A column by Mike Myer, executive editor of The Intelligencer / Wheeling News-Register
WHEELING, W.Va. — Pretend you and a friend have gone together to buy a couple of acres of land. You have a 75 percent interest. Your buddy has 25 percent.
Then, a company contacts you. They’d like to build a restaurant on the land. They’ll pay you $30,000 for your 75 percent share.
Sure, you say. You’ll make a tidy profit.
A few days later, the deal’s off. The restaurant will be built elsewhere, because your buddy won’t take $10,000 for his 25 percent share.
You’re out $30,000 because your (ex) friend got greedy. You’re upset. There oughtta be a law.
West Virginia legislators are thinking of just that – and it may be the toughest, most controversial decision they make this winter.
Instead of land, think of the rights to natural gas below it. Throughout the state, gas companies have struck deals to lease mineral rights, sometimes for big money up front.
But the really good profits come when wells are drilled and gas is produced. Many who have leased their rights stand to earn 18 percent or so of the profits.
Some will miss out, however, because they only own part interests in the rights to particular pieces of land. That’s very common.
In some cases, most of those who own interests in rights to tracts of land have signed leases, but those who own the remainder have not. Some may be holding out for more money from gas companies. Others may not want drilling to occur now at all.
A forced pooling law would solve the problem. In effect, it would require that if owners of a certain percentage of the rights to a given tract have signed leases, the holdouts can be forced to do so. They would be compensated at rates determined by some third party.
Gas companies like that. They get to drill where they want. They don’t waste money in up-front payments to lots of mineral rights owners, only to be blocked by a few holdouts.
It also sounds good to owners of rights who have signed leases and are hoping for that 18 percent once gas is produced. If a forced pooling law takes care of the holdouts, they stand to make lots of money.
It sounds reasonable, right?
Wrong, if you’re one of the holdouts. And wrong if you’re a legislator who doesn’t believe the government should be allowed to take a person’s property, either through eminent domain for, say, a road or in order to turn it over to a gas company.
If you’ve refused to sign a gas company lease, you may have good reasons.
One may be that you think you can get more money than others who own interests in the rights to the same land. Why should a forced pooling law require you to accept, say, $4,000 an acre up front and 18 percent of the profits? Simply by being the lone holdout blocking a well, you may be able to get lots more.
Maybe you want to leave the rights to your children or grandchildren in the hope that, 20 or 30 years from now, gas will be more valuable and they can get substantially more money.
Or maybe you just don’t want a well there at all.
There is no right answer on forced pooling. One way or another, voting for or against, lawmakers are going to make enemies.
I wish them luck deciding what to do.
Myer can be reached at: [email protected].
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