Representing West Virginia, Kentucky and North Carolina
The Marcellus Shale lies under much of northern Appalachia, 6,000 to 8,000 feet below the surface; the pores in the shale contain large quantities of natural gas. The shale layer becomes thicker from west to east beginning at about 50 feet in Ohio to more than 100 feet thick in central PA and NY.
Geologists have known about the gas in this area for years . It is reported that settlers as early as the 1600s noticed "burning springs" through out Appalachia. In the early 1800s oil and gas was discovered accidentally by salt well drillers. By 1840 natural gas was being used to evaporate brine water in Butler County, Pa.
It is the new technology of horizontal drilling, combined with hydraulic fracturing, that has turned recovering the gas locked in these rocks the big new “Shale Play”. It wasn't until about 2007 that Appalachia began turning heads in "the oil and gas states" Texas, Oklahoma, and Louisiana. Mineral owners in the Appalachian area began seeing Landmen knocking on doors to obtain gas leases.
NARO was established in 1981. The NARO Appalachia chapter began in October of 2008 to provide mineral owners some organized support, education and advocacy.
West Virginia Legislative Update – March 30, 2020
Below please find the final West Virginia Legislative Update for the 2020 session. Overall, it was a successful session for mineral owners. There were a few bills which proponents have been working on for several years that finally passed, including SB 554 and HB 4088. Your government relations team at NARO Appalachia is already working on issues for the 2021 session. If you have any suggestions or issues affecting you or your area, we would love to hear your thoughts. If you have any questions relating to the Legislative Update or would like to be a part of the Legislative Committee, please contract NARO Appalachia President, Valerie Antonette, firstname.lastname@example.org, or NARO Appalachia Vice President, Tom Huber, email@example.com.
- SB 554 Relating to Termination, Expiration, or Cancellation of Oil or Natural Gas Leases – This bill was designed to clean up title on oil and gas tracts that have terminated or expired leases by requiring companies to issue a release 60 days after the lease is terminated, canceled or expired on its terms. If the oil and gas operator does not issue said release, a lessor can write to the operator requesting the release and the operator will have 60 days to respond. If the operator does not respond, a lessor can file an Affidavit of Termination in the county of the lease giving notice he or she believes the lease is terminated. In 2019, the bill passed the House of Delegates, 96-4, but it died due to Industry opposition in the Senate towards the end of the session. This year, Valerie Antonette, President of NARO Appalachia, modeled the bill after a similar Pennsylvania statute. This bill passed Senate Judiciary on a unanimous voice vote on February 10, 2020. It passed the full Senate on February 14, 2020, 31-0, with 3 members not voting or absent. On February 20, 2020, this bill passed the House Energy Committee by a unanimous voice vote and the second reference to House Judiciary Committee was waived. On February 29, 2020, this bill passed the House 85-8, 7 absent or not voting, and was communicated to the Senate for a concurrence. On March 2, 2020, the Senate concurred 33-0, 1 member absent or not voting. Governor Jim Justice signed this bill into law on March 25, 2020. It will be effective May 31, 2020.
- HB 4088 Disposition of Funds From Certain Oil and Natural Gas Wells Due to Unknown or Unlocatable Interest Owners - This bill takes monies collected in accounts related to unknown and unlocatable interest owners and transfers such monies to the Oil and Gas Reclamation Fund after the monies are unclaimed for 7 years. This bill applies to partition proceedings and lease and conveyance of mineral interests owned by missing or unknown or abandoning owners. This bill passed the House Energy Committee on January 10, 2020, and the full House on February 13, 2020, 96-0, 4 absent or not voting. The Senate Judiciary Committee passed this bill on February 14, 2020. After a brief delay, the full Senate considered and passed the bill on March 5, 2020, 32-1, 1 absent or not voting. Governor Jim Justice signed this bill into law on March 25, 2020. It will be effective June 3, 2020.
- HB 4090 Creating the Oil and Gas Abandoned Well Plugging Fund – NARO Appalachia supported this bill as it gives some relief to conventional well producers and provides funds to plug abandoned wells. It does not apply to horizontal wells. It essentially cuts severance tax on most conventional wells (60 thousand cubic feet of gas and 10 barrels of oil per day) to 2.5% and reallocates the additional 2.5% to the abandoned well plugging fund. It passed the House of Delegates 99-0 and was single referenced to Senate Finance. It passed out of the Senate Finance Committee on February 27, 2020, where a technical amendment was added. On March 2, 2020, the Senate passed the bill 33-0, 1 member absent or not voting, and the House concurred later that day 91-0, 9 members absent or not voting. Governor Jim Justice signed this bill into law on March 23, 2020. It will be effective June 1, 2020.
- HB 4091 Allowing for Expedited Oil and Gas Well Permitting Upon Payment of Applicable Expedited Fees – NARO Appalachia supported this bill as it provides funding for the West Virginia Department of Environmental Protection and for plugging abandoned wells through increased fees for expedited permits for horizontal wells. It has passed the House of Delegates 98-0 and the Senate 33-0. Governor Jim Justice signed this bill into law on February 18, 2020. It will be effective May 5, 2020.
- HB 4217 (formerly 4311) Relating to Rules of the OGCC- This Rule made changes to the deep well spacing regulations (39 CSR 1) as they pertain to horizontal wells. The base spacing will be 1,000 feet between productive intervals of wells owned by different operators and 800 feet for wells owned by the same operator, or subject to an agreement with a different operator. This rule was negotiated by the Oil and Gas Conservation Commission (OGCC), industry representatives, and royalty owner stakeholders over the summer in 2019. NARO Appalachia supported this rule change. This bill, along with its rule bundle, passed the House 52-39, 9 members not voting or absent, on February 14, 2020. This bill passed Senate Judiciary Committee on February 17, 2020, and bill passed the Senate, 19-15, on March 3, 2020. Governor Jim Justice signed this bill into law on March 25, 2020. It will be effective June 1, 2020.
- HB 4421 Natural Gas Liquids Economic Development Act – The bill provides tax credits for industries and business that use Natural Gas Liquids. It originally also applied to producers of Natural Gas Liquids but was amended to the narrow category of users in House Energy. NARO Appalachia supported this bill as downstream manufacturing using NGLs will help NGL prices, hopefully raising royalties. It passed the House Energy Committee on January 20, 2020. This bill was amended in the House Finance Committee and passed on February 20, 2020. This bill passed the House 85-14, 1 member absent or not voting, on February 24, 2020. The bill passed the Economic Development Committee on February 26, 2020. On March 5, 2020, it passed the Senate 27-6, 1 member absent or not voting. Governor Jim Justice signed this bill into law on March 25, 2020. It will be effective June 3, 2020.
- SB 802 Relating to Public Utilities Generally- This bill allows large volume users of oil and gas (at least 100 mcf annually) to sell directly to consumers without the consent of the Federal Energy Regulatory Commission, effectively cutting out the middleman. NARO Appalachia supported this bill as it should result in better prices and more demand for gas from conventional wells. This bill was introduced by Senator Swope on February 17, 2020, and passed the Senate Government Organization Committee on the same day. It passed the Senate 34-0 on February 26, 2020. It was single referenced to the House Government Organization Committee, where an amendment was added and passed. The bill passed the House 94-0, 6 members absent or not voting, on March 4, 2020. Governor Jim Justice signed this bill into law on March 25, 2020. It will be effective June 5, 2020.
- SB 275 Creating Intermediate Court of Appeals - This bill would have established a second layer of appeals courts in West Virginia. The Senate Judiciary committee adopted an amendment offered by Senator Pitsenbarger that allows judges stand for election. Originally, NARO Appalachia’s position was to oppose this bill unless the judges were elected by the voters, not chosen by Governor’s appointment, thus, we are now neutral.
The bill passed the Senate on February 10, 2020, 18-14, 2 members not voting or absent. It was doubled referenced to House Judiciary, then to House Finance. There was a public hearing on February 27, 2020. It passed House Judiciary 15-10 on February 28, 2020, where it was amended to include criminal appeals under its jurisdiction and delay implementation until after elections are held in 2022. The bill was amended several more times before it came to the floor for a final vote on March 6, 2020. After two hours of debate, the House voted the bill down 44-56. Immediately after the vote, a Motion to Reconsider was made, but voted down 42-58. We expect a version of this bill to be re-introduced in 2021.
- SB 316 Relating to Oil and Gas Conservation Commission Membership- This bill, as introduced, removed the professional requirements from the geologist member of the Oil and Gas Conservation Commission (OGCC). NARO Appalachia and the West Virginia Farm Bureau have been asking for over 5 years to have a land/mineral owner on the OGCC as it administers deep well forced pooling cases and the OGCC is dominated by oil and gas industry members. Senator Randy Smith offered an amendment in Senate Government Organization Committee to change the qualifications for the Public Member of the OGCC to be someone who has never worked or consulted for an oil and gas company or involved in the production or exploration of oil and gas that is also a landowner. The amended bill passed the Senate 34-0, despite industry’s arduous opposition to it. In the House, the bill was single referenced to Energy Committee but was never considered by said Committee.
- SB 535 Eliminating Minimum Spacing Requirements for Drilling of Deep Wells by Oil and Gas Operators - This bill eliminated the authority of the OGCC to regulate spacing of deep wells. NARO Appalachia strongly opposed this bill. There was a lack of interest by the legislature to consider this bill. Bills had to be taken up by all referenced committees in their house of origin by February 23, 2020, to ensure three full days for readings on the floor prior to Crossover Day, February 26, 2020. The Senate Judiciary Committee failed to place this bill on its agenda. Due to the passage of HB 4217, we do not foresee this bill being re-introduced in 2021.
- HB 4460/SB 655 Relating to the Valuation of Natural Resources Property - This bill was an industry backed bill attempting to overturn the West Virginia Supreme Court decision in Steager v. Consol Energy, Inc.. Industry wanted its production taxes to take into account all of its operating and post-production costs when calculating these taxes, not just the “lift” costs, meaning the cost to get the production to the surface. The WVSC held oil and gas operators cannot use post-production costs, such as transportation, fractionation or gathering in this calculation. Passage of the bill would have resulted in millions of tax dollars lost in natural gas producing counties. On January 29, 2020, SB 655 was taken up by Senate Energy and passed out on a contested voice vote. On February 13, 2020, this bill passed out of the Senate Finance Committee and passed the Senate 27-7 on February 19, 2020. It was single referenced to the House to the Finance Committee; however, the committee failed to consider the bill. We expect to see another iteration of this issue next year.
- HB 4956 (formerly HB 2802) Uniform Partition of Heirs Act - The bill defined terms and provided for a court hearing to determine if a partition action concerned heirs’ property and the manner in which such property and interests may be sold. This was a watered down version of the 2019 bill; however, industry still opposed it. Originating bill HB 4956 attempted to reform the current Partition statute by adding an appraisal option and offering the property for sale on the open market rather than an auction. This would have allowed potential borrowers to possibly get a loan to purchase the property and also should bring in a fair market value. There was also a section that stated a parcel of severed mineral interests would be rebuttably presumed to be more valuable as a whole rather than divided. NARO Appalachia supported this bill as written, while the oil and gas operators opposed it. It did pass out of the House Judiciary Committee on February 14, 2020, and passed the House 85-11, 4 members absent or not voting, on February 20, 2020. This bill was on the Senate Energy, Industry and Mining Committee’s agenda on March 3, 2020, but was removed from the agenda at the beginning of said meeting. We expect this issue will continue to be debated during the 2021 session. NARO Appalachia, the West Virginia Farm Bureau and the West Virginia Surface Owners Rights Organization will continue to work on alternatives to reform the partition code.
- HB 4610 Relating to Withholding Tax on Income of Nonresidents From Natural Resources Royalty Payments - This bill would have required producers to withhold income tax from out of state royalty owner’s checks. NARO Appalachia supported this bill as it would make sure out of state royalty owners could more easily fulfill their tax obligation to the state of West Virginia. NARO Appalachia Treasurer, Jeff Yourkovich, worked with legislators to get this bill off of the ground. On January 30, 2020, this bill passed the House Energy Committee. It was double referenced to House Finance. However, bills had to be taken up by all referenced committees in their house of origin by February 23, 2020, to ensure three full days for readings on the floor prior to Crossover Day, February 26, 2020, and the House Finance Committee failed to place this bill on its agenda. We plan to work with Delegate Zukoff to re-introduce this bill in 2021.
- SB 827 Relating to Protection and Repair of Damage Caused by Oil and Gas Industry to State Roads - This bill codified certain procedures of the Department of Highways related to road bonding for oil and gas operations. Its purpose is to protect and repair the state’s roads damaged by the oil and gas industry. An oil and gas operation seeking to operate in West Virginia shall enter into a road use agreement with the division and submit a permit application on the form prescribed by the division. The division shall make available a permit form and instructions for its completion available to the public on its website. Every oil and gas industry operation, except pipeline operations, shall provide a surety to repair anticipated damage to the state’s roads and highways due to the operation, with a minimum bond equal to $135,000 per paved mile, $46,000 per tar and chipped mile, and $36,000 per graveled mile. Oil and gas wells producing less than 5,000 barrels of liquids or well abandonments shall be a minimum of $50,000 per well. Pipeline operations shall provide sufficient surety to repair all anticipated damage to the state’s roads and highways due to the operation. At a minimum, the operation shall provide a bond equal to $200,000 per paved mile, $60,000 per tar and chipped mile, and $50,000 per graveled mile. This bill was introduced by Senator Jeffries on February 17, 2020, and passed the Senate Transportation and Infrastructure Committee on the same day. It was double referenced to Senate Judiciary; however, that Committee voted to move the bill to a Study Resolution during the interim period. The state of the West Virginia roads will always be an important issue; thus, we expect to see similar legislation in 2021.