CHARLESTON — The Senate Energy Committee made quick work of approving two House bills to raise money to cap orphan oil and gas wells across the state.
Committee chair Randy Smith, R-Tucker, said the two bills reflected the work of industry and the environmental community cooperating for a common goal. “I want to tell all the stakeholders how much we appreciate your work on these bills.”
HB 2673 will exempt from the 5 percent severance tax all gas wells producing less than 60,000 cubic feet per day and oil wells producing less than 10 barrels per day. Instead of a tax, these wells will be charged a 2.5 percent fee on the value of product sold that will go into an Oil and Gas Abandoned Well Plugging Fund.
HB 2779 provides a means for royalties due to unknown or unlocatable mineral owners to be transferred to the Oil and Gas Reclamation Fund after seven years.
The bill addresses two situations. One deals with partition suits, where multiple mineral interests in a single tract are sold to a single buyer via a civil suit and the proceeds are divided among the previous owners.
For unknown and unlocatable owners in these cases, the money is held in county courts. Under the bill, the court will appoint a guardian for the funds. Funds unclaimed after seven years will go into the reclamation fund.
The other deals with situations where, after seven years of unpaid property taxes, the surface owner has the option to buy the mineral rights. In these cases, royalties accumulated and held in the court up until the time the surface owner signs the deed will go to the reclamation fund. The surface owner will receive all subsequent royalties and rights to future development.
There are 4,576 orphaned wells in the state and virtually no capping is going on – about half a dozen in the past five years. Wells are considered orphaned is there is no owner on record and no one is responsible for it.
When the Oil and Gas Abandoned Well Plugging Fund reaches $4 million, fee collection is suspended for the subsequent calendar year. It’s been estimated $4 million could cap about 60 wells.
For HB 2779, it’s not known how much unclaimed money is sitting around in the counties. Committee counsel said some may have as much as $7 million.
Speaking on HB 2673, attorney Phil Reale, representing the Independent Oil and Gas Association-West Virginia, said the bill will help small operators of old vertical wells who face production challenges and competition with the vastly more productive Marcellus wells, while also helping the environment.
And since the state doesn’t cap wells, the Department of Environmental Protection will have to contract with some IOGA members, which could create some new jobs. “Frankly, it is a good day for us.”
West Virginia Surface Owners Rights Organization co-found Dave McMahon, who drafted HB 2779, told the members that orphan wells are the most widespread environmental and property rights problem in the state. They can affect a surface owner’s property value and they can leak gas into the air and water table.
There are another 8,000 wells not producing gas that will soon be orphaned, too, he said. He estimated HB 2779 will plug 200 wells in its first year and 30 per year after that. But it will take a long time to plug them all.
After both bills passed, Smith said “I feel like I should get Dave (vice-chair Dave Sypolt) to lead us all in kumbaya.”
From Energy, the bills take separate paths to the Senate floor. HB 2673 to goes to Finance, HB 2779 to Judiciary.
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