The West Virginia Legislature approved two bills in early March to facilitate the development of oil and natural gas in the state, by expanding mineral owners’ abilities to develop jointly owned pooled resources.
In most countries, even many with long-histories of secured private property rights to surface areas and natural features above the surface, mineral rights, rights to valuable subsurface natural resources, are retained by the state.
The fact that in most of the United States the mineral rights were retained by those who owned the surface rights, has enabled landowners to profit from oil and gas development in hydrocarbon rich states.
Abutting or Mixed Properties
West Virginia’s two new statutes expands the power of the West Virginia Oil and Gas Conservation Commission (WVCC) to issue permits for oil and gas development when mineral rights are mixed due to properties close proximity to one another
Under specific circumstances, S.B. 694 authorizes the WVCC to issue horizontal well unit orders and issue permits to drill when owners of mineral rights cannot be located, refuse to lease, or do not consent to amend existing permits to permit horizontal drilling.
Upon the issuance of a unit order, the unitization of tracts for both shallow and deep horizontal wells is authorized by law.
“S.B. 694 allows unitization of interests if a producer demonstrates that executive interest royalty owners in the target formation owning 75 percent of the net acreage in the perspective unit have to pool or utilize their acreage and, with respect to the operator interest, that it controls 55 percent or more of the net acreage in the perspective unit,” says the National Law Review legal analysis of the law.
The bill also provides options for non-consenting owners to have input on permitting.
Majority Rule, Sort Of
The second bill, S.B. 650, builds on the 2018 Cotenancy Modernization and Majority Protection Act.
The 2018 bill permitted oil and gas development within a mineral tract owned by seven or more cotenants, if the royalty owners vested with at least 75 percent of the right to develop the minerals consent to the development of the oil and gas.
S.B. 650 eliminates the requirement that the tract be owned by seven or more cotenants, meaning the Cotenancy Act is applicable to all tracts in the state as long as the other conditions of the statute are met by those wishing to begin oil or gas production
Rising Producer of Natural Gas
Natural gas is becoming increasingly important to West Virginia’s economy, according to the U.S. Energy Information Administration (EIA).
“West Virginia is a net energy supplier to other states and provides about 5 percent of the nation’s total energy, more than half of it from coal production,” says and EIA report. “However, because of increases in natural gas and natural gas liquids production from the Marcellus and Utica shales in northern West Virginia, natural gas surpassed coal for the first time in 2019 and became the largest contributor to the state’s energy economy.”
These bills represented a practical step taken by West Virginia’s legislators to secure the state’s economic future, says, David Wojick, Ph.D., an independent energy analyst.
“Laws like this make it harder for greens to block horizontal area natural gas production by getting one landowner on their side,” Wojick said. “It is great to see a leading energy producer like West Virginia taking the initiative at this critical time.”
‘Poorly Thought Out … Regulations’
West Virginia is showing the good that can happen when badly needed natural resources are properly used, says William Balgord, Ph.D., president of Environmental & Resources Technology, Inc.
“If the Biden administration would follow West Virginia’s example and relax some of its poorly thought-out green regulations imposed on the oil and natural gas industries, the price of energy would soon return to the levels when President Trump left office in January 2021,” Balgord said. “And it would not take very long, because commodity future prices anticipate the future.
Bonner R. Cohen, Ph.D., (bcohen@nationalcenter.org) is a senior fellow at the National Center for Public Policy Research and a senior policy analyst with the Committee for a Constructive Tomorrow.