A program of the West Virginia Oil & Natural Gas Association

Fair Pooling Law Should Be Adopted

Mark Hickman | May 31, 2015 | Wheeling Intelligencer

Editor, News-Register:

 

I read with interest Delegate Pat McGeehan's early April column in the Wheeling newspaper, regarding the issue of natural gas pooling. While I respect his perspective, I disagree wholeheartedly with his position.

 

As an Ohio County landowner benefitting from natural gas development, I see firsthand the need for an expansion of West Virginia's pooling statute that applies to horizontal drilling in the Marcellus formation. The primary reason for this belief is that I have neighbors that would like to benefit from gas development but are unable to do so due to a mineral owner unwilling to lease their gas assets. While I support personal property rights, at what point does an individual's right usurp the rights of a majority?

   

House Bill 2688, legislation that failed to pass in the final minutes of this year's legislative session, required 80 percent of mineral owners within a drilling unit to lease their assets before a gas company could develop the gas. To oversimplify, if there were10 mineral owners within a proposed unit, eight of them would have

to be willing to lease before the pooling provision could be triggered. That's one of the highest standards in the country and assures fairness in the process.

 

Those who oppose this legislation call it "forced" pooling. This is a terrible moniker and, frankly, immediately colors the perspective of those that are uninformed on the policy. Under HB 2688, no one who is pooled into a drilling unit would lose ownership or experience disturbance to the surface of their property if they don't allow it. Second, anyone pooled into a drilling unit would be fairly compensated based on the market value of the gas and in correlation to the amounts others in the region are receiving.

 

Many don't realize that gas companies have the ability currently to pool in the Utica Shale. Not only do they have that right, but the threshold to do so is far below the 80 percent parameter set forth in HB 2688. Anyone who follows the gas industry recognizes that Utica wells, in many instances, are producing far more prolific amounts of gas than those in the Marcellus. This bill would have extended additional property rights to those owning minerals in this and other strata. And, as companies expand operations into other formations, this may be the biggest downside of this legislation failing to pass.

 

Delegate McGeehan makes an argument about the time value of money and that those of us who have leased our minerals now are somehow frivolous spenders. The reality is that whether you lease your minerals now, five years from now or thirty years from now, you will be paid in most instances the going market rate or within some range of it.

 

It's been many decades since the last gas boom. We've reached a point in time where the convergence of demand and technology have created this opportunity. The market for natural gas is here now. The infrastructure to obtain it and move it is here now. And, no one knows the extent or degree to which it will be here in the future.

 

And finally, a factor that received little-to-no attention is that mineral owners would have been protected from the "rule of capture" to a greater degree than ever before under HB 2688. This rule allows gas companies, either unintentionally or otherwise, to drain gas from neighboring property without the permission of the mineral owner. An example might be a situation where a company runs a horizontal lateral near the property boundary of the area they have under lease. If the mineral owner on the other side of the boundary hasn't agreed to lease his minerals - and due to the proximity of the well to his property his gas drains into the company's well - he loses out on his asset.

 

Marcellus well laterals can drain approximately 750 feet left and right of the well bore. A developer can extract valuable resources for years while never paying the unleased mineral owner a penny. Under House Bill 2688, mineral owners are more protected. If minerals are extracted, a royalty would be paid.

 

Expanding West Virginia's pooling statute to include shallow, Marcellus wells would have allowed those that want to benefit from gas development to do so, while fairly compensating the minority that do not want development. This is a complex issue and I believe many who voted against it don't fully understand it.

 

I live on a farm that has been in my family since 1916. I feel strongly about this issue because I am a land and mineral owner and have seen the benefits development can bring. I want my neighbors, county and state to derive as much benefit from this economic opportunity as possible. House Bill 2688 provides a clear and equitable pathway to responsible development, while offering land and mineral owners much needed protections.

 

It saddens me that our legislature snatched defeat from the jaws of victory on HB 2688. I hope cooler heads will prevail and that Governor Tomblin will take a leadership role on this issue. Fair pooling will benefit West Virginia and West Virginians.

 

Mark Hickman


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