Well Spacing and Royalty Sharing.
(a.k.a. “Spacing, Pooling and Unitization”)
What it is, and why it should apply,
instead of the Rule of Capture,
to the drilling of all oil and gas wells in W.Va.
WVSORO expects to oppose any legislation on this subject
during the 2012 Legislative Session!!!
See the link below why forced spacing/pooling/unitization is a good idea if and only if it has certain provisions.
It is obvious that the industry, and therefore the Governor, will not agree to any comprehensive legislation that we want giving recognition of surface owners rights. That has always been a necessary condition to supporting legislation that the industry wants.
In addition, any proposed legislation we have heard about would give the State the right to force a horizontal well pad and access road to be constructed on the surface owner under at least some conditions. We would regard that as an unconstitutional taking of rights beyond what the surface owner or his predecessor bargained for or contemplated when the ownership the surface was split from the ownership of the minerals.
Further, any proposed legislation that we have heard about:
- will LEAVE OUT the "spacing" part of the process that eliminates unnecessary well pads, which is the part of the process that does anything for surface owners as a class,
- may or may not do the "pooling" part that decides which operator gets to drill the well (which surface owners do not care about at all),
- and will certainly do the "unitizing" that IS A TAKING because it forces landowners to have their minerals drilled 1) who may not want drilling at all, and 2) without fairly compensating them for the market value of the lessor/bonus/royalty rights, and 3) without fairly compensating them (if their land is not yet leased to any driller) for their working interest rights they still own (the value of the gas after deducing the royalty and the cost of drilling the well).
Legislation for forced spacing/unitization/pooling for drilling horizontal gas wells is ONLY a good idea IF:
Begin Slide Show
or go to:
II. Who is harmed by the Rule of Capture, and who would be helped by well spacing and royalty sharing.
III. “Pooling and Unitization” statutes in West Virginia.
IV. Illustrations of the effects drilling wells under the Rule of Capture vs. drilling wells using well spacing and royalty sharing.
a. First Example -- Illustration of bad results from Rule of Capture
b. Second Example -- Illustration of bad results from Rule of Capture
c. Third Example -- Real life example of abuse of Rule of Capture
d. Fourth Example -- Illustration of how wells should be drilled, using well spacing and royalty sharing
V. So why is the Rule of Capture still the law?
VI. Why hasn’t the West Virginia Legislature passed well spacing and royalty sharing legislation for all wells in West Virginia?
Prepared by David B. McMahon • Attorney at Law
Copyright December, 2007