Support SB 576
This week has been a busy week. I thank all of you for making your voices heard and putting the pressure necessary to obtain changes to SB 576. Due to the changes to the bill, WVROA now STRONGLY SUPPORTS SB 576.
Our primary concern in the face of a near certain bad decision in the Leggett case, along with the threat that poses to the Tawney decision, is post production expenses. However, it has been impossible to get industry to include language in any bill to prohibit these deductions until now. If SB 576 passes, gas companies CANNOT take post production expenses from royalties on any wells drilled after its passage. We have fought a long, hard battle to obtain this concession, and it will be a long hard battle to pass, but I hope you will help us.
There are many other changes that protect land and mineral owners as well. I will begin by describing the way co-tenancy is structured in the bill. On an individual tract, the gas company can drill once they have leased 75% of the owners and made a reasonable effort to negotiate with all owners. For the minority they cannot obtain a lease from, there are two choices. The first choice is to accept a lease bonus and a royalty rate equal to the highest of the majority co tenants FREE OF POST PRODUCTION EXPENSES. The second choice is to be a carried interest owner with a 200% risk penalty. This choice means you keep the gas companies share of production and the well based on your acreage, and the company gets your share of the costs of drilling from your revenue share once the well is drilled. This choice essentially makes you a co-owner of the well and a partner with the gas company, and is NOT a choice they want you to make.
?Any tract where co-tenancy is used, the driller must obtain the surface owner’s consent before using the surface above the mineral tract. This is also a huge concession to surface owners that currently cannot block mineral owners from using the surface to access their minerals. We as royalty owners feel this is an important concession of our right to the surface owner in order to protect the value of the surface owner’s property.
?The lease integration, sometimes called joint development, portion of the bill now includes the language to prevent post production deductions from new wells drilled on old leases. I know it is hard to give up the renegotiation of old held by production leases, but after the Ascent Resources decision in Tyler county, we see the writing on the wall that it is highly likely the courts, as Judge Hummel did, will recognize an implied right to pool where leases are silent. The loss in the Ascent case as well as the rehearing in the Leggett case put all royalty owners in a very difficult position, and WVROA feels very strongly the post production deduction issue is the more important thing to protect against.
?Once again I thank all of you for the calls you make and the emails you send. SB 576 is on its way to a vote of the full Senate. I hope you will call your Senators and Delegates now IN SUPPORT of SB 576 and we can finally have a good bill that protects both royalty owners and surface owners.
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.