West Virginia Legislature Passes Two Significant Bills Impacting Oil and Gas Development

On Saturday, March 5, 2022, the West Virginia Legislature passed S.B. 650, and on Wednesday, March 9, 2022, it passed S.B. 694.

After lengthy debate, the Legislature passed S.B. 694, which authorizes the West Virginia Oil and Gas Conservation Commission to issue horizontal well unit orders in certain circumstances. Upon the issuance of a unit order, the unitization of tracts for both shallow and deep horizontal wells is authorized by law. S.B. 694 addresses the issues oil and gas operators face when mineral owners cannot be located, refuse to lease, or do not consent to amend existing leases to permit horizontal drilling. S.B. 694 allows unitization of interests if a producer demonstrates that executive interest royalty owners in the target formation owning 75% or more of the net acreage in the prospective unit have consented to pool or unitize their acreage and, with respect to the operator interest, that it controls 55% or more of the net acreage in the prospective unit. The bill also expands the Oil and Gas Conservation Commission from five to seven members and provides options for compensating non-consenting owners.

In 2018, the Legislature passed H.B. 4268, known as the Cotenancy Modernization and Majority Protection Act, which permitted oil and gas development within a mineral tract owned by seven or more cotenants if the royalty owners vested with at least 75% of the right to develop the minerals had consented to the development of the oil and gas. S.B. 650 simply eliminates the requirement that the tract be owned by seven or more cotenants in order for an operator to develop the oil and gas under the Cotenancy statute. The bill does not change any other provisions of W. Va. Code § 37B-1-1, et seq. The effect of passage of S.B. 650 is to make the Cotenancy Act applicable to all mineral tracts in the state so long as the oil and gas producer satisfies all provisions of the statute.

Both bills will now go to Governor Justice for his signature.