Forced Pooling is back, as everyone expected it to be.  However, the oil and gas companies have realized that they can’t get forced pooling to pass under the name of forced pooling here in West Virginia.  So they’re giving it two new names, “joint development” and “cotenancy”.  Both seem to be created in the same bill.

The new forced pooling bill is Senate Bill 244.  It will change Chapter 37 Article 7 Section 2 of the West Virginia code which deals with a legal concept called “waste”.

The existing paragraph is very short, and says simply that if a cotenant commits waste he’ll be liable to his other cotenants for damages.  The new section is much longer and focused precisely on oil and gas leases.

The new paragraph (b) will make it so that if a majority of the owners of a tract agree to a “lawful use” (a lease), the company will not have to enter into a lease with the other owners.  All the company will have to do is account to (pay) the other owners a proportionate share of the revenues and costs of the “lawful use”.

So when 50.01 percent of the owners agree to lease, the other 49.99 percent of owners will have no say in what kind of lease they enter in to.

Also, the only thing the company will have to do is pay royalties to the 49.99 percent.  But they can deduct post-production costs.  It won’t be more than a minute before that right gets abused.

The new paragraph (c) will give the company the right to use the surface of any tract overlying the “jointly developed leases”.  In other words, when tracts are pooled for development the company can use any of the surface without entering into a surface use agreement with the surface owner.

The stated intent of this legislation is to make it so the companies can pool both old and new existing leases which don’t have pooling language in them.  However, it does a lot more than that.

This is bad legislation for both mineral owners and surface owners.  It only benefits the companies, which will get into leases for far less money than they already do.  Don’t forget, the West Virginia Marcellus Shale is the most economic shale play (in 2013, but not much has changed relative to other plays) in the United States.  We’re already giving up our minerals for less than people in Pennsylvania and Ohio do.  Let’s not let the companies force us into even cheaper leases.