WEST VIRGINIA: Federal Court Throws Out ‘Forced Pooling’ Lawsuit

Lawsuit seeking to stop West Virginia’s new natural gas unitization law ruled invalid

A September 10, 2022 story by Steven Allen Adams, Federal Court Throws Out Bethany Residents’ Natural Gas Unitization Lawsuit, in the The Intelligencer | Wheeling News Register details a West Virginia judge’s ruling on what is commonly called “forced pooling.” SB 694, passed March 9, 2022, includes this key phrase:

Encourage the maximum recovery of oil and gas.

WEST VIRGINIA SB 694
Marcellus Air photos of oil and gas production in the Bethany, West Virginia area:

“U.S. District Judge John Bailey issued an order Wednesday granting a motion to dismiss a lawsuit filed in May by Bethany residents Scott Sonda and Brian Corwin in the U.S. District Court for the Northern District of West Virginia against Gov. Jim Justice to block Senate Bill 694, relating to oil and natural gas conservation. In his order, Bailey agreed with attorneys for the Governor’s Office that Justice should not have been sued, given that the Governor was the wrong agency to be sued. Bailey also wrote that neither Sonda nor Corwin provided enough facts to show how the provisions of SB 694 had caused them any harm.”

Reporter Steven Allen Adams | Federal Court Throws Out Bethany Residents’ Natural Gas Unitization Lawsuit | September 10, 2022
SB 694 was the result of a compromise between the Gas and Oil Association of West Virginia, the West Virginia Royalty Owners Association and the West Virginia Farm Bureau. A similar bill to SB 694, House Bill 2688, died in a 49-49 tie vote in 2015.

“The law sets new application requirements for the combination of the tracts for oil and natural gas drilling by operators of horizontal well units. It requires horizontal well units consisting of two or more tracts to get agreements from the mineral rights owners for at least 75% of the net acreage when it comes to interest from the royalties collected. SB 694 caps horizontal well units at 640 acres per unit, and a unit cannot contain more than 128 net acres controlled by non-consenting royalty owners. The law gives options to non-consenting royalty owners with valid leases, but no utilization provisions for how they wish to be paid: either 25% of the weighted average bonuses or 80% of the average royalty rate percentage.”

Reporter Steven Allen Adams | Federal Court Throws Out Bethany Residents’ Natural Gas Unitization Lawsuit | September 10, 2022
Key section of West Virginia SB 694:

ARTICLE 9. OIL AND GAS CONSERVATION.

§22C-9-1. Declaration of public policy; legislative findings.

(a) It is hereby declared to be the public policy of this state and in the public interest to:
(1) Foster, encourage, and promote exploration for and development, production, utilization, and conservation of oil and gas resources;
(2) Prohibit waste of oil and gas resources and unnecessary surface loss of oil and gas and their constituents;
(3) Encourage the maximum recovery of oil and gas;
(4) Safeguard, protect, and enforce the correlative rights of operators and royalty owners in a pool of oil or gas to the end that each such operator and royalty owner may obtain his or her just and equitable share of production from that pool, unit or unconventional reservoir of oil or  gas; and
(5) Safeguard, protect, and enforce the property rights and interests of surface owners and the owners and agricultural users of other interests in the land.
(b) The Legislature hereby determines and finds that oil and natural gas found in West Virginia in shallow sands or strata have been produced continuously for more than 100 years; that oil and gas deposits in shallow sands or strata have geological and other characteristics different than those found in deeper formations and unconventional reservoirs; and that in order to encourage the maximum recovery of oil and gas from all productive formations in this state, it is not in the public interest, with the exception of shallow wells utilized in a secondary recovery program, to enact statutory provisions relating to the exploration for or production of oil and gas from vertical shallow wells, but that it is in the public interest to enact statutory provisions establishing regulatory procedures and principles to be applied to the exploration for or production of oil and gas from deep wells, as defined in section two and oil and gas produced from horizontal wells. Source

“Non-consenting owners without valid leases can either sell their minerals, participate in the well, subject to a 200% payout penalty, or elect to receive royalty payments three different ways. They could choose to receive 100% of the weighted average bonus received by owners inside the unit within the previous 24 months, the highest royalty rate received by the owners in the unit within 24 months, or mineral owners could be paid through a weighted average sales price or the local monthly index price.”

Reporter Steven Allen Adams | Federal Court Throws Out Bethany Residents’ Natural Gas Unitization Lawsuit | September 10, 2022

FORCED POOLING – EARTHWORKS:

“Forced Pooling” is the mandatory consolidation of leased and unleased minerals to access one common underground mineral reserve. Also known as compulsory drilling, compulsory pooling, mandatory pooling & unitization or statutory drilling laws, these laws allow for oil & gas drilling in a large area even if some of the mineral owners have not consented or signed leases.
In its essence, forced pooling is the taking of private property (also known as private eminent domain) that also forces the impacts of drilling onto landowners. Pooled landowners face toxic air emissions, risks of water pollution and other environmental impacts related to drilling.
Nearly 40 states have laws – often times old, unused laws – allowing forced pooling for mineral leases over large acreages of land (usually 640 acres or more). Minerals found under land that was not leased but part of the “pool” can be extracted through fracking or similar techniques…
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