Monthly Archives: May 2015

Nuisance Lawsuits in West Virginia

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Frack Truck Country Road

 

 

 

 

 

West Virginia Public Broadcasting did a short segment on what it’s like to live next to Marcellus Shale drilling and production activities.  It’s not real pretty.  While I’m all for oil and gas development here in West Virginia, I also think that the oil and gas companies should really go a little more out of their way to allow the neighbors to maintain their standard of living.  That standard of living isn’t usually extravagant, but it’s often comfortable, quiet, and chosen.  It’s Wild and Wonderful West Virginia.

The people that the oil and gas company contract with usually get enough to make up for the disruption in lifestyle.  It’s the neighbors who don’t have anything the company wants that get the short end of the deal.  They put up with big trucks on little roads, gigantic potholes made by those trucks, noise and light from the drilling rig, the intense rumble of gas being flared off the well when it’s first brought in, and the dust, smoke, and gas from the trucks, rigs, pipelines, and machinery necessary to process the gas.  The companies don’t usually do anything about it.  People can call and complain all they want, but it won’t usually do a lick of good.  The neighbors don’t have any way of forcing the companies to make up for the disruption to their lifestyle, and the change in their environment, other than to file suits.

The article states that over 100 people filed nuisance lawsuits in West Virginia last year against oil and gas production companies of various sorts.  50 of those suits were compiled into a mass litigation suit.  Dave McMahon of WVSORO fame noted in the article that there would probably be a lot more of these kinds of suits if there was more money involved.  It’s hard for an attorney to take on a nuisance case because there’s often not much of a payday in it.

I’d like to see the companies take more initiative to clean things up.  I’ll give them credit, they mostly do a pretty decent job of restoring their well sites to previous contours and otherwise abiding by state regulations.  It’s just not enough.  The companies are affecting peoples’ lives, making it impossible (not just hard) to live the way they did before the gas wells and pipelines came around.  It’s not fair or right that the companies can affect West Virginians’ property and lifestyle without compensating for it.

Perhaps we need a law that allows for double or triple damages in a nuisance lawsuit involving corporations.  Or perhaps we need larger setbacks for certain processing facilities and well pads.  We certainly need better regulations on trucks and roads.  Whatever we do, it should be done soon, before we drive more people out of West Virginia and before the natural gas boom dies off completely.

Magnum Hunter Sells Tyler County, WV Leases

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Dollar SignNow this is news.  Magnum Hunter will close tomorrow on a deal to sell 5,210 acres of leases in Tyler County.  Magnum says the leases are in “non-core undeveloped and unproven” parts of the county.  The sale should net Magnum $40.8 million dollars.  That’s $7,831.09 per acre, by our calculator.  For non-core, undeveloped, and unproven leases.  Oh, and the Chairman of the Board, Gary C. Evans, also pointed out that a large portion of the acreage had expirations on the horizon.  So Magnum sold leases that are expiring soon and in questionable parts of Tyler County for almost $8,000 an acre.

Just speculating, but the only company that could possibly drill on soon-to-expire leases in Tyler County is Antero Resources.  They have the rigs in place and the most infrastructure of anyone up there right now.  We could be wrong about that, of course.  JayBee, Statoil, EQT, and Noble are all working hard in that neck of the woods, too.

But that’s beside the point.  We’d like to point out that the sale was for almost $8,000 per acre for, shall we say, sub-prime leases.  West Virginians continue to sell themselves short regarding what they’ll take for lease bonuses.  Ask for more than you think you can get.  Always ask for more than you think you can get.  You might be pleasantly surprised at what happens.

Kentucky Pipeline Project Doesn’t Get Eminent Domain (for now)

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no-eminent-domainThe Bluegrass Pipeline has been trying to use eminent domain in Kentucky.  The Court of Appeals said they couldn’t.  Read about it here.

The Kentucky Supreme Court has not heard the case yet, so the final decision could be different.  However, when both the Circuit Court and the Appeals Court agree, you’re less likely to find that the Supreme Court makes a different decision.  It’s not conclusive, but it’s indicative.

West Virginians who are concerned about the Atlantic Coast Pipeline and the Mountain Valley Pipeline (and a few other projects) should take note of this decision.  Kentucky’s eminent domain laws are a little different from ours, but the language of the decision sounds like language I could see a West Virginia court drafting to explain our eminent domain laws and their interpretation.  For those of us who are not fans of how eminent domain is being abused, this is good news.

Another Pipeline Spill

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There’s another pipeline spill, this one out in California.  The picture below is not from that pipeline, of course.

Gas Pipeline Construction

While we need the pipeline projects that are planned for West Virginia, we also need to be sure that the work is done well so that we don’t end up with leaks and spills.  I don’t want to see what a 42-inch gas pipeline would do if it ruptured.  There’s going to be one going in not too far from where I live.  It’s become personal.  The dangers are real, and should be looked at closely.

ASCENT Project to be Re-Evaluated, Again

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Cracker Plant

Odebrecht has been talking with major players in the state about the cracker plant that’s been planned for Parkersburg, West Virginia.  The current news is that the plant will be changed.  Our guess is that the plant will be made smaller, perhaps with an eye to expansion when oil prices rise again someday.  Here’s to hoping that they do get around to building it.  That plant would be great for our economy.

Forced Pooling is Unconstitutional (in West Virginia)

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In an editoriaIsaac Sponauglel published in the Herald-Dispatch out of Huntington, WV, Isaac Sponaugle, a member of the West Virginia House of Delegates, makes the argument that forced pooling is unconstitutional because it’s a “taking” using eminent domain.  To be more precise, he points out that the Kelo decision in 2005 actually makes it constitutional, but argues that the Kelo decision was a bad decision, and that eminent domain is now too big for its own britches. I agree entirely.

Allowing oil and gas companies to exercise eminent domain in the guise of forced pooling, fair pooling, or lease integration (whatever you want to call it) is simply wrong.  If mineral owners don’t like the lease that’s being offered, they should be able to turn it down flat.  It’s up the the mineral owners to determine whether the lease is fair, whether they want development of their minerals, and whether the price is right.  Oil and gas companies already have the upper hand in oil and gas lease negotiations, they shouldn’t be given even more leverage.

 

West Virginia Oil and Gas Severance Tax Distribution

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Tax MoneyThe Intelligencer out of Wheeling, WV published an article that tells us how much severance tax the oil and gas companies paid to the State of West Virginia in 2014 and how that tax is allocated to the different counties.  There’s some pretty good detail in the article.  It also points out that Wetzel County has gone from being listed as a depressed county to, well, no longer being listed as such.  We suspect that no longer being a “depressed county” really only means that the county government is able to provide all of or most of the services that a county government is expected to provide.  It probably doesn’t mean that every citizen of the county is now rolling in the dough, so to speak.  Still, going from depressed to not depressed is always good.

The Upper Devonian Formations

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Burket Formation

Clients of Nuttall Legal have long known about the Upper Devonian formation, also known as the Burket formation here in West Virginia.  It’s shallower than the Marcellus, and not terribly thick, but has good potential to produce natural gas.  Gas and Oil Mag has an article on the Upper Devonian formation that should be interesting to anyone thinking of signing an oil and gas lease.

The important point to remember is that the Marcellus and the Utica are not the only producible formations down there.  The Upper Devonian is probably not the last of the formations, either.  As technologies change and the price of gas increases with demand, formations that were previously uninteresting will become financially feasible.  The lease that you sign today could be in effect for generations as the original formation is developed and runs low, only to be replaced by a well to another formation.  You have to think to the future as much as you possibly can when negotiating an oil and gas lease.

Seven Pipeline Ruptures in West Virginia this Year

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Broken Pipe

So far this year, there have been seven pipeline ruptures in West Virginia.  The average most years is four.  At fault is an abnormally wet spring, according to this article.

Also pointed out in the article, though this is hardly news to anyone in the industry, is that there are not enough pipeline inspectors in West Virginia.  We have five, and we have roughly 14,000 miles of pipelines.  Each inspector would have to inspect about 7.6 miles of pipeline 365 days a year in order to inspect every pipe once a year.  That’s just not happening.  We could really use a few more inspectors.