Source: http://www.wvlegislature.gov/Bill_Status/bills_text.cfm?billdoc=HB4268%20SUB%20ENR.htm&yr=2018&sesstype=RS&i=4268
Timestamp: 2019-04-25 05:48:44+00:00

Document:
AN ACT to amend and reenact §22C-9-3 and §22C-9-4 of the Code of West Virginia, 1931, as amended, to amend and reenact §37-7-2 of said code; and to amend said code by adding thereto a new chapter, designated §37B-1-1, §37B-1-2, §37B-1-3, §37B-1-4, §37B-1-5, §37B-1-6, §37B-1-7, §37B-2-1, §37B-2-2, §37B-2-3, §37B-2-4, §37B-2-5, §37B-2-6, §37B-2-7, §37B-2-8, and §37B-2-9, all relating generally to real property; providing the Oil and Gas Conservation Commission enforcement authority for certain mineral development by cotenants; providing an exception to waste and trespass for certain oil or natural gas developments; providing a short title; providing declarations of public policy and legislative findings; providing definitions; providing that, in cases where there are seven or more royalty owners, consent for the lawful use and development of oil or natural gas mineral property by the persons owning an undivided three fourths of the royalty interests, as defined, in an oil or natural gas mineral property is permissible, is not waste, and is not trespass; providing that nonconsenting cotenants may elect a production royalty interest or a working interest share of production; providing an election period and default elections; providing a certain right of appeal; providing that interests owned by unknown or unlocatable owners be reserved, reported, and deposited in a fund administered by the State Treasurer; providing methods for determination of leasehold and contractual terms; providing for the development of specifically targeted stratigraphic formations; providing the Oil and Gas Conservation Commission rule-making authority; providing a mechanism for surface owners to acquire title to certain severed oil and gas interests; providing limitations of liability for certain nonconsenting cotenants and unknown or unlocatable interest owners; prohibiting surface use or disturbance in certain circumstances; preserving common law rights; providing for severability of provisions; providing a short title; providing that the article shall be read in conjunction and not in conflict with the West Virginia Uniform Unclaimed Property Act; providing definitions; providing for quarterly reporting and remittance of each reserved interest for each unknown or unlocatable interest owner to the State Treasurer; providing reporting requirements and administrative duties; creating a fund known as the Unknown and Unlocatable Interest Owners Fund, to be administered by the State Treasurer; permitting investment of moneys in the fund with the West Virginia Board of Treasury Investments; requiring payment of lawful claims of unknown and unlocatable interest owners; permitting deduction of certain expenses; requiring that certain funds be transferred to the Oil and Gas Reclamation Fund and the Public Employees Insurance Agency Stability Fund in equal amounts; providing for certain notice requirements; providing for the crediting of certain amounts to each owner’s account and payment of certain interest earned; providing for rule-making authority; providing for severability of provisions; and providing an effective date.
CHAPTER 22C. ENVIRONMENTAL RESOURCES; BOARDS, AUTHORITIES, COMMISSIONS AND COMPACTS.
ARTICLE 9. OIL AND GAS CONSERVATION.
§22C-9-3. Application of article; exclusions.
(a) Except as provided in subsection (b) of this section, the provisions of this article shall apply to all lands located in this state, however owned, including any lands owned or administered by any government or any agency or subdivision thereof, over which the state has jurisdiction under its police power. The provisions of this article are in addition to and not in derogation of or substitution for the provisions of §22-6-1 et seq. of this code.
(2) Fix prices of oil or gas.
(d) Nothing contained in either this chapter or §22-1-1 et seq. may be construed so as to require, prior to commencement of plugging operations, a lessee under a lease covering a well to give or sell the well to any person owning an interest in the well, including, but not limited to, a respective lessor, or agent of the lessor, nor shall the lessee be required to grant to a person owning an interest in the well, including, but not limited to, a respective lessor, or agent of a lessor, an opportunity to qualify under §22-6-26 of this code to continue operation of the well.
§22C-9-4. Oil and gas conservation commissioner and commission; commission membership; qualifications of members; terms of members; vacancies on commission; meetings; compensation and expenses; appointment and qualifications of commissioner; general powers and duties.
(a) The “oil and gas conservation commission” shall be composed of five members. The director of the Department of Environmental Protection and the chief of the office of oil and gas shall be members of the commission ex officio. The remaining three members of the commission shall be appointed by the Governor, by and with the advice and consent of the Senate, and may not be employees of the Department of Environmental Protection. Of the three members appointed by the Governor, one shall be an independent producer and at least one shall be a public member not engaged in an activity under the jurisdiction of the Public Service Commission or the federal energy regulatory commission. The third appointee shall possess a degree from an accredited college or university in petroleum engineering or geology and must be a registered professional engineer with particular knowledge and experience in the oil and gas industry and shall serve as commissioner and as chair of the commission.
(b) The members of the commission appointed by the Governor shall be appointed for overlapping terms of six years each, except that the original appointments shall be for terms of two, four and six years, respectively. Each member appointed by the Governor shall serve until the members successor has been appointed and qualified. Members may be appointed by the Governor to serve any number of terms. The members of the commission appointed by the Governor, before performing any duty hereunder, shall take and subscribe to the oath required by section 5, article IV of the Constitution of West Virginia. Vacancies in the membership appointed by the Governor shall be filled by appointment by the Governor for the unexpired term of the member whose office is vacant and such appointment shall be made by the Governor within 60 days of the occurrence of such vacancy. Any member appointed by the Governor may be removed by the Governor in case of incompetency, neglect of duty, gross immorality or malfeasance in office. A commission member's appointment shall be terminated as a matter of law if that member fails to attend three consecutive meetings. The Governor shall appoint a replacement within 30 days of the termination.
(c) The commission shall meet at such times and places as shall be designated by the chair. The chair may call a meeting of the commission at any time, and shall call a meeting of the commission upon the written request of two members or upon the written request of the oil and gas conservation commissioner or the chief of the office of oil and gas. Notification of each meeting shall be given in writing to each member by the chair at least 14 calendar days in advance of the meeting. Three members of the commission, at least two of whom are appointed members, shall constitute a quorum for the transaction of any business.
(d) The commission shall pay each member the same compensation as is paid to members of the Legislature for their interim duties as recommended by the citizens legislative compensation commission and authorized by law for each day or portion thereof engaged in the discharge of official duties and shall reimburse each member for actual and necessary expenses incurred in the discharge of official duties.
(e) The commission is hereby empowered and it is the commission's duty to execute and carry out, administer and enforce the provisions of this article in the manner provided herein. Subject to the provisions of §22C-9-3 of this code, the commission has jurisdiction and authority over all persons and property necessary therefor. The commission is authorized to make such investigation of records and facilities as the commission deems proper. In the event of a conflict between the duty to prevent waste and the duty to protect correlative rights, the commission's duty to prevent waste shall be paramount.
(4) Serve as technical advisor regarding oil and gas to the Legislature, its members and committees, to the chief of office of oil and gas, to the Department of Environmental Protection and to any other agency of state government having responsibility related to the oil and gas industry.
(2) No request for hearing has been received.
(3) Approve or deny an application for the pooling of interests within a drilling unit.
(i) Any exception to the field rules or the spacing of wells which does not conform to the rules of the commission, and any application for the pooling of interests within a drilling unit, must be presented to and heard before the commission.
(j) The commission is hereby empowered and it is the commission’s duty to execute and carry out, administer, and enforce the relevant provisions of §37B-1-1 et seq. of this code concerning mineral development by cotenants for all wells at all depths. The commission has jurisdiction and authority over all persons and property necessary therefor. The commission is authorized to make such investigation of records and facilities as the commission deems proper.
If a tenant in common, joint tenant, or parcener commits waste, he or she is liable to his or her cotenants, jointly or severally, for damages. The lawful use or development of oil or natural gas and their constituents in compliance with the provisions of §37B-1-1 et seq. of this code is not the commission of waste.
ARTICLE 1. MINERAL development by A majority of cotenants.
This article shall be known as the Cotenancy Modernization and Majority Protection Act.
§37B-1-2. Declaration of public policy; legislative findings.
(5) Safeguard, protect and enforce the integrity of the passive royalty owner’s interest in his or her minerals.
(7) Protect and enforce the clear provisions of contracts lawfully made.
“Consenting Cotenant” means a tenant in common, joint tenant, or parcener having an interest in the mineral property who consents in writing to a lawful use of the mineral property through a bona fide lease made in an arms-length transaction.
“Nonconsenting Cotenant” means an owner who for any reason chooses not to consent to a lawful use of the mineral property agreed to by the consenting cotenants owning, cumulatively, at least an undivided three-fourths interest in and to the mineral property.
“Operator” means any owner of at least an undivided three-fourths interest of the right to develop, operate and produce oil, natural gas, or their constituents, and to appropriate the oil, natural gas, or their constituents produced therefrom.
“Person” means any individual, corporation, partnership, joint venture, limited liability company, association, receiver, trustee, executor, administrator, guardian, fiduciary or other representative of any kind, and includes any government or any political subdivision or any agency thereof.
“Post-production expense” means an expense or cost subsequent to production including, but not limited to, an expense or cost related to severance taxes, pipelines, surface facilities, telemetry, gathering, dehydration, transportation, fractionation, compression, manufacturing, processing, treating or marketing of oil or natural gas and their constituents.
“Prorata share” means the allocation of revenues and costs attributable to the lawful use of a mineral property that is calculated based on the proportion that the net acreage of such ownership interest bears to the total net acreage in the mineral property, in a development or production unit that includes, all or part of, that mineral property.
“Royalty owner” means any owner in place of oil or natural gas and their constituents, owners of oil or natural gas leasing rights, and owners vested with any leasehold estate less than 25 percent of the total, to the extent that the owners are not an operator as defined in this section. A royalty owner does not include a person whose interest is limited to: (A) A working interest in a wellbore only; (B) overriding royalties; (C) nonparticipating royalty interests; (D) nonexecutive mineral interests; or (E) net profit interests.
(D) A reasonable review of available Internet resources commonly utilized by the industry.
§37B-1-4. Lawful use and development by cotenants; election of interests; reporting and remitting of interests of unknown or unlocatable cotenants; establishment of terms and provisions for development; and merging of surface and oil and gas.
(a) In cases where there are seven or more royalty owners, if an operator or owner makes or has made reasonable efforts to negotiate with all royalty owners in an oil or natural gas mineral property and royalty owners vested with at least three fourths of the right to develop, operate, and produce oil, natural gas, or their constituents consent to the lawful use or development of the oil or natural gas mineral property, the operator’s or owner’s use or development of the oil or natural gas mineral property is permissible, is not waste, and is not trespass. In that case, the consenting cotenants and their lessees, operators, agents, contractors or assigns are not liable for damages for waste or trespass due to the lawful use or development and shall pay the nonconsenting cotenants in accordance with subsections (b) and (c) of this section, reserve the amounts specified in subsection (d) of this section for the benefit of unknown or unlocatable interest owners, and report and remit the reserved interests as provided in subsection (d) of this section.
(2) To participate in the development and receive his or her prorata share of the revenue and cost equal to his or her share of production attributable to the tract or tracts being developed according to the interest of such nonconsenting cotenant, exclusive of any royalty or overriding royalty reserved in any lease, assignments thereof or agreements relating thereto, after the market value of such nonconsenting cotenant’s share of production, exclusive of such royalty and overriding royalty, equals double the share of such costs payable or charged to the interest of such nonconsenting cotenant.
(c) A nonconsenting cotenant shall have 45 days following the operator’s written delivery of its best and final lease offer in which to make his or her election for either a production royalty or a revenue share as specified in subsection (b) of this section. If the nonconsenting cotenant fails to deliver a written election to the operator prior to the expiration of such 45-day period, he or she shall be deemed to have made the election set forth in subdivision (1), subsection (b) of this section. Within thirty days after a nonconsenting cotenant has chosen or is deemed to have chosen the production royalty option, the nonconsenting cotenant shall have the right to appeal to the Commission regarding the issue of whether there has been compliance with subdivision (1) of subsection (b) of this section, to verify the highest royalty paid in the same mineral property and the value for the lease bonus and delay rental payments: Provided, however, That the operations upon the parcel may continue during the proceedings.
(d) Unknown or unlocatable interest owners are deemed to have made the election provided by subdivision (1), subsection (b) of this section and are only entitled to receive the amount provided by that subdivision. Within 120 days from the date upon which an amount is reserved for an unknown or unlocatable interest owner pursuant to subsection (a) of this section, the consenting cotenants and their lessees, operators, agents, contractors or assigns shall make a report to the State Treasurer as the Unclaimed Property administrator and each calendar quarter, thereafter, concerning each reserved interest for each unknown or unlocatable interest owner and shall concurrently remit the amount reserved, in accordance with the provisions of §37B-2-1 et seq. and §36-8-1 et seq. of this code and as determined by the State Treasurer. The quarterly report and remittances shall be submitted by the first day of the month following each calendar quarter.
(e) Unless otherwise agreed to in writing or defined by this section, any nonconsenting cotenant and any unknown or unlocatable interest owner who elects or is deemed to elect a production royalty under subdivision (1), subsection (b) of this section is subject to and shall benefit from the other terms and provisions defined by the lease executed by a consenting cotenant which contains terms and provisions most favorable to the nonconsenting cotenant or the unknown or unlocatable interest owner: Provided, That nonconsenting cotenants and unknown or unlocatable interest owners shall not be subject to or liable under any warranty of title, jurisdictional or choice of law provisions, arbitration provisions, injection well provisions, disposal well provisions, and storage provisions: Provided further, That consenting cotenants and their lessees, operators, agents, contractors or assigns shall only develop the specifically targeted stratigraphic formation and 100 feet above and below said formation; nonconsenting cotenants and unknown or unlocatable interest owners will retain all rights to all other formations unless or until reasonable efforts are made to renegotiate under this section for each additional formation. If a consenting cotenant has made a lease only for the targeted formation, in that case the nonconsenting cotenants and unknown and unlocatable cotenants shall receive the highest royalty, bonus and delay rental in the lease which was executed for the targeted formation.
(f) Unless otherwise agreed to in writing or defined by this section, a nonconsenting cotenant who elects to participate under subdivision (2), subsection (b), of this section, shall be subject to and shall benefit from other terms and provisions determined to be just and reasonable by the Oil and Gas Conservation Commission in a manner similar to the provisions of §22C-9-7(b)(5)(B) of this code governing deep wells. The commission may propose rules for legislative approval in accordance with the provisions of §29A-3-1 et seq. of this code, to implement and make effective the provisions of this section and the powers and authority conferred and the duties imposed upon the commission under the provisions of this section. Notwithstanding the determination of participation terms by the commission, an operator may proceed with the development of oil, natural gas, or their constituents pursuant to this section.
(g) After seven (7) years from the date of the first report to the Treasurer, a bonafide surface owner may file an action to quiet title to the interests of all unknown and unlocatable interest owners of the oil and natural gas estate underlying the surface tract. To the extent relevant and practical, such action shall follow the provisions of W.Va. Code §55-12A-1 et seq. Upon presentation of sufficient proof, a bonafide surface owner shall be entitled to receive a special commissioner’s deed transferring title to the interest of any or all unknown or unlocatable interest owners in an oil and natural gas estate which underlies the surface tract. The surface owner shall only be entitled to their proportionate share of all future proceeds and is not entitled to any of the accrued funds which have been remitted to the Treasurer prior to the execution of the special commissioner’s deed. The unknown or unlocatable interest owners are not entitled to any amounts paid to the grantees of the special commissioner’s deed after delivery of said deed.
§37B-1-5. Limitations of liability for certain cotenants.
Nonconsenting cotenants who elect to receive a production royalty pursuant to §37B-1-4(b)(1) of this code and unknown or unlocatable interest owners shall have no liability for bodily injury, property damage, warranty of title, or environmental claims, arising out of site preparation, mineral extraction, maintenance, reclamation, and other operations with respect to minerals produced from the cotenant’s property, except nonconsenting cotenants and unknown or unlocatable interest owners are liable for their intentional acts.
(a) When any tract of mineral property where an interest in the oil or natural gas in place is owned by a nonconsenting cotenant is used or developed pursuant to §37B-1-4 of this code, in no event shall drilling be initiated upon, or other surface disturbance occur, without the surface owner’s consent regardless of whether such surface owner possesses any actual ownership in the mineral interest: Provided, That this subsection shall not require surface owner consent for tracts on which surface disturbance does not occur or tracts otherwise subject to an existing surface use agreement, oil and gas lease which includes surface use rights, or other valid contractual arrangement in which the owner has granted rights to the operator to use the surface for horizontal drilling or any other use for which this article is used.
(b) Except as specifically described in subsection (a) of this section, nothing contained in this chapter is intended to alter in any way, and this chapter shall not diminish or increase, the rights of the owners of the surface overlying the minerals developed in this state. Except as specifically described in subsection (a) of this section, in enacting this chapter in 2018, it is the intention of the Legislature to leave unchanged the common law of this state as it relates to the mineral owner’s right to utilize the surface for the extraction of minerals.
The provisions of this article are severable and accordingly, if any part of this article is adjudged to be unconstitutional or invalid, that determination does not affect the continuing validity of the remaining provisions of this article.
ARTICLE 2. Unknown and unlocatable interest owners ACT.
§37B-2-2. Relationship between unknown and unlocatable interest provisions and unclaimed property provisions.
The provisions of this article shall be read in conjunction and not in conflict with the provisions of the West Virginia Uniform Unclaimed Property Act in §36-8-1 et seq. of this code.
(iii) Under an agreement or option, including a joint operating agreement, unit agreement, pooling agreement and farm-out agreement.
§37B-2-4. Report of unknown and unlocatable interest owners.
(a) The holder shall make a report to the administrator each calendar quarter concerning each reserved interest for each unknown or unlocatable interest owner and shall concurrently remit the amount reserved to the administrator. The quarterly report and remittances shall be submitted by the first day of the month following each calendar quarter.
(4) All other information the administrator by rule prescribes as necessary for the administration of this article.
(c) Before the date for filing the report, the holder of the reserved interests may request the administrator extend the time for filing the report. The administrator may grant the extension for good cause.
(d) The holder is not liable to any person for the wrongful use or appropriation of personal information of interest owners by another person described in the reports required under this section.
(e) With respect to all unknown or unlocatable interest owners, all obligations under this chapter of the holder are satisfied once an adequate report is filed and reserved interests are remitted to the administrator.
§37B-2-5. Unknown and unlocatable interest owners fund; duties of the State Treasurer.
(a) The Unknown and Unlocatable Interest Owners Fund is created in the State Treasury as a special revenue and interest-bearing account to be administered by the State Treasurer for the purposes prescribed in this article.
(b) The administrator shall deposit all moneys received pursuant to §37B-1-1 et seq. and §37B-2-1 et seq. of this code into the fund. All expenditures from the fund shall be in accordance with this article and as otherwise determined by the Legislature.
(c) The administrator may invest the moneys in the fund with the West Virginia Board of Treasury Investments. All earnings shall accrue to the fund and are available for expenditure in accordance with this article.
(d) The administrator shall pay all lawful claims of unknown and unlocatable interest owners from the fund.
(3) Expenses incurred in examining the reports of the holder and in collecting the reserved interest from the holders.
(f) After deducting the claims paid and the expenses specified in subsection (e) of this section and maintaining a sum of money which the administrator estimates will be needed to pay claims and expenses duly allowed from the reserved interests received and deposited in the fund, the administrator shall determine the amount that is transferrable from the Fund. Beginning July 1, 2023, and every six months thereafter, the administrator shall transfer 50 percent of the amount the administrator determines is transferrable to the Oil And Gas Reclamation Fund established under §22-6-29 of this code and expended for the purposes provided by that section and §22-10-6 of this code, and 50 percent of the revenue shall be deposited into the Public Employees Insurance Agency Stability Fund and expended pursuant to §11B-2-32 of this code.
(g) At least sixty days prior to the seven year anniversary of the first report to the administrator concerning the property of an unknown or unlocatable interest owner, the administrator shall publish a notice in a newspaper of general circulation in each county of this state where the minerals are located once a week for two successive weeks as provided by the West Virginia Rules of Civil Procedure. Said publication should provide notification of the impending seven year anniversary to all possible surface owners and unknown or unlocatable interest owners.
§37B-2-6. Crediting of interest to owner’s account.
(a) The administrator shall credit the amount of interest earned to each owner’s account and shall pay the interest earned when a claim is paid on that account.
(b) In no event shall the administrator be required to pay the owner any income or gain realized or accruing on the account after the third anniversary of the payment of the owner’s interest to the administrator.
(c) Nothing in this section shall be construed to entitle an owner to interest on property which did not realize or accrue income or gain while in possession of the administrator.
On or before July 1, 2018, the administrator shall promulgate emergency legislative rules in accordance with the provisions of §29A-3-15 of this code. The administrator shall propose legislative rules for promulgation in accordance with the requirements of the Secretary of State and the provisions of §29A-1-1 et seq. of this code to otherwise effectuate the purposes of this article.
This article shall take effect on July 1, 2018.

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