This article originally provided by The Charleston Daily Mail

November 12, 2007

W.Va. gas industry butts heads with coal, landowners

West Virginia's natural gas industry has been on the rise, aided by a pricey market for oil and the debate over the nation's energy future. But the year has also been marked by growing pains, of sorts.

West Virginia has 11.6 percent of the nation's producing gas wells, with more than 49,000 as of 2005, according to the latest figures from the U.S. Energy Information Administration.

The Mountain State added 6,860 producing wells between 2000 and 2005, the fifth-largest growth nationwide during that period, those figures show. The state's wells yielded nearly 217 million cubic feet of natural gas in 2005.

"The number of well permits has steadily increased over the last several years,'' said Charlie Burd, executive director of the state's Independent Oil and Gas Association. "We would look for the current drilling market in this state to absolutely stay, well, robust would be a good term.''

But such heady times have not come without a cost. The West Virginia Coal Association and several companies from that industry have taken leading gas producers to court. Their petition, which mainly targets the state Oil & Gas Conservation Commission, takes issue with the handling of a series of requests to drill wells near mineable coal seams.

The gas industry also continues to reel from a $405 million Roane verdict awarded in January to thousands of landowners alleging they had been cheated out of royalty payments. That case, and the lingering dispute over royalties, has also helped unite the surface owners. They have formed a lobbying association to take on the natural gas industry, one of the better-represented interest at the Legislature.

The West Virginia Surface Owners' Rights Organization represents land holders in at least 41 counties, organizer Dave McMahon estimated. The group also finds itself at odds with the industry on such other topics as drilling in state forests, post-drilling reclamation and the placement of access roads.

It also shares the coal industry's concerns over the spacing of wells, a key issue in the pending Supreme Court case, McMahon said.

All this could lead to legislative action once the 2008 regular session begins in January. The session might also see lawmakers revisit portions of the sprawling bill unsuccessfully proposed by Gov. Joe Manchin during August's special session.

Manchin wanted lawmakers to redefine the sort of royalty contract between gas producers and mineral rights owners at the center of the Roane County case. The failed bill also sought to tinker with the regulations related to well-depth invoked in the coal industry's petition.

But McMahon hopes legislators consider a more fundamental change.

West Virginia applies a legal standard dating back to medieval England to its laws governing oil and gas wells. This "rule of capture'' was crafted to decide who owned deer that may have been born on one noble's land, grazed on a second's and hunted down on a third's.

"The rule of capture was adopted for gas wells in this country when it was thought that oil and gas ran in underground rivers and gas was a valueless byproduct,'' McMahon said.

The surface owners prefer the "pooling an utilization'' laws developed in western states, which like West Virginia also sit atop a co-mingling array of natural resources.

"Wells are required spaced for maximum production based on porosity, permeability and other geologic properties of the formation,'' McMahon said. "All mineral tract owners being drained by a particular well receive a proportional share of the royalty that well produces.''

Producers have yet to bite, Burd said.

"West Virginia is approaching 125 years worth of law governing how oil and gas can be extracted,'' Burd said. "We have ongoing discussions with representatives of the surface owners. We have listened to them, and they have listened to reasons why we feel existing statutes better cover certain areas.''