Co-tenancy bill has good chance to pass, WV legislators say

A bill with a co-tenancy provision, which would allow natural gas drilling to take place as long as a certain percentage of ownership approves even if other co-owners object, has a good chance of passing the 2018 legislative session after coming up short last year.

That’s according to Delegate Bill Anderson, R-Wood, and Sen. Glenn Jeffries, D-Putnam, in a panel Friday at the West Virginia Press Association’s 2018 Legislative Lookahead. As expected, natural gas drilling legislation affecting land and mineral owners drove much of the discussion.

“Co-tenancy will be a piece of legislation that will probably pass this year,” said Jeffries, a member of the Senate Energy, Industry and Mining Committee. “All parties involved have come to an agreement that we can get that piece of legislation passed.”

However, Jeffries said, legislation related to co-tenancy should have measures that make sure objecting landowners in the minority will be properly compensated by drilling companies.

Anne Blankenship, executive director of the West Virginia Oil and Natural Gas Association, backed Jeffries by saying co-tenants who do not consent to drilling will be compensated “very well,” with “strong language for how they will be treated” likely to be part of the bill.

Getting a co-tenancy bill passed is the top priority for the industry this session, and it’s a fair way to deal with not every owner consenting to drilling, she added.

A drilling bill with a co-tenancy provision died last year, with House leaders pointing to limited time and not enough support for the bill to move forward. Legislators have attempted to push similar bills in recent years — including a “forced pooling” bill in 2015 — to no avail.

“It’s a property rights issue, so it’s a sensitive issue,” Blankenship said. “Of course, it will take a while to pass with the Legislature, but we think we’re finding common ground with all parties.”

The bill last year also bundled in a more controversial provision known as joint development. Joint development, also referred to as lease integration, would allow companies to combine older leases for horizontal drilling activity, even if the leases were signed before horizontal drilling technology was developed.

Supporters of joint development maintain that it’s necessary to more easily expand drilling production while also reducing surface disruption. Opponents say it would allow for property to be taken unwillingly for development and would mean owners would have to abide by decades-old leases and couldn’t renegotiate royalty payments.

“In some cases, these leases may have been signed 100 years ago,” said Anderson, chairman of the House Energy Committee.

After the bill died last year, Anderson said, House members did “not buy into” a joint development measure. That’s likely to continue in the upcoming session, according to Jeffries.

“Joint development, I believe, will have a hard time in its current version,” he said. “It’ll have a hard time to get through even both chambers.”

Any legislation on joint development should have measures that make sure objecting landowners in the minority will be properly compensated by drilling companies, Jeffries said.

Natural gas associations would prefer to see future legislation where companies could renegotiate with landowners to modernize those leases for joint development purposes, said Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia.

“It can negatively affect you monetarily, if you hold a lease and someone says, ‘Now, we’re going to integrate it in because it doesn’t say we can’t,’ ” he said of the past joint development proposal.

The panel often shifted the conversation to how the state’s announced $83.7 billion investment agreement with China Energy, along with a planned underground natural gas liquids storage hub, will affect legislation and the state’s overall economic development philosophy.

Jeffries said he hasn’t heard yet of any specific proposals by Gov. Jim Justice on legislation that would help move the China deal forward, but Jeffries added that he expects Justice and Department of Commerce Secretary Woody Thrasher to reveal that, in time.

Major questions remain unanswered by the Justice administration about the deal, like what projects it will go toward, said Angie Rosser of the West Virginia Rivers Coalition. She cautioned the state to think about any long-term consequences an aggressive push in shale gas and chemical manufacturing could create.

Rosser said, with new investments and new facilities potentially coming to the state, lawmakers will need to see if existing legislation addresses environmental protections specific to the natural gas storage hub and projects from the China deal.

“It does go back to lessons learned,” she said. “You can take the coal industry for example. Some companies have gotten out [of West Virginia], and then we’re left with billions of dollars in cleanup.”

An increased push for regional downstream processing facilities in the state, where the natural gas in the Marcellus Shale can be refined and distributed, would keep economic growth seen from the gas within West Virginia, said Greg Kozera, marketing director for Shale Crescent USA.

This article was authored by Max Garland for the Charleston Gazette Mail. Click here to read it on the publication's website.