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West Virginia Lawmakers Once Again Mulling Forced Pooling Legislation

For the fifth time in the last six years, the West Virginia legislature is considering a bill that would allow forced pooling in the Marcellus Shale and other shallow formations.

Republican House Delegate Lynwood Ireland of Ritchie County introduced HB 4426 earlier this month, and it has since moved to the House energy committee, which he chairs. He introduced a similar bill last year that was defeated in the final hours of the regular session (see Shale DailyMarch 16, 2015). The legislation was one of several forced pooling bills to fail in recent years, as lawmakers cited concerns about property rights (see Shale DailyApril, 17, 2013Feb. 11, 2011).

But ahead of this year's session, which adjourns March 12, oil and natural gas industry representatives said they were committed to getting pooling legislation passed (see Shale DailyJune 9, 2015). As unconventional development is still in its early stages, the industry has said forced pooling would provide fewer roadblocks to unifying acreage positions.

During an interim meeting of the joint energy committee last June, West Virginia Oil and Natural Gas Association attorney Kurt Dettinger said that the legislation would likely allow development of 100 more shale wells per year, along with $1 billion of additional capital investment and $365 million in tax revenues.

The language of HB 4426 contends that the bill would "safeguard, protect and enforce the private property rights of mineral owners in this state." Like last year's legislation, it would require an operator to lease/acquire at least 80% of the net acreage in a proposed unit before applying for a pooling order. Pooling allows an operator to gather consenting and nonconsenting landowners into a unit in which they share royalties and production costs. Dozens of states have similar laws, including neighboring Ohio.

Unlike last year's bill, HB 4426 would not allow companies to deduct post-production expenses from royalties to cover compression, dehydration, transmission and other costs. Forced pooling is allowed in the state for deep wells below the Marcellus, such as the Utica Shale, as well as shallow secondary oil recovery and coalbed methane wells. Under current law, the state does not allow pooling for wells targeting other shallow formations, such as the Marcellus.

Another bill introduced in the state Senate earlier this month, SB 508, would add a section to state law to establish criteria for private nuisance claims and clarify the language that defines a nuisance. Antero Resources Corp. and other smaller state operators have faced lawsuits from individuals claiming the companies' operations are causing nuisances in their daily lives, citing noise, truck traffic and environmental concerns.

Republican Sen. Ryan Fern of Ohio County is sponsoring the bill, which defines a nuisance as a "substantial or unreasonable" interference with the private use of land. It would require individuals to prove physical property damage or bodily injury in a claim.

More specifically, Fern’s bill would not permit individuals to bring nuisance claims against any owner, operator, contractor or subcontractor that has a license, permit or any other authorization from local, state or federal government unless the activity violates a term of contract. The bill is currently under consideration in the Senate judiciary committee.

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