February 7, 2008

Drilling Boom Spurs Legislation

'Bill of Rights' gives surface owners more say about how work occurs on their land.

Story by Walt Williams

CHARLESTON -- A surge in drilling permits issued in West Virginia in recent years has sparked calls among some advocates for a "bill of rights" to give surface owners more say about oil and gas drilling on their land.

A few state lawmakers are proposing to do just that.

Two identical bills introduced in the 2008 Legislature would rewrite state law to give landowners more notice before a drillers start developing well on their land and allow to collect more money for any damages caused by the operation.

The "Surface Owner's Bill of Rights" bills come at the request of the West Virginia Surface Owner's Rights Organization, a new group headed by Charleston attorney David McMahon. He recounted situations such as a military couple who learned while deployed overseas that a driller had started drilling on their land, and a man who one day found a surveyor on the piece of property where he had planned to build a new house.

"He went up there and said he planned to build a house there, and the surveyor drove a stake and said, 'Not now,'" McMahon said.

The groups representing oil and gas operators said McMahon and other supporters of the legislation are exaggerating the extent of the problem and that most landowners get along fine with the companies drilling on their land. While they acknowledged there are occasionally a few drillers who are bad actors, they point that there are laws on the books giving surface owners recourse if they have been wronged.

"Are we doing this truly because there is a public outcry, or are we doing this because some mineral owner somewhere has primacy and the surface owner doesn't like it?" said Nicholas "Corky" DeMarco, director of the West Virginia Oil and Natural Gas Association.

The state has seen a substantial increase in well permits during the past few years, thanks to rising oil and gas prices. The state Office of Oil and Gas issued more than 3,200 drilling permits in 2007 for both new and old wells, although the majority of them were for new wells, office chief James Martin said.

Landowners often don't own the natural gas, oil and other minerals beneath their properties, and West Virginia, like most states, gives mineral owners the right to extract those minerals even if they don't own the property above them. The situation is commonly known as "split estates."

Surface owners currently get a notice in the mail 15 days before a permit to drill on their land is issued, during which time they can comment on the proposal. If they don't like the location of an access road or a drill site, they can say so, but the Office of Oil and Gas looks only at whether the soil erosion from the development would impact water quality in nearby streams.

"We certainly encourage that the operator work with the landowner with the placement of roads and (well) locations themselves," Martin said. "In terms of our review process, we would not be in the position to deny the application for that reason."

For that and other reasons, McMahon said, current state law is too heavily skewed in favor of the rights of mineral interests rather than trying to find a balance between surface owners and oil and gas operators.

The two bills -- Senate Bill 482 and House Bill 4286 -- would require landowners to receive notice at least two weeks before any surveyors show up on their properties. Both also encourage drilling operators to enter into agreements with landowners.

"The idea is to create a mechanism where the driller and the landowner can sit down before the survey stake goes into the ground ... so that the landowner has more of a say hopefully of where things go on their property," said Gary Zuckett, executive director of the West Virginia Citizen Action Group, a Charleston-based advocacy group supporting the legislation.

Both bills also allow surface owners to purchase gas from the wells at bulk prices and change damage laws so surface owners are paid fair market value for their land rather than basing damages on the current use of the land, as the law currently is set up.

While Zuckett and McMahon said passage of either bill will lead to a better balance between the rights of the property owners involved, oil and gas industry representatives said it will result in fewer well permits and, as a result, fewer tax dollars for counties and for the state.

In 2006, property tax revenues attributable to oil and gas operations generated $88.1 million for counties, according to the West Virginia Oil & Natural Gas Association. That figure rose to $130 million in 2007.

The state also collected $69.7 million in oil and gas severance tax revenues in 2006, which was up from $17.8 million in 1999, according to the association. A total of 10 percent of those revenues are directed to counties.

Charlie Burd, executive director of the Independent Oil & Gas Association of West Virginia, also pointed to the growth in the industry and asked why, when the state is reaping the tax benefits from oil and gas operations, would it want to stop that.

"We just think it would be detrimental to the industry and financially detrimental to the state," he said.

While the surface owners and drilling operators have been known to clash from time to time, he believes those are the exceptions rather than the rule.

"Without a doubt, there are instances where an operator might not have complied to the exact letter of the law, and that is not something the industry endorses," he said. "The industry endorses all operators in the state to comply with the regulations that are in statute."

The Legislature had yet to hold a hearing on either bill by the time The State Journal went to print. The Senate bill is sponsored by Sen. Larry Edgell, D-Wetzel, while the House bill is sponsored by Delegate Mike Burdis, D-Wyoming.