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NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688

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29041431

A new forced pooling bill was introduced today in H.B. 2688. You may find it online at:

http://www.legis.state.wv.us/Bill_Status/bills_text.cfm?billdoc=hb2688%20intr.htm&yr=2015&sesstype=RS&i=2688

Please review this bill that was introduced by Lynward Ireland, R-Ritchie (Chairman of the House Energy Committee) and William Anderson, R-Wood (Speaker Pro-Tempore).

This bill was a collaborative effort among many of the stakeholders in the production of natural gas in the State of West Virginia. I'm not saying it's good or bad, but for the first time, we may have a pooling bill that benefits not just the gas industry, but perhaps the surface owners, royalty owners and the citizens of the State of West Virginia. I haven't totally read the entire document, but a short list of things it addresses are 1) It rewrites the rules on both deep and shallow wells; 2) It brings some transparency to the leasing process. If you are forced pooled, you will be paid the same as others in your area and the gas companies have to provide written proof of same to the Oil and Gas Commission; 3) surface owners will be given some say in the placement of wells; 4) royalty owners will not be charged any post-production costs; 5) gas companies must have leases on 80% of the acreage in a pooling unit in order to force pool;       6) the Oil and Gas Commission will no longer be totally made up of pro gas industry members. Under this bill, one member will be a royalty owner (not related to the gas industry) and one will be a farmer and 7) the gas industry, under the new rules, may now force pool those minority  and/or missing royalty owners they're always talking about.

Please stay tuned and be aware of developments related to this bill. Tomorrow (2/12/2015), there is a meeting of the Energy Committee between 3 PM and 4PM where the first vote on this legislation may take place. Most committee hearing may be heard online at

http://www.legis.state.wv.us/live.cfm



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29041431

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #1 on: February 12, 2015, 09:59:33 AM »
Correction to number 5 above: The gas companies must have leases on at least 80% of the acreage in the pooling unit in order to force pool.

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claude

  • 158
Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #2 on: February 12, 2015, 03:46:01 PM »
does the bill address the issue of compensation to surface owners for underground natural gas storage? this issue needs to be addressed at both the state and federal levels.
The Federal Government, MS state government, FERC, Courts, and gas and pipeline companies have stolen my underground caverns.

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #3 on: February 25, 2015, 08:15:43 PM »
Interesting conversation on the subject of "FORCED POOLING BILL 2688"
Click the link below. THEN SAY NO TO FORCED POOLING !!!

http://gomarcellusshale.com/forum/topics/proposed-legislation-for-forced-pooling-in-wv-gaining-steam?x=1&id=2274639%3ATopic%3A657117&page=1#comments

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #4 on: February 26, 2015, 03:31:13 PM »
So, how does the Forced Pooling Bill HB2688 improve on the below ?

 1- You will lose your right to lease your minerals on your terms. All tax paying mineral owners in West Virginia should reserve the ''Right to a Fair Lease'' !

2- Billions of dollars will be lost to the State and the Mineral Owners during the coming years of leasing and drilling !

3- The companies will be able to ''Force Pool'' any acreage (leased or unleased).  For the unleased, pay no bonus monies and also they may only have to pay the state minimum 12.5% royalty. For the the leased, you will never get the chance to negotiate a more favorable and fair lease on your terms with addendums and separate leases for multipul parcels and formations if your poorly executed lease expires. If ''Forced Pooling'' is enacted, your chances of seeing your poorly executed leases expire greatly diminish.

4- The companies will also be able to Hold By Production millions of acres by including only a portion of large and small parcels in a drilling unit ! Also, the companies have taken advantage of many unknowing mineral owners by getting them to sign over multiple parcels within the same county on a single lease, allowing the companies to ''Hold By Production'' all parcels that have been included in the lease, once a well is drilled on any one parcel. If Forced Pooling is enacted, the companies will likely start applying for and drilling hundreds of verticals throughout the state so as to ''HBP'' as much acreage as possible before leases expire.


5- The companies will be able to take all gas producing formations from the mineral owners. Mineral owners should reserve the right to lease each formation separately.

6- The companies will be able to drill based on all the poorly executed early leases and the unsigned will not be able to add in addendums for protections.


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mejk

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #5 on: March 02, 2015, 10:12:53 AM »
2nd reading today.

A amendment was entered by Mr. Manchin and Trescost pretaining to the lease terms for those forced. It reads,

 “Provided, That such consideration shall not be less than the 80th percentile of leases measured in terms of favorability to the lessor during the preceding 3 years for tracts lying within a two mile radius of the subject property.”

I have written a reply to all the delegates with the following:

I would like to start off with offering thanks to Mr. Manchin and Trecost for their amendment to HB 2688 entered on Saturday. And I would also like to send thanks out to the delegates that took the time to write back to my initial correspondence.
I would like to comment on the amendment entered, because I think it is going in the right direction.
Point 1
My main contention with the amendment is that the 2 mile radius is abstract. It has no bearing in anything of concrete value for either the gas companies or mineral right owners of West Virginia. A case in point, the natural gas under my property is under the same pressure, has the same carbon content, has the same geology for affinity for proppants, the same topography and is at the same depth as lands to the south in West Virginia and north into Pennsylvania along that depth contour according to published data by several gas companies.
I believe verbiage addressing these concrete items, but allowing the gas companies to rebut with evidence is a fair compromise.  It is in their interest to take the property by force, but they should not be able to offer less than the fair market value offered to others with the same quality mineral.
The gas industry utilizes scientific data to decide where to drill. Let’s introduce some transparency into this bill that tells those forced pooled why their mineral tract is of lesser value.
Point 2
Also, remember that this bill is about forcing a mineral right owner to something they are not aware or against their will for the benefit of the people of West Virginia and, to a greater degree, the natural gas extraction companies. These mineral right owners should get no less than the highest amount of a lease for their strata because their rights have been removed.
The leases to date have not been negotiated purely to the benefit of the mineral right owner. The highest amount paid for royalties have had downward pressure in terms of percent royalty and bonus and lease terms applied by the gas companies.
With these two arguments, I would like to propose a further amendment to the bill expanding along the path taken by Mr. Manchin and Trecost,
“Provided, that such consideration shall not be less than the highest terms in terms of favorability to the lessor during the preceding 3 years for wells drilled within the same strata and of the same gas composition as the subject property, unless evidence is provided by the lessee.”
I would again welcome any and all comments from any of you. This is a significant bill for all the people of West Virginia and can be written to accommodate the interests of all.


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mmwv

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #6 on: March 02, 2015, 11:19:05 AM »
I am not a big fan of forced pooling.... so I don't have any real objection to making the cost of forcing a tract very expensive.

That said, I may be able to offer some potential concerns which might be raised with respect to your idea here...

First, the "best" lease terms that companies give out are generally for leases that amount to very, very small acreage totals.  I may agree to a high royalty and a high per-acre bonus for a 1 acre tract, because it will still end up being a small cost to my company.  If I have to pay ten thousand dollars to get a 0.75 acre lease because its the only way they will sign and I , for whatever reason, need that tract.... thats $12,500 per acre.... but that would not be the market value for acreage there on any larger scale... we would simply look elsewhere if the cost of, say, a 50 or 100 acre lease was $12,500/acre.
...so simply taking those lease terms for the .75 acre tract and saying that is what you should get for your 75 acre tract would distort what the market which actually bear for that 75 acre lease.



Similarly, looking at market prices in more distant regions would not be an accurate representation of the market for leases in a specific part of WV.  That is, just because the Northern Panhandle or Washington County, PA, has 20 companies competing for leases and driving up the cost of a lease does not mean that is the case in Braxton County. 

As with any other good or service, the market price is more about supply and demand than it is the intrinsic value of the thing.  Just because its the same marcellus shale (which, btw, is not a very good assumption...what it takes technically and economically to develop the shale differs from here to there, as does the cost of building a surface location, etc) doesn't give it the same market value.  To get a lease in an area of heavy activity I have to outbid all of the other companies, which will drive up the cost.  If there are only one or two companies interested in leases in an area, the market price of the leases there is going to be lower. 

Whats more, the amount of money that can be made from selling the gas (even though it may be the very same type of gas once its out of the ground) can vary widely not just from county to county, but from pipeline to pipeline which may be just a couple of miles apart from each other....and when the costs to drill for and produce the gas differ along with the potential sales price, the economics of development vary greatly across the entirety of the Marcellus and Utica plays, before you even take into account the differences in wet vs dry gas.

So some geographic limit makes sense....whether it should be 2 miles or county-wide or whatever, I dont know.


Again, to me, if I want to just take your property against your will, I shouldnt be able to complain about how much it costs me...Im not the one being wronged here.... But I think that this is going to pass in some form, I guess, so get what you can in the law....

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mejk

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #7 on: March 02, 2015, 12:33:08 PM »
Thanks mmWV for the reply.

For the size of the acreage, the evidence would support the high price for the small acreage but not the large.

I hear you on the rest of your post. I could agree with the county argument.

I do agree there is fluctuation in shale from north WV to south. The evidence would need to be presented. Give reasons like market conditions, shale quality, lack of infrastructure, bad topography, etc., but require it so an informed commission could rule in an open forum for all to see. Light purifies.

Hey, I hear you about the economics of the market. It is their job to figure out if there is a market. I would just as soon leave it till it is worth as much to me as them.

If we cant write a good law for all, then let's let supply and demand run its course.

My proposition only requires some element of justification. Why should that be an issue?

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mejk

Re: NEW FORCED POOLING LEGISLATION INTRODUCED TODAY IN HOUSE BILL 2688
« Reply #8 on: March 15, 2015, 08:26:33 AM »
Many bills’ fates uncertain after legislative session ends

David Beard
TheDPost.com

CHARLESTON — The gas well mineral interest pooling bill, HB 2688, appeared to be headed toward death Saturday, March 14. So did the bill to review Common Core educational standards, HB 2934; and one to create charter schools, SB 14.

A bill to legalize commercial fireworks, HB 2646, went to conference committee but hadn’t been finally approved at deadline.

The fate of the others was uncertain at deadline:

Pooling bill

A divided Senate approved HB 2688 earlier Saturday, 24-10.

When it came back to the House, opponents offered more speeches on property rights and action was eventually delayed.

Delegates said support for the bill was waning. With an 8 p.m. deadline to have conference committee reports brought to the podium, the bill was never resurrected in time for a vote, report to the Senate and assignment of conferees.

As of deadline, it was said that this bill and the Common Core bill, along with a few others in limbo, might be negotiated and amended back to life.