West Virginia passes law permitting forced pooling

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West Virginia Gov. Jim Justice recently signed into law HB 4268, the “Co-Tenancy Modernization and Majority Protection Act.” A victory for landowners and the natural gas industry, the bill will take effect July 1, 2018 and essentially acts as a forced pooling law similar to that already in effect in Pennsylvania.

Currently, 100 percent of rights holders must agree in order to permit horizontal drilling in West Virginia.1 Once HB 4268 becomes effective, horizontal drilling will be permitted with the consent of 75 percent of cotenants. The law will apply only to interests owned by seven or more cotenants. Gov. Justice stated that “[t]his co-tenancy law will allow for oil and gas development while protecting the rights of surface, mineral and landowners.” The bill protects nonconsenting interest owners by allowing them to elect a production royalty or working interest share of production.

Prior to HB 4268, West Virginia courts had joined with a small minority of states, including Louisiana, Michigan, and Illinois, holding that the development of oil and gas by one cotenant without the consent of others amounted to waste. HB 4268 will bring West Virginia closer in line with the majority. Fellow Appalachian Basin state Pennsylvania currently allows a single cotenant to develop all of the oil and gas underlying a property without the consent of co-tenants. This is because the vast majority of states – including Pennsylvania, Texas, Oklahoma, Montana, Kansas, Georgia, Florida, California and others – do not consider development of oil and gas to be waste. Following the passage of HB 4268, West Virginia has joined the majority, specifically providing a statutory exception to waste and trespass for the development of oil and gas. 

Meanwhile, Ohio law on the development of oil and gas without the consent of all cotenants remains unsettled. While Ohio law clearly permits one cotenant full use of property without the consent of fellow cotenants, there is no statute or case law which expressly states whether or not the development of oil and gas will be deemed waste such that consent of all cotenants is required.

[1] W. Va. Code § 55-12A-1 et seq. allows a court to appoint a special commissioner to enter into leases for unknown or missing interest owners.

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