(01/11/2016)
By Sarah Tincher, Energy Reporter STATE JOURNAL

West Virginia lawmakers are looking to revive a lease integration, or "forced pooling," proposal, after last year's attempt died in the state House of Delegates during the final hour of the regular legislative session by a vote of 49-49.

The 2015 bill would have allowed horizontal drilling on properties where mineral rights owners won't agree to lease their minerals, or the owners can't be found, as long as 80 percent of the surrounding mineral owners had worked out drilling agreements.

Although the House originally showed largely bipartisan support for the bill, despite spending hours debating the issue, 11 Democrats switched their original votes to oppose the legislation in the final vote March 14.

This year, Delegate Lynwood "Woody" Ireland, R-Ritchie, said stakeholders from across the board, including representatives from the oil and gas industry, as well as the agricultural community and surface and mineral owners rights organizations, all are working to create an improved version of last year's proposal.

"We still feel that this is an important situation that needs to be resolved both for the good of the industry for the mineral and landowners, and state in general," said Ireland, who also is chairman of the House Energy Committee.

While the bill is still being drafted, Ireland said the new proposal likely will clarify a few issues that were raised with last year's legislation.

Last time, Ireland said, some people were concerned that mineral owners were going to have deductions taken from post-production expenses for the purpose of calculating royalties.

"No deductions could be taken if you were forced," he said. "We tried to clarify that again this year no deductions may be taken. To me, that's pretty clear.

"Now, some folks are concerned they'll take them anyway," he added. "That may be, and that becomes a judicial issue if folks do things outside of the law, but from a legislative standpoint what we've been saying is you cannot take deductions if you are forced."

Additionally, he said, some citizens previously thought the legislation made it so mineral owners would only be able to get a maximum of a 12.5 percent royalty, but Ireland said that is actually meant to serve as a minimum.

The new proposal likely also will include a feature that would allow mineral owners who don't want to develop their minerals to, instead, sell a right-of-way through their minerals to allow a company to drill through the minerals without actually developing them.

Ireland, who owns property in Ritchie and Doddridge counties, as well as mineral rights in Doddridge County, said, "I'm looking out for mineral owners and surface owners as well as doing what's right for overall state standpoint."

Not for sale

Most stakeholders involved with the drafting process have argued the state needs to do something to protect everyone involved in the process.

"I talked to not only those (stakeholder) organizations, but people in general across the state, individuals and legislators," Ireland said. "There's an understanding now that yes, we need to do something, both from development standpoint and personal property rights standpoint."

Ireland also said the bill will aim to help the Mountain State ramp up its oil and natural gas severance tax revenue to offset the dramatic loss it has seen in coal severance revenue since the coal industry began plummeting in recent years.

"We need to make up as much as we can of that through responsible development of our shale gas," he said.

However, there are still plenty of concerns with the bill.

Jon McLaughlin, who owns property and mineral rights in Monroe County, still stands firmly opposed to the proposal.

"I'm really against forced pooling at all," McLaughlin said. "We're not for any kind of forced sale or relinquishing of mineral rights if the owner wishes to maintain them for future generations."

McLaughlin is also one of several who believes the state's extraction industries, like coal and natural gas, have taken a lot from West Virginia but given little in return.

"It has not created any kind of sustainable economy over the long term and that's continuing today," McLaughlin said. "(Extraction is) going to go forth but it needs to be done with more thought on how it can impact the citizens of West Virginia, not just the coffers of the state.

"We're essentially giving oil and gas a free ride," he added. "Forced pooling would make it all the more free, in my opinion."

Liz Tobey, who owns property and minerals rights in Greenbrier County, also called the legislation "troubling," raising several concerns with both the premise behind the proposal as well as language being proposed for the bill itself.

"Just because the Legislature says something is important, it doesn't give the right to private corporations to plunder this state for their own profit," Tobey said. "Essentially it does away with the free market system.

"In general," she added, "I don't think it's a very well drafted piece of legislation."

Tobey said her family specifically chose the property they live on because they were able to own the mineral rights beneath it as well.

"Now I'm being forced into governance where surrounding property owners can force me to sell my rights at prices set by them," she said. "I just don't think this country was founded on principle that because you own something of value to everyone you can be forced to sell it.

"We're selling our birthright and our children's future for nothing," she added.

Conversely, Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said the current law is unfair to those who want to develop their minerals but can't because one or two people who own rights to minerals in the same tract don't want to.

"The way West Virginia law is currently written, we have to get 100 percent of the people who are known and locatable to agree to proceed, and one person can be that holdout," DeMarco said.

Additionally, DeMarco noted, "We're not stealing anything, we're monetizing those resources."

Similarly, Ireland said, "One thing folks need to understand is they are not being forced to sell their mineral rights. They will continue to own their mineral rights; their mineral rights will be developed."

Uncertain future

As the 2016 legislative session approaches, lawmakers and other parties involved with drafting the bill are continuing to tweak some of the language in the proposal.

Ireland, who is optimistic the bill will find success this year, said the committee will likely introduce the legislation early in the 60-day session.

"I think there's a significant support for it," Ireland said.

While DeMarco said he's unsure of whether or not the bill will hit the same wall it did last year, he hopes people will at least have more of an understanding of the issue this time around.

"I think there has been a huge effort on the part of industry and other groups interested in the success of the bill to reach out to people during this time away from the Legislature to answer questions and listen to concerns," DeMarco said. "I know there has been a concerted effort to educate."

But Dave McMahon, co-founder of the West Virginia Surface Owners' Rights Organization, said he still foresees controversy in passing the bill this year.

"I think it's still going to be difficult," McMahon said. "I think people still perceive pooling as a taking, even though it's not really."

"It's a complex issue and difficult for people to understand," he added.

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