Federal Court Upholds Ohio Forced Pooling Law in Chesapeake Case

In 2015, landowners in Harrison County, OH who own 127 acres (the Kerns) filed a lawsuit alleging their property rights were about to be violated because Chesapeake Energy had filed a pooling request with the Ohio Dept. of Natural Resources (ODNR) to pool (combine) the Kerns property with surrounding properties for shale drilling. The Kerns had not signed and do not want drilling under their land. Their neighbors do. Ohio has a law on the books that allows for “forced pooling” in cases when a majority of the surrounding land is leased but landowners with small positions refuse to sign. The Kerns resisted and fought the case all the way to Ohio Supreme Court, which rejected their claims. Chesapeake drilled and fracked three wells (on a neighboring property), which included drilling under the Kerns’ property. So the Kerns filed a new lawsuit in 2016, in federal court, claiming a “taking” of their property had occurred. The federal court has just ruled–against the Kerns. This was the first time a court case dealt directly with the constitutionality of Ohio’s unitization (forced pooling) law. The upshot: Ohio’s forced pooling law remains intact and in force…
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OH Supreme Court Rejects Challenge to Forced Pooling Law

On Tuesday, the Ohio State Supreme Court rejected a case in which landowners who were made part of a “unitization order” (i.e. forced pooling) had objected claiming their property rights were stripped away without due process. In legal terms, the landowners claimed it was a “taking” of their property without just compensation. The Supreme Court rejected the case because, they said, there were other legal means the landowners could have tried first (a lower court) before appealing the case direct to the Supremes using something called a mandamus action. In essence, the Supremes said, “Nice try, but you need to jump through the proper hoops first.” Ultimately the Supremes did not rule on the Constitutionality of the claim itself because the case had gotten to them via the wrong path. We’re guessing the landowners will now go back to square one and use the path laid out by the Supremes. Here’s the low down on the rejection by the Supremes, from the legal beagles at the Vorys law firm…
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Co-Tenancy Front and Center for WV Legislature as Session Nears

At the beginning of each new year the West Virginia legislature meets for a 60-day session. This year the session runs from Jan. 10 to Mar. 10. For the previous maybe 6-7 years, the shale industry has pushed for some sort of forced pooling legislation. Each year those bills, as close they sometimes got, were defeated. This year the industry is staying well away from saying anything about “forced pooling.” Last time around (in 2017) we came close with something MDN calls forced pooling lite–a bill that would have allowed for co-tenancy and joint development. That bill was eventually defeated (see WV Force Pooling Lite Goes Down in Flames – Lawmakers Blame Pot). For the rest of last year WVONGA (the West Virginia Oil and Natural Gas Association) hyped both co-tenancy and joint development. What are they? Co-tenancy says a majority of rights owners can vote to accept a lease for drilling. It corrects a situation in which multiple rights owners are listed for a property–sometimes 200 or more rights owners for a single piece of property! It is often difficult, if not impossible, to track them all down and get them to sign on the dotted line. Joint development (sometimes called “lease consolidation”) is more nuanced. Currently there are a number of existing old leases, signed before shale drilling began, that prevent drillers from drilling a horizontal well across an individual property boundary line–until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties they want to combine into a single drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. It is a form of theft. We’re happy to see WVONGA leave joint development behind. This year WVOGNA and legislators are laser-focused on co-tenancy, which we think is a good thing…
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IOGA WV Gets it Right on Co-Tenancy & Joint Development

For some time we’ve reported on the effort to pass new legislation in West Virginia on co-tenancy and joint development (see WVONGA Makes Plans to Push Forced Pooling Lite in 2018). These two concepts together somewhat replace what the oil and gas industry once wanted in WV–a forced pooling law. The West Virginia Oil and Natural Gas Association (WVONGA) has been the driving force behind the effort to adopt co-tenancy and joint development. MDN has been right up front about our views: co-tenancy is fair and reasonable, joint development is not. WVONGA continues to push for both. However, WVONGA is not the only oil and gas trade association in the Mountain State. WV also has the Independent Oil & Gas Association of West Virginia (or IOGA WV), which broke off from WVONGA in 1959. We were delighted to spot an article that reports IOGA WV is pushing for co-tenancy, but NOT for joint development. IOGA of WV recognizes joint development for what it is–an attempt to allow drillers to use old leases for shale drilling without having to negotiate new terms (i.e. pay more to rights owners). Kudos to IOGA WV for getting it right. What, precisely, is co-tenancy and joint development? Glad you asked…
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Enervest Pushes for Co-Tenancy in West Virginia

In August MDN told you the West Virginia Oil & Natural Gas Association (WVONGA) plans to push, once again, for what MDN calls forced pooling lite in the next session of the legislature scheduled for early 2018 (see WVONGA Makes Plans to Push Forced Pooling Lite in 2018). Forced pooling legislation in West Virginia has been put forward five times in the past seven years–and each time it has failed to win enough votes in the WV legislature. This year, WVONGA changed tactics and renamed forced pooling as co-tenancy and joint development (see WV Won’t Push Forced Pooling, Will Push Joint Dev. & Co-Tenancy). The West Virginia Surface Owners Rights Organization refers to co-tenancy as “majority rules” and joint development as “invisible ink” (see Another Look at WV’s Co-tenancy & Joint Development Proposals). EnerVest, a shale (and conventional) driller with considerable acreage in West Virginia recently contributed a editorial to the Charleston Gazette-Mail which unsurprisingly supports WVONGA’s push–at least for co-tenancy. The article doesn’t mention joint development, but since the two are tied together in a single bill, we assume they also want to see joint development. Below is (once again) a brief explanation of the two concepts, along with EnerVest’s editorial/reasons for why the Mountain State needs them…
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Another Look at WV’s Co-tenancy & Joint Development Proposals

When MDN editor Jim Willis attended the Shale Insight conference in Pittsburgh two weeks ago, one of the recurring themes he heard from West Virginia officials is that the state urgently needs to pass “mineral efficiency” laws. What they meant by mineral efficiency is another name for co-tenancy and joint development. We’ve written a fair bit about the topic–what we call “forced pooling lite.” In August the West Virginia Oil & Natural Gas Association (WVONGA) announced its intention to push, once again, for co-tenancy and joint development (see WVONGA Makes Plans to Push Forced Pooling Lite in 2018). We spotted an editorial from the co-founder of the West Virginia Surface Owners Rights Organization on the topic co-tenancy and joint development. He has a unique perspective. He calls co-tenancy “majority rules” and joint development “invisible ink.” What does he mean? And what would these two measures do if adopted? And is there really an urgent need for them? Let’s tackle this issue once again…
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WV Surface Owners Win Important Case Against EQT re Drill Pad

A West Virginia Circuit Court case decided last week (by jury) found in favor of surface owners against a well pad constructed by EQT. The decision has far-reaching implications for not only surface owners and drillers, but mineral rights owners too. From the first time we read about so-called “joint development” legislation being promoted by the drilling industry in WV (back in February), we’ve not been fans (see More on WV’s Push for “Joint Development” Instead of Forced Pooling). In brief, there are a number of existing old leases in WV, signed before shale drilling began, that prevents drillers from drilling a horizontal well across an individual property boundary line–until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties they want to combine into a drilling unit, they can do so without signing a new lease. The proposed joint development law seemed to us to be a way for drillers to avoid negotiating and paying more for new leases–which they should be willing to do! However, the case of Crowder and Wentz v EQT puts joint development in a new light for us. The case appears (to us) to be an abuse of power by surface owners against both drillers and mineral rights owners–by using the current prohibition against joint development. We certainly understand why surface rights owners would resist having a drill pad on their property, however, that’s life. They bought land (or inherited it, etc.) that doesn’t have mineral rights attached. Under existing WV law, a well pad can be drilled, taking 10-15 acres of the surface land (against the surface landowner’s wishes, but with compensation), in order to access the minerals under that specific piece of property. However, the court ruled last week in Crowder and Wentz v EQT that a driller cannot then use that same already-constructed well pad to further drill wells that access minerals under other, adjacent properties. Which in our book makes a strong case for a joint development law, to avoid this kind of misuse by surface landowners…
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WV Legislature Panel on NatGas Dev Meets Tuesday, Forced Pooling?

The West Virginia Legislature has appointed a new Joint Committee on Natural Gas Development, composed of Senators and Delegates, to put their collective heads together to see how they can encourage more oil and gas development in the Mountain State. The committee will meet tomorrow for the first time. The effort is being supported by the West Virginia Oil and Natural Gas Association (WVONGA). In general, it certainly seems like a good idea–WV needs more drilling. However, WVONGA plans to use the committee as a platform to push its “modernized mineral efficiency laws”–i.e. forced pooling lite. As we reported last week, WVONGA is making an all-out push for new forced pooling laws in 2018 (see WVONGA Makes Plans to Push Forced Pooling Lite in 2018). There are two components to WVONG’s agenda: (1) Co-tenancy. The concept of co-tenancy means if a majority of mineral rights owners of a property (75%) want to lease the property for drilling, they can–even if a small 25% minority doesn’t want to lease. This helps overcome an urgent problem in WV where sometimes not all mineral rights owners can be found–or where someone with a sliver of the rights wants to blackmail (our word) the other rights owners for a larger share of the profits. (2) Joint development. This is the one we have a problem with. Currently there are a number of existing old leases, signed before shale drilling began, that prevents drillers from drilling a horizontal well across an individual property boundary line–until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties that they want to combine into a drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. Although the topics of co-tenancy and joint development are sure to be raised tomorrow, the committee will look at more than just those issues. They will also consider how to attract more downstream (petrochemical) investment in the state…
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WVONGA Makes Plans to Push Forced Pooling Lite in 2018

The West Virginia Oil & Natural Gas Association (WVONGA) plans to push, once again, for what MDN calls forced pooling lite in the next session of the legislature scheduled for early 2018. Forced pooling legislation in West Virginia has been put forward five times in the past seven years–and each time it has failed to win enough votes in the WV legislature. This year, WVONGA changed tactics and renamed forced pooling as co-tenancy and joint development (see WV Won’t Push Forced Pooling, Will Push Joint Dev. & Co-Tenancy). Co-tenancy says a majority of rights owners can vote to accept a lease for drilling. It corrects a situation in which multiple rights owners are listed for a property–and sometimes (often?) it’s difficult to track them all down and get them to sign on the dotted line. Joint development is a bit more nuanced. Currently there are a number of existing old leases, signed before shale drilling began, that prevents drillers from drilling a horizontal well across an individual property boundary line, until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties they want to combine into a drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. WVONGA came close this year to getting co-tenancy and joint development passed–Senate Bill 576 (see WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.). However, like other forced pooling bills before it, SB 576 didn’t get passed. So WVONGA has signaled it will push once again next year, this time renaming (euphemizing) forced pooling lite as “mineral efficiency”…
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OH Budget Bill Blocks Forced Pooling of Public Lands

Ohio is about to pass and adopt it’s latest biennial budget. Part of the budget bill includes language to exempt Ohio’s city and town parks from the state’s unitization (i.e. forced pooling) laws. In Ohio, if 65% of the landowners in a proposed unit have agreed to lease their land for oil or gas drilling, the other landowners in the unit can be forced to join the unit to allow drilling under (not on) their land. There are all sorts of requirements before forced pooling occurs, including a $10,000 fee paid by the driller, and a hearing to review efforts made to enroll said recalcitrant landowners. But in the end, it is possible to force landowners who don’t want drilling, to have it. The justification is that those who don’t want it are harming those who do want it by not agreeing to join the unit. Should the action of someone with a few acres deny benefits to all of his neighbors? We’re not saying we support the concept of forced pooling–just giving you our best interpretation of the arguments used to support it. We understand those arguments. We also understand the sanctity of private property. Until now, local towns and municipalities in Ohio were treated like any other landowner. But now, with the new budget, they will get a special exemption. Local municipalities cannot be forced to participate–unless they want to participate–in a drilling unit…
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Ohio DNR Issues New Pooling Guidelines for Drillers

Last week the Ohio Dept. of Natural Resources (ODNR) issued updated guidelines for “statutory unitization applications” (full copy below). That is, when a driller wants to form a unit for drilling by combining adjacent properties, the driller must first request permission from the ODNR to form a unit. In Ohio, a unit can be formed when the driller has 65% of the acreage in the unit under a lease agreement. In other words, these are the revised/new guidelines (i.e. hoops) drillers must jump through before the ODNR will agree to combine either willing, or unwilling (force pooled) landowners into a unit for drilling…Continue reading

WV Forced Pooling Lite Not Dead Yet – EQT Wants Special Session

In early April MDN reported that West Virginia’s effort to pass a law dealing with co-tenancy and joint development–what we called forced pooling lite–had gone up in pot smoke (see WV Force Pooling Lite Goes Down in Flames – Lawmakers Blame Pot). Legislators in the House go bogged down debating pot smoking and didn’t have enough time to finish debate and vote on Senate Bill (SB) 576 (for background on what the bill would do, see Analysis of New WV Bill SB 576 re Co-Tenancy & Joint Development). The West Virginia Oil & Natural Gas Association (WVONGA) pulled out all the stops to support the legislation. They organized a bus-in rally at the Capital where nearly 1,000 people showed up to support the legislation (see WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.). We thought for sure it was a fait accompli, because WV’s new Governor, Jim Justice, threw his support behind the bill. But at the last minute, the bill failed–as forced pooling bills have failed five times before. However, we did say this back in early April: “So is it curtains for the sixth time on forced pooling? We’re not ready yet to declare it dead during this legislative tenure. The governor in West Virginia has the power to convene a special session. We saw it happen when Earl Ray Tomblin was governor.” It seems our words were prophetic. EQT, one of the biggest drillers in the state, is pushing hard for Gov. Justice to convene a special session and to pass SB 576. EQT is providing some not-so-subtle pressure by indicating they may reallocate some of their drilling budget elsewhere if WV doesn’t pass the law…
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WV Force Pooling Lite Goes Down in Flames – Lawmakers Blame Pot

We find this news somewhat surprising. The West Virginia Oil & Natural Gas Association (WVONGA) has been pushing hard to get legislation passed in WV’s short legislative session on an issue we call “forced pooling lite”–WV Senate Bill 576 which addresses the issues of co-tenancy and joint development (see Analysis of New WV Bill SB 576 re Co-Tenancy & Joint Development). WVONGA pulled out all the stops. They organized a bus-in rally at the Capital where nearly 1,000 people showed up to support the legislation (see WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.). It most certainly had an impact. The legislation passed the Senate last week and headed to the House (see WV’s “Forced Pooling Lite” Bill Passes Senate, Heads to House). We thought there was no way in Hades this bill would not pass and pass quickly. But then it hit a brick wall. Or should we say, it hit a “pot” wall. Word has leaked out that there isn’t enough time left in the current session to consider the bill because the House has spent so much time “dealing with the cannabis legislation.” That is, talking about pot smoking in the Mountain State. For medical purposes, of course (wink, wink, nod, nod). There’s been so much talk about pot smoking, forced pooling lite got lost in the fog. Could it still pass, at a later date?…
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WV’s “Forced Pooling Lite” Bill Passes Senate, Heads to House

Earlier this week MDN reported that West Virginia Senate Bill (SB) 576, which addresses the issues of co-tenancy and joint development, was a freight train on a fast track to approval (see Co-Tenancy/Joint Dev Bill Heads to WV Senate – On Fast Track?). We call SB 576 “forced pooling lite” because it targets two of many issues that previously were bundled under WV bills aimed at creating forced pooling in the Mountain State. The freight train continues on down the tracks, although it’s lost a little bit of its steam. Yesterday the full WV Senate voted on the bill and passed it, “narrowly,” voting 19-14 in favor of the bill. It was an interesting bipartisan mix both voting for and against. There were 15 Republicans and 4 Democrats voting for the bill, and 6 Republicans and 8 Democrats who voted against. The bill now heads to the WV House. If it passes there, Gov. Jim Justice has signaled he will sign it…
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Co-Tenancy/Joint Dev Bill Heads to WV Senate – On Fast Track?

The West Virginia Oil & Natural Gas Association (WVONGA) is pushing hard to get legislation passed that we call “forced pooling lite”–WV Senate Bill 576 which addresses the issues of co-tenancy and joint development (see Analysis of New WV Bill SB 576 re Co-Tenancy & Joint Development). This is the sixth time forced pooling-related legislation has been put forward and WVONGA is determined this time it will pass. They’ve pulled out all the stops. Last week WVONGA organized a bus-in rally at the Capital where nearly 1,000 people showed up at a rally to support the legislation (see WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.). It most certainly had an impact. SB 576 is now out of committee and on the Senate floor for consideration, as of Friday and had its first reading. It had its second reading on Saturday and is scheduled for a third reading today. The bill is being touted as a way to increase the number of jobs in the oil and gas industry in the state. What is co-tenancy and joint development?…
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WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.

The West Virginia Oil & Natural Gas Association (WVONGA) has just raised the stakes significantly in a bid to pass new “forced pooling lite” legislation. In the past six years, the oil and gas industry in WV has pushed for a forced pooling law five times. It’s failed every time. So this year the industry, represented by WVONGA, said it would not push forced pooling but instead would try to get a bill passed to address two of the issues that were previously part of a larger forced pooling bill–something called co-tenancy and joint development (see WV Won’t Push Forced Pooling, Will Push Joint Dev. & Co-Tenancy). Co-tenancy says 51% of the rights owners can vote to accept a lease for drilling. It corrects a situation in which multiple rights owners are listed for a property–and sometimes (often?) it’s difficult to track them all down and get them to sign on the dotted line. Joint development is a bit more nuanced. Currently there are a number of existing old leases, signed before shale drilling began, that prevents drillers from drilling a horizontal well across an individual property boundary line–until a new lease is signed. Joint development says if the driller already owns the leases on all adjoining properties they want to combine into a drilling unit, they can do so without signing a new lease. WVONGA says it corrects a loophole that prevents more drilling from happening. Rights owners say joint development legislation lets drillers have a freebie–instead of signing a new lease (for more money), the driller gets something never envisioned when the original lease was signed. Yesterday WVONGA bused a bunch of people (mostly oil & gas workers) from across the state to the Capitol steps in Charleston for a rally in support of new legislation to pass co-tenancy and joint development. Depending on the news source, “several hundred” or “nearly 1,000” attended the rally. It was a lot of people. One of the star speakers was newly minted Gov. Jim Justice (a Democrat who supports the industry). Justice came out in full-throated support of co-tenancy and joint development. The rally certainly seemed to have an impact on WV legislators, some of whom attended…
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