering buying surface land to look into whether they will own any small portion of the mineral interest before buying or agreeing on a price.

The so-called “co-tenancy” part of the bill will force the surface owner’s interest into a pool unless the surface owner owns at least a 1/3rd interest in the minerals. Also, the surface owner’s interest will be forced into the pool at a royalty percentage that is the average of what the drillers have talked the owners of the other 2/3rds of the mineral owners into.

Finally, no protection from use of the surface owner’s land appears written into the so-called “co-tenancy” parts of the bill. Surface owners will be entitled in the bill to royalties that would be paid to unknown or unlocatable mineral owners, but unlike an existing statute often used by drillers, the surface owners would not get title to those mineral interests.

Please contact Senate Judiciary Committee members and your senators and tell them to oppose this shameful attempt to take away the property rights of West Virginians.

 

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