(06/20/2009)
By Marie Hedges
Contributing Reporter
thetimesrecord.net

A court case in McDowell County could impact land owners, oil and gas developers and royalty owners all over the state, and in particular those in Roane County.

The case, Blue Eagle Land Co. vs. the W.Va. Oil and Gas Conservation Commission, deals with the spacing of Marcellus Shale gas wells and could determine whether the wells can be drilled as close to mineral tract boundaries as the driller wishes or whether there should be regulations declaring the distance from the boundaries, as well as how far the wells themselves should be apart.

At the heart of the dispute is whether wells drilled into the Marcellus Shale formation common in this part of the state are statutory "deep wells" that require well spacing and royalty sharing, or "shallow wells" that rely on the rule of capture that says whoever obtains the gas, even if it comes from adjoining land, is the owner.

The state Oil and Gas Conservation Commission has ruled that Marcellus Shale wells are deep wells in a case involving thousands of acres in Roane, Kanawha, Clay and Braxton counties.

Last month the state Supreme Court issued an order denying a petition seeking to declare the Marcellus Shale wells as shallow wells. However, the court allowed 30 days for an appeal of that ruling. Coal industry representatives and others have filed a petition in McDowell County arguing that the wells are not deep wells.

Earlier this month McDowell County Circuit Judge Rudolph Murensky issued a ruling that allows the W.Va. Surface Rights Owners Organization (WVSORO) to intervene in the case.

According to Dave McMahon, WVSORO founder, drillers now can put wells 1,000 feet apart, or one well for every 40 acres.

McMahon believes the wells should be much farther apart. He said allowing wells to be drilled as close to boundaries as the drillers wish would result in more wells being drilled and wells that produce less total gas for royalty owners, investors and consumers.

Environmental damage, such as soil erosion, forest fragmentation, and possible stream sedimentation, can also result from each additional well site, McMahon said.

The W.Va. Coal Association has taken the position that Marcellus Shale wells are not deep wells that require well spacing and royalty sharing. The appeal also takes the position that the commission did not have jurisdiction to order spacing on the wells, but if it did, the minimum spacing should have been more than 1,000 feet.

McMahon said if the coal industry wins the suit, the Marcellus Shale wells would be considered shallow wells so a different agency, using different laws, will space the wells further apart. That means in places where there is no coal, the rule of capture will apply. If that's the case, according to McMahon, "everyone loses investors, mineral owners, surface owners and even most drillers."

He said all other Marcellus Shale wells could be drilled as close to the mineral tract boundary as the driller wants, legally stealing gas from neighboring mineral owners. Drillers would also drill wells so close they could drain the same area. He said this would result in more wells being drilled on surface owners and waste reservoir pressure so wells produce less total gas.

WVSORO agrees with Blue Eagle that the wells should be spaced farther apart than 1,000 feet. However, if Blue Eagle wins on the point that the commission did not have jurisdiction, there will not be any spacing for Marcellus Shale wells unless there is coal under the land and the coal owner requests it.

In areas like Roane County where coal is not an issue, McMahon said there would be no spacing requirements.

McMahon would like the wells to be at least 1,500 feet apart, but would prefer them to be 3,000 feet apart. McMahon said if the judge does not throw the lawsuit out there will be other problems.

"The question will be how close together they can put the wells and how close they can put the wells to a property line without having to share the royalty with their neighbors," he said.

Local oil and gas developer Roy G. Hildreth sees another side to the problem. He said additional regulation regarding the location of wells could hurt development in the business that provides jobs and royalty checks to many local residents.

"It would be bad for the industry because land dictates where the well should be, and the land can not always be controlled," Hildreth said.

He said the ruling could lead to wells not being in the proper location at times.

Hildreth said another potential downside is the creation of more regulations that would force the state to have to hire more employees to enforce the regulations.

thetimesrecord.net


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