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Marcellus Pooling Debate Continuing in West Virginia

West Virginia lawmakers are once again trying to pass legislation that would allow exploration and production companies drilling the Marcellus Shale and other shallower formations in the state to pool landowners into units.

For years now, similar measures have failed over concerns about property rights (see Shale DailyApril 17, 2013Feb. 1, 2011). But the latest attempt, HB 2688, has passed the House of Delegates Energy Committee and moved to the House Judiciary Committee.

Since the 1990s, forced pooling has been allowed in West Virginia 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, though, the state does not allow pooling for wells targeting other shallow formations such as the Marcellus.       

"In West Virginia, there are many occasions when voluntary units cannot be formed due to title and other issues, which render some lands unavailable for development," wrote West Virginia Oil and Natural Gas Association President Kevin Ellis in an opinion article that appeared in local newspapers Wednesday.

"In the Marcellus region of West Virginia, most oil and gas tracts are not large enough alone to drill horizontally," he added. "Pooling laws create a framework for stakeholders to realize the benefit of development by allowing for the combination of sufficient tracts to employ horizontal drilling techniques."

Under HB 2688, the West Virginia Oil and Gas Conservation Commission would be given the authority to approve or deny requests for unit operations. The legislation as written requires that operators acquire or sign lease agreements for at least 80% of the net acreage proposed to be included in the well unit. Compensation in those units would be determined by the commission.

The legislation also would require operators to demonstrate "good faith" efforts to contact all landowners in the unit or negotiate fairly to lease the property in question. The bill also wold require that the oil and gas commission expand from five to seven members to decide unit requests.

State Delegate Lynwood Ireland, who serves as the energy committee's chairman, introduced the latest pooling legislation earlier this month. He's billing it as a way to promote economic development and prohibit the waste of oil and gas resources.

Pooling allows an operator to gather both consenting and nonconsenting landowners into a unit in which they share royalties and production costs. Dozens of states have similar laws, including Ohio, where proponents say the practice reduces surface disruption and maximizes oil and gas production by reducing the amount of drilling pads (see Shale DailyJuly 18, 2013March 20, 2013). Proponents also claim pooling laws stop a small minority of landowners that may be opposed to drilling in a certain area from preventing a majority of those that may want to capitalize on their mineral rights.  

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