As many of you know, a bill, SB 244, is currently before the West Virginia Legislature. The bill provides for co-tenancy and lease integration, both controversial topics and proposals WVROA has fought against in the past. However, our organization has made the decision to try to include certain protections for surface and royalty owners included in the bill rather than defeat it outright, and we feel it is important to explain why.
On November 17, 2016, Royalty Owners celebrated a huge victory in West Virginia in the Leggett Vs EQT decision handed down from the West Virginia Supreme Court. Our organization felt it so important that we filed an Amicus Brief in favor of the royalty owner’s position in the case. In its decision, the court, 3-2, said that in light of the Tawney decision and other factors, new wells drilled under the “1/8th” statute are to pay 1/8th royalties without deduction for post-production expenses. Obviously this was a great decision for royalty owners, our organization has always fought against deductions for post-production expenses that dramatically lower royalty payments.
Justice Benjamin wrote the opinion and was one of the three justices in the majority. Justice Loughrie wrote a scathing dissent, questioning the validity of Tawney and clearly siding with EQT’s legal arguments. In January, Justice Benjamin was replaced on the court by Justice Walker, and in a 3-2 decision, the court granted EQT’s petition to re-hear the case, which will occur on May 2, 2017. This is a highly unusual occurrence, and sends the signal that the Leggett decision is likely to be overturned and possibly Tawney as well. If this occurs, Any Lease that does not expressly prohibit deductions for post-production expenses would allow for post-production expenses to be taken! This would be devastating to West Virginia Royalty Owners, and preventing this from happening is our top concern.
So, our goal is to amend SB 244 to include the protection that when a lease is silent on deductions, they are prohibited by that lease. We would also like to see the language granting surface use stricken from the lease integration portion to protect the property rights of our fellow property owners, the surface owners. But if SB 244 includes these things, we as an organization are willing to accept co-tenancy and lease integration as well. That is how important we believe these protections are, and doing this may be our last real chance to keep West Virginia from seeing our royalty checks disappear due to post production expenses.
So please, help us. Call your Senators and Delegates and tell them to include protections for royalty and surface owners in SB 244. Let us protect our royalties before it is too late!
Doddridge County Case Update
Earlier this year WVROA, filed an amicus brief in regards to a court case in Doddridge County. In November the ruling was released that stated that gas companies could NOT take deductions out of royalty payments which had “at the well head” language in the lease or modification. We at the WVROA are very happy with this ruling and think this will help royalty owners out significantly in the future.
The WV State Journal had a great article that explains this ruling extremely well.
Summer 2016 Update
This summer the WVROA has been busy keeping up with new court rulings, as well as filing amicus briefs with the supreme courts to protect royalty owners.
A case was filed in Mcdowell County West Virginia in May of 2016. The WVROA feel strongly that the coal bed methane gas is the property of the gas owner. However the lower court ruled that the coal owner was the sole owner of the coal bed methane gas. Our organization hired John Kennedy Bailey to file an amicus brief with the West Virginia Supreme Court of Appeals. Stating that we as oil and gas owners are the rightful owner of the coal bed methane gas. The court should issue its ruling by the end of the year.
Another case filed in originally in Doddridge County in the circuit court against EQT, which later was moved to the United States District Court for the Northern District of West Virginia. This case is trying to define what “at the well head” means and in our view was a way to circumvent the Tawney case (which stated that deductions may not be taken unless specifically agreed to in the lease). The question being, the does the language “at the well head” from the one-eighth statute provide for a gross royalty or a net royalty. We at the WVROA firmly believe that “at the well head” provides for a gross royalty without deductions. We hired Persinger and Persinger law firm to file the amicus brief jointly with the West Virginia Land and Mineral. The court should issue its ruling by the end of the year as well.
As always we continue to monitor the ever changing landscape of the legislation, and continue monitoring any bad legislation which may affect royalty owners across the state. We continue to appreciate all of your support and as always if you need anything please feel free to contact us.
Last Updated (Thursday, 29 September 2016 19:03)
2016 Legislation Upadate
2016 Legislation Update
We would all like to thank everyone who called and emailed legislators this session, without you our efforts would not be successful! Without you some terrible legislation would have passed. This session we saw a multitude of versions of forced pooling, lease integration and co-tenancy introduced. We as an organization still feel strongly that the compromised bill would be the most beneficial to the state. The compromised bill, which we worked diligently with ALL stake holders, gives the most protections to mineral owners as well as surface owners. This bill, which is by far the most fair and reasonable of the bills that were introduced, got the least support from our representatives. The proposal to repeal the deep well statute, which allows for forced pooling in the deep strata, was also shut down quickly by legislators.
The good news is, nothing was passed this year. However it still has left our members having to deal with the copious amount of partition suites filed by gas companies. As we all know our royalty checks are getting smaller and smaller and the ability to continue to fight these attacks will become more difficult. In addition to the low gas prices, we are concerned that there will be a greater push for unfair pooling legislation next session.
This session was also the first session that an accounting (transparency) bill was introduced which was a good start to what needs to pass in order to repair the distrust between royalty owners and industry. However, we feel that it needed some additional work to truly make it an effective accounting bill.
We must continue to be vigilant in Charleston. As the gas prices continue to stay low the industry will want more rights to our surface and minerals. We suspect that next year we will continue to see legislation introduced that is solely there for the benefit of industry.
Again we thank you for all your hard work this winter and we will continue to keep you informed with what is going on in Charleston.
The Horizontal Unitization and Landowner Protection Act
Why WVROA Supports The Horizontal Unitization and Landowner Protection Act
1. The bill replaces the current pooling law for formations below the Onondaga and applies to all horizontal wells. Currently below the Onondaga, West Virginia allows for forced pooling without any of the protections listed below. That means formations such as the Utica and the Rodgersville can be pooled without any effort to lease before going to the Commission.
2. The bill expands the Oil and Gas Commission to include a Royalty Owner who is unaffiliated with an operator and a farmer giving property owners a powerful voice in the decision making process.
3. The bill requires multiple good faith efforts to lease the property before applying for a unit order as well as requiring at least 80 percent of the proposed unit acreage to have pooling agreements, meaning leases that contain pooling provisions. This threshold is the highest in any pooling statute nationwide. This threshold forces companies to actually negotiate in order to achieve this number.
4. Companies applying for a unit order must provide the details of how much was paid in upfront money and how much was agreed to in royalty percentage prior to any hearing. That information is available to anyone involved in the hearing for ten days prior to the hearing.
5. Property owners being forced in can present their own evidence or witnesses at the hearing to argue why they should not be pooled or how much they should be paid.
6. Any pooled tract cannot be used for surface operations. So the well pad and all pipelines, roads, and other surface use must have voluntary agreements made with owners.
7. The bill prohibits the Unit Order from allowing deductions from royalties. Since deductions can reduce royalty checks by up to 75% this is an essential protection. It also makes it easier for royalty owners to hold out against leases containing deductions as it makes going to a forced pooling hearing possibly desirable for a mineral owner.
8. While the minimum royalty is set at 12.5% with no deductions, the Commission can decide to order a higher royalty percentage with no deductions, with no ceiling. That determination is made by the Commission based on evidence from the hearing.
9. On lease modifications, the terms can be no less favorable to the mineral owner as the original lease, so they cannot insert deductions into deduction free leases or change free gas provisions where they already exist in old leases.
10. Pooled in owners can choose from multiple options, including being a carried interest owner with only a 200 % risk penalty, a participating owner, or simply a traditional royalty owner.
11. All Unit Orders are appealable to the Circuit Court under administrative rules. We opposed De Nova Review as was offered as an amendment because De Nova would mean none of the important protections would apply to the court’s decision on appeal and would advantage the Producer over the property owner.
12. After a period of 5 years and due diligence in locating lost owners, the surface owner can apply for a deed to be issued for those minerals, and once that deed is issued they would receive royalties and two years back royalties. The royalties accruing in that 3 year period go to plug abandoned wells in WV.