Forced Pooling Imperils Shale Bill
Charleston Daily Mail
18 February 2011
By Ry Rivard, Daily Mail Capitol Reporter
CHARLESTON, W.Va. -- A bill to protect the state's water supply could
be derailed amid a fight between natural gas companies and mineral
rights owners.
Development of the underground gas-containing Marcellus Shale could
bring billions in investment and thousands of new jobs to West Virginia.
Environmentalists, regulators and many lawmakers want to beef up
environmental regulations ahead of the boom. They are responding to
complaints from some residents in the state's gas-rich Northern
Panhandle who say gas companies are riding roughshod over landowners,
polluting water and damaging roads.
But some of the state's most powerful interests are clashing over a
provision that would allow companies to remove gas from reluctant or
absentee mineral rights owners' property without the owners' permission.
This tactic, known as "forced pooling," lets companies extract gas from
beneath a large tract of land even if some mineral owners are holding
out on signing a lease with the gas companies or if the companies can't
find every mineral owner, some who are unknown heirs to long-deceased
owners.
On one side is the West Virginia Oil and Natural Gas Association, which
represents some of the state's largest gas companies.
Spokesman Corky DeMarco said pooling is necessary to make sure
producers can efficiently extract all the gas from the ground. Without
it, one holdout mineral rights owner in the middle of a proposed gas
site could imperil development of a whole project.
Demarco suggested the industry could work to kill the bill if forced
pooling wasn't in it.
"The appetite for the bill is less without pooling," he said.
"We need pooling," Scott Rotruck, the director of corporate development
at Chesapeake Energy, told lawmakers during a public hearing Wednesday.
On the other side, some mineral rights owners compare forced pooling to
eminent domain takeovers -- but worse. They say that instead of the
government taking property for use by the government, forced pooling is
the government taking property for use by companies.
"It's forcibly taking it using the government to allow you to do it,"
said Ron Hayhurst, leader of the West Virginia Mineral Owners
Association and vice president of a Fairmont-based company that buys
mineral rights.
He said his group would attempt to kill any bill that contained forced
pooling unless the company requesting the forced pooling has leased 95
percent of the proposed site.
Right now, legislative drafts put that percent -- known as a "trigger"
-- at 75 percent, meaning a project can go ahead without the consent of
owners who control a quarter of the mineral rights at a proposed site.
That land could be held by a single person or by dozens, in the case of
tracts owned by many heirs.
Even if a mineral rights owner's land is force pooled, the owner is
entitled to royalties. But Hayhurst argues owners wouldn't receive as
much if companies could tell them their gas would be taken anyway once
their neighbors signed up.
The West Virginia Farm Bureau is also concerned about forced pooling.
Farmers often own mineral rights or have fields atop property for which
the mineral rights belong to somebody else.
Farm Bureau President Charles Wilfong suggested there is some wiggle
room over the "triggers," and DeMarco agreed.
The forced pooling fight is just one of many.
There also are disagreements over the cost of permitting fees; over
whether companies should reveal the contents of the chemical serum they
inject into the earth to release natural gas from the shale; and over
how much deference gas companies need to give to surface owners, which
are the landowners who don't own the minerals companies seek but have
property atop the site.
Large gas producers say they support some new regulations. Smaller
producers caution raising fees hurts them more than others.
The key provisions in the legislation raise permit fees so the
Department of Environmental Protection can hire new inspectors; force
gas drillers to avoid drilling near water sources; and give more rights
to surface owners who are often caught between mineral rights owners
and gas companies.
Acting Gov. Earl Ray Tomblin supports the concept of forced pooling but
wants it handled fairly.
"The Governor believes that this issue, as well as the larger picture
regarding the Marcellus Shale, is too important for West Virginia to
stand on the sidelines and wants to make sure we get this right,"
Tomblin's Legislative Director Jason Pizatella said in an e-mail.
"Governor Tomblin is committed to providing the leadership necessary in
order to make 'forced pooling' a reality for West Virginia under the
right circumstances. And when the Legislature does pass legislation
that includes the concept of 'forced pooling,' it will be regulated and
structured in a way that is best for the State and does not unduly harm
any of the stakeholders involved."
The Farm Bureau's Wilfong said he doesn't like the current forced
pooling provisions but is heartened by the new protections for surface
owners.
At the public hearing Wednesday in the House Chamber, people from
across the state showed up to complain about gas company practices,
even as gas company representatives said regulations could hurt the
state's economic future.
"We can drive industry out of this state," said Mike McCown, president
of the Independent Oil and Gas Association.
IOGA, which represents companies that are generally smaller than those
in DeMarco's group, is divided over forced pooling -- which typically
benefits larger companies more than small ones -- and is more wary of
higher permitting fees.
Property owners, both surface and mineral, said they were concerned
about the gas companies' treatment of people and the land.
"The gas guys in the gas fields need to be watched," said Steve Conlon,
a Wetzel County resident who owns mineral rights.
"People are sucking up dust, water is being compromised."
Marty Whiteman, 50, another Wetzel County resident and a surface owner
who apparently didn't own the rights to the minerals beneath his land,
said some of his farmland had been rendered useless by gas companies
coming in and not letting him on it.
"I'm the sacrificial lamb when it comes to all this," Whiteman said. "I
thought it was America. I thought you when you bought a piece of
property, you actually did own it."
Contact writer Ry Rivard at ry.riv...@dailymail.com or 304-348-1796