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gasfacts2019

2019 Priorities

HB 2834 – Updating and Modernizing the Minimum Spacing Provisions for the Drilling of Horizontal Deep Wells

WVONGA supports HB 2834 and urges the adoption of the bill to encourage and improve efficiencies in the development of deeper shale formations such as the Utica by updating regulatory impediments established for traditional vertical deep well production.  The bill modernizes decades old spacing requirements for deep wells that are not now applicable to horizontally drilled deep wells on multi-well pads.  This bill provides the opportunity for the Legislature to correct and eliminate unnecessary regulatory hurdles to improve West Virginia’s competitive position for investment in natural resources.

HB 2384 Details
  • Deep wells (which are defined to include wells drilled in the Utica Shale) are regulated in WV by the Oil and Gas Conservation Commission (OGCC). The statute and regulations were created decades ago for vertical wells and do not reflect the technological and geological advancements associated with horizontal well development, including the use of multi-well pads (well pads containing more than one well).

  • Multi-well pad development produces oil and gas more efficiently and reduces the environmental footprint of production. However, the current deep well spacing laws require 3,000 ft between each well which discourages multi well-pad development for wells drilled in the Utica Shale. 

  • An operator drilling a multi-well Utica pad must seek an exception from these requirements from the OGCC, prolonging the well development process. This process is time-intensive, requires a hearing in Charleston for every Utica well pad, and costs more than $25K per hearing for outside legal fees and internal resources.

  • The current level of regulation for the Utica shale in West Virginia does not take place in any other neighboring shale producing state. In fact, this process is not even used for Marcellus wells in West Virginia (which are considered shallow wells).

  • Exploration of wells in the Utica Shale has been minimal in West Virginia because it is much costlier to produce than a well in the Marcellus Shale. Legal resources add an additional burden to producers and could deter future investment into the Utica formation.

  • The revised spacing requirement in HB 2834 provides operators the opportunity to produce wells in an environmentally sound and fair practice and gives them the ability to explore the optimal spacing necessary to produce deep wells, without having to seek an exception from the OGCC. 

  • If WV wants to encourage investment in the oil and gas industry, then deep well spacing requirements must be modified to account for technological advances in horizontal well development. Modifications in WV’s statute will enable future growth in the Utica Shale formation and allow operators the flexibility to use more modern spacing requirements to increase development.

HB 2673 - Creating the Oil and Gas Abandoned Well Plugging Fund

WVONGA supports HB 2673 as it helps resolve the issue of funding the plugging of abandoned and orphaned wells.  The bill exempts low volume oil and gas wells from a portion of the severance tax and provides for a special use fee on sales from oil and gas wells which produce more than 5,000 cubic feet of natural gas or one-half barrel of oil per day but less than 60,000 cubic feet of natural gas or 10 barrels of oil per day. The special use fee would be used by the Secretary of the Department of Environmental Protection to plug abandoned oil and gas wells.

HB 2661 - Relating to Natural Gas Utilities

WVONGA supports HB 2661 as it promotes the continued production of natural gas from local wells and provides for the natural gas utility to recover costs, including of converting customers to alternative fuel sources.   The bill permits a natural gas utility to make a request for proposal for incentivized gas drilling where dependable, lower-priced supplies of natural gas are not readily available. The bill also permits a natural gas utility to recover the cost reasonably necessary to convert a customer to an alternate fuel source when gas service to that customer has been abandoned.

HB 2779 - Providing that Proceeds from Certain Oil and Gas Wells to Persons Whose Name or Address are Unknown are to be Kept in a Special Fund

WVONGA supports this bill as it places funds into an abandoned well plugging fund from missing and unknown heirs.

SB 665 - Allowing for Expedited Oil and Gas Permitting

WVONGA supports this bill as it seeks to allow for expedited permitting with the WV Office of Oil and Gas if a permittee pays an increased permitting fee.   This bill will make West Virginia more competitive with our surrounding states with regard to the time it takes to receive 

a permit before drilling can begin.  HOWEVER, the increased permit fee included in the introduced version of the bill is too high.   The bill needs to be amended to reduce the increased fee by half or else the bill is counterproductive.   Note that the increased fee to allow for expedited permitting is in addition to the fee already required to be paid when a permit application is filed, which is $10,000. 

SB 266 - Creating Intermediate Court of Appeals

WVONGA supports this bill without any amendment to segregate oil and natural gas from the appeal process.

HB 2661 - Relating to Natural Gas Utilities

WVONGA supports HB 2661 as it promotes the continued production of natural gas from local wells and provides for the natural gas utility to recover costs, including of converting customers to alternative fuel sources.   The bill permits a natural gas utility to make a request for proposal for incentivized gas drilling where dependable, lower-priced supplies of natural gas are not readily available. The bill also permits a natural gas utility to recover the cost reasonably necessary to convert a customer to an alternate fuel source when gas service to that customer has been abandoned.

Bills We Oppose

SB 541 - Establishing Priorities for Expenditures for Plugging Abandoned Gas or Oil Wells  

WVONGA strongly opposes this bill has it was amended to include onerous bonding requirements every time a well is transferred to another operator.  This bill would be very damaging to the industry and discourage the transfer of ownership of wells to new owners.

HB 2802 - Uniform Partition of Heirs Property Act

WVONGA strongly opposes this bill.  The Uniform Partition of Heirs Property Act is simply not designed for the property ownership as it exists in West Virginia.  Specifically, its application to severed mineral property interests such as oil and gas will negatively impact oil and gas development in West Virginia.  It is an extremely complicated bill that will invite litigation and cloud title to minerals. HB 2802 would provide a mechanism for owners of 20% of mineral interest to prevent the development and production of oil and gas for an entire tract.  This bill is almost directly contrary to the policy and objectives of the Cotenancy Act passed during the 2018 Legislative Session. At minimum, this bill should be applied only to surface property interests and all severed mineral interests and rights should be exempted from the application of HB 2802.

HB 2866 - Release of Oil or Natural Gas Leases

WVONGA strongly opposes HB 2866 as it proposes to upset decades of settled common law regarding the creation and termination of oil and gas leases.  The bill allows the current successor in interest to an original oil and gas lessor to deliver a notice of termination, expiration or cancellation without any standard or burden of proof to the lessees.  The lessees then have 90 days to object or protest in writing to the asserted termination. However, there are no due process protections for the lessees who have a vested property interest and the right to produce the oil and gas subject to a written lease.   When a lessor sends the notice required in the bill and the operator of existing productive wells fails to receive or administratively misses the 90-day objection deadline, the lessor records a notice of termination with the County Clerk thereby creating a "rebuttable presumption" that the lease is terminated and no longer record notice of the existence of the lease.  This could occur even though a producing well is located on the lease or on an adjoining lease which is unitized with the subject lease. The cost of an administrative oversight in these bills is simply unreasonably high without imposing any duties or risks on the lessor sending an invalid notice of termination - even if the lessor does so without basis or ill-intent.   Pennsylvania has a more reasonable statute that this bill, at the very least, should be amended to mirror. 

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