Legislative Session Passes with No Major Changes to Oil and Gas Law

After striking out over the last 5 years on a forced pooling bill, the natural gas industry took a new approach in West Virginia in the past legislative session, attempting to get 2 different laws passed – one for “joint development” and one for “co-tenancy”. Both attempts failed.

The joint development bill pushed by the industry would have allowed the oil and gas operators to “pool” one lease with another to drill horizontal wells so long as the leases did not explicitly prohibit such an action. This bill was targeted at situations in which there is an old lease with an operating vertical well where the old lease did not contain language to permit the oil and gas company to pool and/or unitize the lease with other leases to share in production. Under the current law, if a lease does not have pooling and unitization language in it, the oil and gas company must negotiate with the mineral owner to amend the lease to allow for it. If the oil and gas company and mineral owner cannot come to terms, the oil and gas company cannot drill. The failed bill would have given the oil and gas operators the ability to bypass negotiations and force mineral owners to accept their terms.

Co-tenancy is the joint ownership of an oil and gas interest by multiple parties. It is very common, particularly in Marshall, Wetzel, and Tyler Counties, to have divided ownership of oil and gas in a property due to inheritance. Under West Virginia law, in order to drill through a property the oil and gas company must have 100% of the oil and gas interests under lease. Therefore, a person owning as little as 0.1% of the oil and gas for a property could prevent drilling on that property by refusing to lease. The proposed legislation would have allowed the companies to drill the property if they were able to come to an agreement with the owners of at least 2/3 of the oil and gas interest. In essence, this proposal was a form of forced pooling for somebody who did not own all of their oil and gas rights.

While both concepts failed to be made into law during this legislative session, you can be sure that the industry will continue to pursue these items in future years. As always, we encourage you to make sure that your representatives know how you feel about these issues.