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Co-Tenancy Awaiting Signature by West Virginia’s Governor

West Virginia’s natural gas industry is “anxiously awaiting” Republican Gov. Jim Justice’s signature on co-tenancy legislation that would modernize the mineral law and better accommodate unconventional development in the state.

After failing for years to reach consensus with an array of stakeholders inside and outside the legislature on similar proposals to enact forced pooling or joint development, the state Senate passed HB 4268 by a vote of 23-11 on Saturday. The bill had passed the House of Delegates 60-40 last month, but it had to be returned after minor changes were made in the Senate version. The House agreed and sent the bill to Justice’s desk with just days left before the regular sessions ends.

The co-tenancy legislation would require a producer to obtain consent from 75% of the mineral rights owners of a single tract of land. It’s common for dozens of people to own a single piece of property in the state, which has prevented some producers from developing assets when a minority co-tenant can’t be found or doesn’t agree to drilling.

While HB 4268 was still hotly debated in this year’s legislative session, it didn’t divide like similar bills have in the past. The industry, surface owners, and mineral owners all supported the bill.

“HB 4268 represents great compromise among the various stakeholder groups that have been interested in this issue for a number of years, and the passage of this bill is a victory to all of those groups, especially the mineral interest owners,” said Executive Director Anne Blankenship of the West Virginia Oil and Natural Gas Association.

As the bill was being debated in the Senate last week, Tom Huber, president of the West Virginia Royalty Owners Association told NGI’s Shale Dailythat the bill appealed to members in part because it would provide adequate protections for nonconsenting landowners. For example, the bill would allow those property owners the option of collecting a royalty or participating in a well by sharing the revenues and costs.

At one point last week, the bill seemed imperiled when Justice said it should be scrapped, brought to special session and traded for a higher severance tax to help fund pay raises for striking teachers. Justice later dropped the proposal and indicated he would sign it if it were to reach his desk.

The teacher strike was in its ninth day on Tuesday, but a solution appeared near. It was unclear when Justice could sign the co-tenancy legislation as he was devoting his attention to the strike.

WVONGA, other industry groups and some of their members have said for years that the state’s mineral laws had to be modernized to accommodate longer laterals and make the state more competitive with other energy producing states.

“Once effective, this bill will allow more access to the enormous amount of natural gas we are sitting upon in West Virginia, which will provide even greater economic benefits to West Virginia and its citizens, and game changing opportunities for downstream uses of natural gas,” Blankenship said Tuesday.

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