West Virginia natural gas producers are at it again, lobbying state lawmakers to pass a version of forced pooling legislation that they claim would propel drilling operations into the 21st century and better help operators compete with their peers in Ohio and Pennsylvania.
The industry is pushing again for co-tenancy, which fell short of passing the legislature earlier this year. The state Senate approved a bill that died in the House Energy Committee because there wasn’t enough time left in the regular session to move it to the floor.
Enervest Operating LLC’s James Pritt, regulatory manager, told lawmakers at the Joint Standing Committee on Energy this week that without the ability to pool landowners into larger tracts of land to better accommodate longer laterals, the state’s unconventional producers would be at a disadvantage. West Virginia is one of three producing states without a comprehensive pooling law. California and Illinois have no pooling laws.
The industry opted to push for co-tenancy and joint development in the last regular session, which ended in April. Co-tenancy would require a producer to obtain a simple majority agreement from mineral rights owners within a proposed tract rather than 100% of the mineral rights owners.
But the proposal would prevent operators from forcing a co-tenant into a tract if the landowner owns at least one-fourth of the mineral rights. Under joint development, operators would be able to integrate older leases executed before the shale era into large tracts.
Pritt, who also serves as secretary of the Independent Oil and Gas Association of West Virginia, said producers wants the legislature to consider co-tenancy again next year when the regular session convenes in January.
Prior to co-tenancy and joint development, the state’s gas industry pushed forced pooling unsuccessfully for years, which has failed in part over lawmakers’ concerns about property rights. West Virginia produced the least of the other two leading shale states in the Appalachian Basin last year, reporting about 1.3 Tcf. Volumes reached roughly 1.4 Tcf in Ohio and 5.1 Tcf in Pennsylvania last year.
Some producers, such as EQT Corp., have indicated that they are waiting for some kind of forced pooling legislation before developing land in West Virginia. Proponents of co-tenancy have argued that the provision would better enable producers to block up acreage positions for far-reaching laterals, to maximize production and reduce surface disruption.
Pritt said the state has lost out on additional taxes, while landowners haven’t realized as much royalties as they could be with pooling. The West Virginia Oil and Natural Gas Association, which helped advance co-tenancy and joint development, said after the bill failed earlier this year that it would push again for the proposals in next year’s regular session.