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West Virginia Lawmakers Again Likely to Consider Forced Pooling Legislation

A West Virginia lawmaker plans to again introduce a bill that would allow exploration and production companies drilling the Marcellus Shale and other shallower formations to pool landowners into units despite the failure of similar legislation in recent years.

Republican House Delegate Lynwood Ireland, who serves as the chairman of the Joint Standing Committee on Energy, highlighted his latest proposal during an interim committee meeting this week. Lawmakers reconvene for next year's regular session in January, when the legislation is likely to be introduced.

Earlier this year, Ireland sponsored HB 2688, which was rejected in the House just hours before the conclusion of this year's regular session (see Shale DailyMarch 16). In March, delegates failed to agree on several amendments added to the bill by senators, which resulted in a rare 49-49 tie and defeated the legislation. For years, similar measures have largely failed over concerns about property rights (see Shale DailyApril 17, 2013; Feb. 1, 2011), and this year was no different as lawmakers in the Republican-controlled legislature expressed their reservations, with one calling the bill a "gross violation of property rights."

But Ireland was quoted by local news media as saying something must be done soon as operators also turn their attention to the Utica Shale in the state. He said it was imperative that the state update its current pooling laws to provide more protection for landowners. Under current law, forced pooling is allowed in the state for deep wells below the Marcellus, such as the Utica, as well as shallow secondary oil recovery and coalbed methane wells. The state does not allow pooling for wells targeting other shallow formations such as the Marcellus.

Pooling allows operators to gather both consenting and nonconsenting landowners into units in which they share royalties and production costs. Dozens of states have similar laws, including nearby Ohio, where proponents say the practice reduces surface disruption and maximizes oil and gas production.

Similar to HB 2688, Ireland's next bill would require an operator to lease or acquire at least 80% of the net acreage in a proposed unit before applying with the state for pooling. The West Virginia Oil and Gas Conservation Commission would be tasked with approving or denying requests for unit operations. The legislation would also require that an operator show it first negotiated in good faith with affected landowners before applying for a pooling order, a stipulation that other states with similar laws also impose.

Just months after Ireland's last bill failed, the oil and gas industry said it would continue to push for what it considers necessary legislation. In testimony before the energy committee in June, West Virginia Oil and Natural Gas Association attorney Kurt Dettinger told members that forced pooling legislation would likely lead to the development of 100 more shale wells per year, along with $1 billion of additional capital investment and $365 million more in tax revenues (see Shale DailyJune 9). At the time, he said the organization would work to promote the legislation before next year's legislative session.

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