CHARLESTON – The Senate energy Committee punted a contentious bill intended to enable mineral owners to gain release from inactive leases so they can sign new ones.
And after grilling some state Office of Oil and Gas officials, the committee passed a bill to expedite gas well permits and use the higher fees to cap orphan gas wells.
Lease bill
The committee started week on SB 554 on Tuesday, but paused it after the West Virginia Oil and Natural Gas Association voiced objections during the meeting.
SB 554 sets up a notification process for mineral owners that would lead leading to an affidavit of termination for an inactive lease – for a non-producing well or wells.
Mineral owners explained last year that sometimes producers stop producing wells but don’t release the leases, prohibiting the owner from signing a new lease to generate income. Many leases don’t have release provisions requiring the producer to release them.
This bill would help them get their minerals back into production.
SB 554 requires a company (the lessee) to provide notice of lease termination to the mineral owner (lessor) within 30 days. Failing that, the lessor may serve notice to the lessee and then file an affidavit of termination at the county courthouse. Various details are spelled out.
Thomas O’Neal, representing the West Virginia Oil and Natural Gas Association, said on Tuesday WVONGA opposes the bill for several reasons. One, it would allow one party in a contract, the lessor, to declare the contract terminated.
Two, WVONGA members have thousands of leases, some with unknown or unlocateable owners, and if all the lessors, with real or bogus claims, filed notice, WVONGA would be overwhelmed. Mineral owners counter that this mass of paperwork won’t happen at all. It’s a one-on-one process and mineral owners won’t be filing false or frivolous claims.
Last year’s bill, O’Neal said, had some protections for lessees that he hoped would be restored in this bill.
Committee chair Randy Smith, R-Tucker, decided after O’Neal’s testimony to give WVONGA 48 hours to consult on and retool the bill. It was unclear on Thursday how much progress had been made. So, since the bill has a second reference to Judiciary, Smith decided to vote it out and send it there for the retooling.
After the meeting, WVONGA officials said they were unprepared to immediately comment on what had been done and what they’re still looking for.
Well capping bill
HB 4091 came over from the House. It sets up a process and fee structure for expedited horizontal gas well permitting. The bill devotes half of the fee income to the Department of Environmental Protection, up to $1 million, for Office of Oil and Gas operations and half plus anything above OOG’s $1 million to orphan well capping.
The typical permit fee for a horizontal well is $10,000 for the first well on a pad and $5,000 for each additional well. The fee doubles under the expedited process: $20,000 and $10,000, respectively. Barring the need for additional information, the DEP has 45 days to grant or deny the permit. For each day from 46 to 60 days, it must refund a prorated amount that eventually results in a full refund of the extra money by the 60th day.
The bill also creates a permit modification fee of $5,000, with a 30-day deadline and a refund schedule for missing the deadline.
Some of the grilling stemmed from members not quite understanding where the money was going. Members wanted to know what OOG needs the money for and DEP General Counsel Jason Wandling told them that reduced permitting in the low-price gas environment means the office is facing a $1.5 million annual deficit.
A DEP fiscal note with the bill says it expects to receive about $765,000 in expedited permit revenue in the first full year of implementation. OOG will face some additional expenses under the expedited process.
OOG Chief James Martin told the members that permit numbers have remained relatively constant in the last few years, but they don’t know what the future holds. The low gas prices aren’t motivating the level of drilling seen before 2015 when prices were high.
The committee passed the bill in a unanimous voice vote and sent it to the Senate floor. Last year’s version of this bill died on the Senate floor on the last night of the session after a couple industry lobbyists — as Smith reported on the Senate floor — undermined negotiations on the fees and killed it.
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