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Legislation Targeting Natural Gas Industry Fails in West Virginia

A long list of legislation that targeted the natural gas industry in West Virginia failed to receive enough support from lawmakers before they adjourned last Saturday. However, the House of Delegates enacted a series of resolutions, perhaps offering a glimpse of things to come.

Chief among the failed bills was SB 167, a proposal to set a baseline to collect Marcellus Shale oil and gas severance taxes and to establish a West Virginia Future Fund, which the legislature could draw up to 25% of the proceeds from for various appropriations.

SB 167, sponsored by House of Delegates Majority Leader Brent Boggs (D-Braxton) and Senate President Jeffrey Kessler (D-Marshall), also called for annually reallocating up to $20 million in severance tax revenue to oil and gas producing counties and municipalities, beginning in 2014. The bill stalled in the Senate Economic Development and Finance committees.

"Much was said and written about the failure of some bills at the end of the session," Boggs said Monday. "Many good bills did not pass, as is always the case. However, I believe while we are in the extended budget session, Governor Tomblin may place a few of the most important bills on an agenda call. Minor differences between the two houses can be quickly ironed out and see a few more important measures passed."

Legislators did not consider raising the state's severance taxes on oil and gas, which currently stands at 5% of gross receipts (see Shale Daily, Jan. 23).

"I wasn't surprised by that at all," Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia (IOGA), told NGI's Shale Daily on Tuesday. Kessler, Gov. Earl Ray Tomblin and House Speaker Richard Thompson (D-Wayne) "had all made statements that they did not want to see any new taxes. Those three gentlemen kept their word."

HB 2435, sponsored by Del. Mike Ferro (D-Marshall), would have allocated 10% of the $64.8 million in baseline severance tax revenue to oil and gas producing counties and municipalities. The remaining 90% would have been equally divided between the state's General Fund and a Marcellus Development Account, the latter of which would have been used to finance, on a pro rata basis, infrastructure projects in the Marcellus and/or Utica shales.

Meanwhile, HB 2255, sponsored by Del. Mike Manypenny (D-Taylor), called for the West Virginia Department of Environmental Protection (DEP) to study wastewater injection wells for any link to seismic activity and to develop a seismic monitor plan with the state's Bureau of Public Health. The bill foundered in the House Judiciary Committee.

Another Manypenny bill, HB 2280, would have required anyone who was not a member of the American Association of Professional Landmen to have two years or more of experience in contracting for oil and gas leases and to complete an ethics class for landmen. That measure stalled in the House Energy, Industry & Labor, Economic Development & Small Business Committee.

"Most new landmen are challenged by the fact that they have to be an analyst, manager, salesman and negotiator all at the same time," the text of HB 2280 said. "It takes a very self motivated individual to wear all of these hats one time."

Manypenny and Del. Barbara Evans Fleischauer had sponsored HB 2256, which would have established a "cradle to grave" monitoring system at the DEP for water withdrawals at natural gas wells. At a minimum, the new system would have included the use of hydrants with a backflow preventer, and water trucks outfitted with GPS devices. The bill also ended in the House Judiciary Committee.

HB 2313 and HB 2947 would have allowed surface owners to purchase mineral interests that lay below the property when the mineral interest becomes subject to a tax lien, or allowed their purchase under certain circumstances, respectively. Both bills failed to get support to advance to a floor vote.

Another Manypenny bill to ultimately die in Judiciary was HB 2137, which would have given counties and municipalities "the authority to enact zoning ordinances to regulate drilling and hydraulic fracturing [fracking] of horizontal wells in order to protect the citizens within their jurisdictions." For most of 2011, the City of Morgantown and Northeast Natural Energy were locked in a dispute over two of Northeast's gas wells and the city's power to shut them down (see Shale Daily, Dec. 29, 2011).

At least 18 additional bills Manypenny sponsored also failed to clear Judiciary. Another bill, HB 3085,would have required employers and owners conducting horizontal well drilling activities to submit a report to the state Department of Labor. The report was to include their employees' state of residency. The bill died in the House Government Organization Committee.

"I do not suspect that these bills will come back up for discussion," Burd said, adding that most were carried over from the legislature's last session, or were addressed by the Natural Gas Horizontal Wells Control Act, which Tomblin signed into law in late 2011 (see Shale Daily, Dec. 27, 2011; Dec. 15, 2011). "We're not anticipating seeing these bills [again] in a session."

Burd said he expects the legislature may, at some point, take up one or all of five resolutions adopted by the House of Delegates last Friday night.

House Concurrent Resolution (HCR) 163 calls for the state to study the impacts of the disposal of drill cuttings into landfills. HCR 168 seeks a study on renewable fuel standards, while HCR 169 calls for a study of alternative and renewable energy sources. HCR 174 calls for a study on the inventory and development of the state's resources, while HCR 177 seeks a study on oil and gas lease integration, or shallow well pooling.

"These are the kinds of things that they might still attempt to address in an interim session," Burd said. "I might expect to encounter it these sometime through January. The House and Senate both have to adopt them in order for them to have passed. None of them were, but [Kessler] and [Thompson] do have the discretion to initiate studies on them."

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