WV O&G Pushes Hard for Forced Pooling Law, Landowners Push Back
Last week MDN brought you news of a new forced pooling bill under consideration in this year’s West Virginia legislative session (see WV Makes a New Push for Forced Pooling Using New WVU Study). Forced pooling is one of those rare issues where drillers and landowners are typically on opposite sides of the debate. The WV drilling industry continues to press hard for this new bill, while landowner groups continue to push back just as hard against it.
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As sure as the seasons change and our long winter is finally turning into spring with the first crocuses popping up through the soil, you can count on another sign of spring: a forced pooling bill will pop up in the 60-day West Virginia legislative session. And so it has. The WV legislature is currently considering two bills, Senate Bill (SB) 538 and House Bill (HB) 2853, called “unitization bills” which is just another word for forced pooling. This time West Virginia University is providing support for forced pooling in the form of a new study claiming forced pooling will “jump-start” a new era of natural gas development.
West Virginia House Bill (HB) 2581 is rapidly advancing through various committees. The bill changes how the State Tax Department values producing oil and gas wells for property tax purposes. It also creates a new appeals process for all property taxes in WV. Provisions in the bill allow expenses from “lifting, processing, transportation and other industry activities” to be subtracted from a well’s income. Question: Do these new post-production deductions also apply to royalties?
All three M-U states received permits to drill new shale wells last week. Pennsylvania received 9 new permits, with 5 of those permits going to Cabot Oil & Gas and their drilling program in Susquehanna County. Ohio received 4 new permits, all for the same company (Encino Energy) in the same county (Harrison) on the same well pad. And West Virginia received 3 new permits, all for the same company (Northeast Natural Energy) in the same county (Monongalia) on the same well pad.
The pandemic did its best to shut the world down, and maybe it succeeded in shutting down other countries–but not here in the US of A. Against an onslaught of shutdowns (particularly in “blue” states), people staying home, businesses closing, anarchy and chaos in large Democrat cities…and against an onslaught against fossil fuels by environmental Nazis seeking to destroy the economies of the world via bans of oil and natural gas and coal…U.S. natural gas production decreased by just 1 percent last year. Can you believe it? That’s a victory in our book!
A few weeks ago during his “State of the State” address, West Virginia Gov. Jim Justice announced a plan to eliminate the state’s personal income tax. Who wouldn’t love that idea? We sure would! But in order to replace the $2.1 billion received annually from the personal income tax, Justice would raise other taxes, including a tiered system that potentially raises the state’s oil and gas severance tax. We don’t like that idea so much. However, the reaction to Justice’s proposal by the Gas and Oil Association of West Virginia (GO-WV) may surprise you.
Yesterday the country’s largest natural gas producer, EQT Corporation, released its 4Q and full-year 2020 update, holding a conference call with analysts to discuss the results. The update shows the company produced an average of 4.45 million cubic feet per day (MMcf/d) of natural gas in 4Q. Although there was plenty of “free cash flow” for the year, on paper the company lost $967 million in 2020, which is an improvement over the year before when it lost $1.2 billion. Perhaps the biggest news (for us) coming from yesterday’s update is that in 4Q EQT turned its drilling attention to the West Virginia Marcellus. EQT plans to do much more drilling in WV this year too.
West Virginia is represented by one Republican U.S. Senator, Shelley Moore Capito, and one Democrat, Joe Manchin. Manchin is tolerable (just) because he advocates for coal and oil/gas. Manchin is also the new chairman of the powerful Senate Committee on Energy and Natural Resources. Manchin, to his credit, is pushing back against Joe Biden’s ill-advised cancelation of the Keystone XL oil pipeline. In fact, both Biden and Capito are loudly supporting Keystone and (important for us) the Mountain Valley Pipeline (MVP) project, which runs through WV.
Last year the West Virginia Dept. of Environmental Protection (WVDEP) fined the Mountain Valley Pipeline (MVP) project $265,972 for erosion and sediment issues related to constructing the 303-mile pipeline (see