West Virginia Royalty Owners Association
Is having FREE Informative Meetings
About Your Surface, Oil and Gas Rights
The Meetings will be held
August 21, 2014
White Hall, WV 26554
September 25, 2014
American Legion #120
Box 41 Wetzel St.
Hundred, WV 26575
October 9, 2014
The Moose Lodge #1344
105 E. Railroad St.
Mannington, WV 26582
Information on Force Pooling of your Surface and Mineral Rights
Along with Helpful Information Regarding Leasing Rights
Including Marcellus and Utica Discussions
For more information contact
WVROA at 304-363-0239
2014 Force Pooling Bill Issues
A Summary of the Lease Integration/Force Pooling Bill
The Bill is Sponsored By:
Senate President Jeff Kessler in the Senate bill 578
House Speaker Tim Miley in the House bill 4558
1. 22C-9-2 (1) “Commission” This Bill will allow the deep well commission to oversee all shallow and deep horizontal wells except coal bed methane wells. This commission is made up of five members Director of the Department of environmental protection, Chief of the Office of Oil and Gas of the DEP, A Governor appointed independent producer, A Governor appointed public member not employed by the public service committee, and a Governor appointed professional engineer with a degree in engineering or geology and experience in oil and gas. This commission is dominated by industry people with no mineral (royalty) owner representation. Bill draft page 3 line 16; Website draft page 3
2. 22C-9-2 (4) “Operator” means any owner of the right to develop…and as “royalty owner” as to one-eight interest in such oil and gas;…The Committee has previously allowed deductions from the state minimum of 12.5% royalty, which has the potential of lowering the royalty amount to as low as 6.56% with natural gas prices at four dollars. This should be 18% with no deduction to be in line with the national average. Bill draft page 4 line ; Website draft page 4
3. 22C-9-7a (C) (2A) “…consent or agreement to pool or unitize the acreage to be included in the horizontal well unit from executory interest royalty owners of sixty-seven percent or more..” 1.00 minus .67 = .33 times 640 = 211 acres of people who would not consent to a lease and could still be forced pooled into the unit. 99% of all tracts do not contain 211 net acres, thus almost everybody will be forced in. Shouldn’t royalty owners be treated equally with operators who have a threshold of 85%. Bill draft page 17 line; Website draft page 8
4. 22C-9-7a (C) (c) (i) “Made good faith offers to consent or agree to unitization” Written correspondence of proof should be required to determine a good faith offer has been made. Bill draft page 18 line 13; Website draft page 18
5. 22C-9-7a (d) (1) (J) “A percentage allocation to the separately owned tracts…” There needs to be a pugh clause inserted here, to avoid sterilizing any unused acreage. Bill draft page 22 line 12; Website draft page 22
6. 22C-9-7a (f) (E) Any unitization consideration due. There MUST be compensation to force the will of the driller on to West Virginians. Bill draft page 26 line 3; Website draft page 26
7. 22C-9-7a (f)(E) (6)Further, if an award of unitization consideration differs from the rights under a lease or other contract, the applicant, all royalty owners and owners of leasehold, working interest, overriding royalty interest, and other interest in the oil and gas shall be bound by the order. By the constitution it is illegal for any commission to arbitrarily change a contract. Bill draft page 27 line 1; Website draft page 27
8. 22C-9-7a (f) (7) The Royalty owner does not have the option to participate in the well although the operator of the lease does have that option. Bill draft page 27 line 13; Website draft page 27
9. 22C-9-7a (f)(1)(E) (18) “…if such a well has been drilled within three years the horizontal well unit shall continue in force and effect until all the horizontal wells drilled in the horizontal unit are plugged.” This should be changed to the standard which is “continue in full force and effect until the well is no longer capable of production in paying quantities” or 99 years. Bill draft page 33 line 7; Website draft page 33
10. 22C-9-7a (f)(1)(E) (19) “…the commission shall determine what is “just and reasonable” based on relevant evidence adduced at a hearing regarding amounts paid or consideration given in arm’s length transactions in the vicinity of the horizontal well unit and within a reasonable time prior to the hearing…” In the vicinity is a very vague wording, we suggest within ten miles of the well and within a reasonable time period is also vague, we believe a proper time period would be ten year because most oil and gas companies want to lease for 5 years with a 5 year renewal. Bill draft page 33 line 15; Website draft page 34
Leasing Clauses to Look for
Top Leasing Clauses to Include or Remove!
1. Specific Depth Reservation
· Lease only the Marcellus, or only the shallow formations; never lease the surface to center of the earth.
2. Lease only Your Tract
· Avoid language that includes words such as adjacent, or contiguous; it can allow them to hold your tract even though there is no production.
3. Your Royalty Payments are Deduction Free
· Deductions or post production expenses on royalty payments can reduce a 12.5% lease to under 6%.
4. Avoid Enhancement Clauses
· Enhancement clauses have been used against royalty owner’s under the guise of ‘The gas is not marketable at the well head, so transportation is an enhancement’; even if your lease says deduction free.
5. Pugh Clause
· If a portion of your acreage is not included in a unit, the non-developed acreage is released, allowing for another company to potentially develop it.
6. Warranty of Title
· Do not give any warranty on your title, in most cases you haven’t done title and they have approached you wanting to lease.
7. Limit on Shut in Payments
· Put a time limit for how long a shut in payment can hold your lease in full effect.
8. ALWAYS Consult a Lawyer
· These are a few things to watch for and should not be considered legal advice, find a good oil and gas lawyer that will be able to assist in the leasing process.
1. Forced Pooling is the taking of an individual’s personal property rights.
2. Forced Pooling would allow companies to forcibly take private property for the benefit of private corporations.
3. The West Virginia State Tax Department estimates that there are 500,000 owners of oil and gas in West Virginia.
4. Meaning, approximately 1 out of every 4 people in West Virginia own oil and gas minerals and would be subject to forced pooling.
5. There is no need to pass a new law regarding lost and unaccounted for heirs; West Virginia State Statute 55-12a-1 addresses this issue.
6. Land-men already use the tactic of "If you don't sign this we'll just force pool you"; in passing this law it will allow bullying to increase.
7. Recently proposed legislation would allow a Commission to approve surface use without consulting surface owners.
8. The Recently proposed legislation does not take into account the fact that horizontal drilling is going to happen in many different formations under the same tract in the future.
9. Force pooling legislation is going to cost mineral owners many millions of dollars in royalty payments if it's passed.
10. It will not only cost mineral owners millions, it will also cause the loss of numerous high paying jobs in West Virginia.
Last Updated (Tuesday, 18 June 2013 16:46)