Senate Bill No. 613
(By Senator Kessler)
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[Introduced March 17, 2009; referred to the Committee on Energy,
Industry and Mining.]
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A BILL to amend and reenact §22-21-6, §22-21-15, §22-21-16 and §22-
21-17 of the Code of West Virginia, 1931, as amended, all
relating to clarifying notice requirements; requiring the
promulgation of rules associated therewith; making technical
clarifications; and penalties.
Be it enacted by the Legislature of West Virginia:
That §22-21-6, §22-21-15, §22-21-16 and §22-21-17 of the Code
of West Virginia, 1931, as amended, be amended and reenacted, all
to read as follows:
ARTICLE 21. COALBED METHANE WELLS AND UNITS.
§22-21-6. Permit required for coalbed methane well; permit fee;
application; soil erosion control plan; penalties.
(a) It is unlawful for any person to commence, operate, deepen
or stimulate any coalbed methane well, to conduct any horizontal
drilling of a well commenced from the surface for the purpose of commercial production of coalbed methane, or to convert any
existing well, vent hole or other hole to a coalbed methane well,
including in any case site preparation work which involves any
disturbance of land, without first securing from the chief a permit
pursuant to this article.
(b) Every permit application filed under this section shall be
verified and shall contain the following:
(1) The names and addresses of: (i) The well operator; (ii)
the agent required to be designated under subsection (e) of this
section; and (iii) every person or entity whom the applicant must
notify under
any section
nine of this article;
(2) The name and address of each coal operator
of record and
each coal owner of record or providing a record declaration of
notice pursuant to section thirty-six, article six of this chapter
of any coal seam which is: (i) To be penetrated by a proposed
well; (ii) within seven hundred fifty horizontal feet of any
portion of the proposed well bore; or (iii) within one hundred
vertical feet of the designated
completion coal seams
of to be
stimulated in the proposed well, except that in the case of an
application to convert a ventilation hole to a gob well, the name
and address only of such owner or operator of the seams to be
penetrated by a proposed well shall be necessary;
(3) The well name or such other identification as the chief
may require;
(4) The approximate depth to which the well is to be drilled,
deepened or converted, the coal seams (stating the depth and
thickness of each seam) in which the well will be completed for
production, and any other coal seams (including the depth and
thickness of each seam) which will be penetrated by the well;
(5) A description of any means to be used to stimulate the
well;
(6) If the proposed well will require casing or tubing to be
set, the entire casing program for the well, including the size of
each string of pipe, the starting point and depth to which each
string is to be set, and the extent to which each such string is to
be cemented;
(7) If the proposed operation is to convert an existing well,
as defined in section one, article six of this chapter, or to
convert a vertical ventilation hole to a coalbed methane well, all
information required by this section, all formations from which
production is anticipated, and any plans to plug any portion of the
well;
(8) Except for a gob well or vent hole proposed to be
converted to a well, if the proposed coalbed methane well will be
completed in some but not all coal seams for production, a plan and
design for the well which will protect all workable coal seams
which will be penetrated by the well;
(9) If the proposed operations will include horizontal drilling of a well commenced on the surface, a description of such
operations, including both the vertical and horizontal alignment
and extent of the well from the surface to total depth;
(10) Any other relevant information which the chief may
require by rule.
(c) Each application for a coalbed methane well permit shall
be accompanied by the following:
(1) The applicable bond prescribed by section eight of this
article;
(2) A permit application fee of $650;
(3) The erosion and sediment control plan required under
subsection (d) of this section;
(4) The consent and agreement of the coal owner as required by
section seven and, if applicable, section twenty of this article;
(5) A plat prepared by a licensed land surveyor or registered
engineer showing the district and county in which the drill site is
located, the name of the surface owner of the drill site tract, the
acreage of the same, the names of the surface owners of adjacent
tracts, the names of all coal owners underlying the drill site
tract, the proposed or actual location of the well determined by a
survey, the courses and distances of such location from two
permanent points or landmarks on said tract, the location of any
other existing or permitted coalbed methane well or any oil or gas
well located within two thousand five hundred feet of the drill site, the number to be given the coalbed methane well, the proposed
date for completion of drilling, the proposed date for any
stimulation of the well, and if horizontal drilling of a well
commenced on the surface is proposed, the vertical and horizontal
alignment and extent of the well;
(6) A certificate by the applicant that the notice
requirements of section nine of this article have been satisfied by
the applicant. Such certification may be by affidavit of personal
service, or the return receipt card, or other postal receipt, for
certified mailing.
(d) An erosion and sediment control plan shall accompany each
application for a permit. Such plan shall contain methods of
stabilization and drainage, including a map of the project area
indicating the amount of acreage disturbed. The erosion and
sediment control plan shall meet the minimum requirements of the
West Virginia erosion and sediment control manual as adopted and
from time to time amended by the office of oil and gas in
consultation with the several soil conservation districts pursuant
to the control program established in this state through section
208 of the federal Water Pollution Control Act Amendments of 1972
[33 U.S.C. 1288]. The erosion and sediment control plan shall
become part of the terms and conditions of a permit and the
provisions of the plan shall be carried out where applicable in
operations under the permit. The erosion and sediment control plan shall set out the proposed method of reclamation which shall comply
with the requirements of section thirty, article six of this
chapter.
(e) The well operator named in such application shall
designate the name and address of an agent for such operator who
shall be the attorney-in-fact for the operator and who shall be a
resident of the State of West Virginia, upon whom notices, orders
or other communications issued pursuant to this article may be
served, and upon whom process may be served. Every well operator
required to designate an agent under this section shall within five
days after the termination of such designation notify the office of
such termination and designate a new agent.
(f) The well owner or operator shall install the permit number
as issued by the chief in a legible and permanent manner to the
well upon completion of any permitted work. The dimensions,
specifications and manner of installation shall be in accordance
with the rules of the chief.
(g) The chief shall deny the issuance of a permit if he or she
determines that the applicant has committed a substantial violation
of a previously issued permit, including the erosion and sediment
control plan, or a substantial violation of one or more of the
rules promulgated hereunder, and has failed to abate or seek review
of the violation. In the event that the chief finds that a
substantial violation has occurred with respect to existing operations and that the operator has failed to abate or seek review
of the violation in the time prescribed, he or she may suspend the
permit on which said violation exists, after which suspension the
operator shall forthwith cease all work being conducted under the
permit until the chief reinstates the permit, at which time the
work may be continued. The chief shall make written findings of
any such determination made by him or her and may enforce the same
in the circuit courts of this state and the operator may appeal
such suspension pursuant to
the provisions of section twenty-five
of this article. The chief shall make a written finding of any
such determination.
(h) Any person who violates
any provision of this section
shall be guilty of a misdemeanor and, upon conviction thereof,
shall be fined not more than $5,000, or be
imprisoned confined in
the county jail not more than twelve months, or both fined and
imprisoned confined.
§22-21-15. Drilling units and pooling of interests.
(a) In the absence of a voluntary agreement, an operator,
owner or other party claiming an ownership interest in the coalbed
methane may file an application with the chief to pool: (i)
Separately owned interests in a single tract; (ii) separately owned
tracts; (iii) separately owned interests in any tract; and (iv) any
combination of (i), (ii) and (iii) to form a drilling unit for the
production of coalbed methane from one or more coalbed methane wells.
(b) The application for a drilling unit may accompany the
application for a permit for a coalbed methane well or be filed as
a supplement to the permit application. Such application shall be
verified by the applicant and contain the following information for
the proposed unit:
(1) The identity of each well and operator as set out in the
well permit application;
(2) Each well number, if one has been assigned;
(3) The acreage of the proposed unit, the identity and acreage
of each separate tract to be included in the proposed unit, and,
where parts of tracts are included, the acreage of such parts;
(4) The district and county in which the unit is located;
(5) The names and addresses of
the owners of the coal and
coalbed methane underlying each separate tract, or the portion
thereof which is to be included in the unit, any lessees or
operators thereof, any coalbed methane owners not otherwise named,
and any other claimants thereto all persons to whom notice must be
provided by personal service or by certified mail, return receipt
requested, under subsection (1), section sixteen of this article,
known to the applicant. When any coal seam is separately owned,
the list of names shall identify such separate ownership giving the
names of the separately owned seams;
(6) A statement describing the actions taken by the applicant to obtain a voluntary agreement from each interest owner or
claimant named in the application
to whom notice must be provided
by personal service or be certified mail, return receipt requested,
under subsection (a), section sixteen of this article or any other
owner or claimant who has notified the applicant of a claim from
which agreement has not been obtained;
(7) Other pertinent and relevant information as the chief may
prescribe by rules.
(c) The application for a drilling unit shall be accompanied
with the following:
(1) A plat prepared by a licensed land surveyor or registered
professional engineer showing the location of the coalbed methane
well or wells, or proposed well or wells, the boundary and acreage
of the proposed drilling unit, the boundary and acreage of each
tract contained in the unit and, where parts of tracts are
included, the boundary and acreage of such parts, a name
identification of each tract, and the district and county in which
the unit is located. All boundaries must be shown with courses and
distances;
(2) A permit application fee of $250;
(3) A certificate by the applicant that the notice
requirements of section sixteen of this article were satisfied by
the applicant. Such certification may be by affidavit of personal
service, or the return receipt card, or other postal receipt, for certified mailing;
(4) An estimate of the cost, or the actual cost if known, of
drilling, completing, equipping,
operating, plugging and abandoning
any well or wells in the proposed unit.
§22-21-16. Notice to owners.
(a) At least thirty days prior to the date set for hearing
under section seventeen of this article, the applicant shall
deliver
by personal service or by certified mail, return receipt
requested, notice to the following:
(1) Each coal owner
of record and coal operator of
record of
any coal seam underlying any tract or portion thereof which is
proposed to be included in the unit
by personal service or by
certified mail, return receipt requested;
(2) Each owner and lessee of record and each operator of
natural gas surrounding the well bore and existing in formations
above the top of the uppermost member of the "Onondaga Group" or at
a depth less than six thousand feet, whichever is shallower
by
personal service or by certified mail, return receipt requested.
Notices to gas operators shall be sufficient if served upon the
agent of record with the office of oil and gas;
(3) Any coalbed methane owner to the extent not otherwise
named
which interest arises from a deed, lease, contract, will,
inheritance or other instrument of record wherein a person or
entity identified in section sixteen (a)(1) or (2), article twenty-one, chapter twenty-two of this code, or the predecessor in title
to such person or entity, expressly granted, leased or conveyed
coalbed methane, by personal service or by certified mail, return
receipt requested; and
(4) Any other person or entity
which the Legislature hereby
finds is not reasonably ascertainable and which includes, but is
not limited to, those persons or entities described in sections
sixteen(a) (1), (2) and (3), article twenty-one, chapter twenty-two
of this code, underlying any tract or portion thereof which is
proposed to be included in the unit whose name and address is not
of record, by publication in the county of counties in which the
well unit is located of a Class II legal advertisement as described
in section two, article three, chapter fifty-nine of this code,
containing such notice and information as the chief shall prescribe
by rule, with such initial publication date to be at least thirty
days prior to the hearing at which the pooling application will be
heard. known to the operator to have an interest in the coal or
coalbed methane.
(b) The notice required by subsection (a) of this section
shall specify a time and place for a conference and a hearing on
this application, shall advise the persons notified that the
applicant has filed an application for a drilling unit for the
production of coalbed methane, that they may be present and object
or offer comments to the formation of the proposed unit, and shall be accompanied with copies of: (i) The permit application for the
coalbed methane well; (ii) the permit application for the drilling
unit; and (iii) the plat of the drilling unit.
However, in the
case of the notice required by subdivision (4), subsection (a) of
this section, only the address of where an interested party can
obtain such copies is required to be published.
(c) Notice by the applicant to all persons to whom notice must
be provided under subsection (a), section sixteen of this article
shall be deemed to include, and shall be deemed to be sufficient
notice to, all potential claimants to ownership of the coalbed
methane.
§22-21-17. Review of application; hearing; pooling order;
spacing; operator; elections; working interests,
royalty interests, carried interests, escrow
account for conflicting claims, division order.
(a) Prior to the time fixed for a hearing under subsection (b)
of this section, the board shall also set a time and place for a
conference between the proposed applicant to operate a coalbed
methane drilling unit and all persons
identified in the application
as having an interest in the coalbed methane or being a claimant if
such interests are disputed, to whom notice has been given under
subsection (a), section sixteen of this article who have not
entered into a voluntary agreement. At such conference the
applicant and such other persons present or represented having an interest in the proposed unit shall be given an opportunity to
enter into voluntary agreements for the development of the unit
upon reasonable terms and conditions.
No order may be issued by the board as to any unit unless the
applicant submits at the hearing a verified statement setting forth
the results of the conference. If agreement is reached with all
parties to the conference, the board shall find the unit is a
voluntary unit and issue an order consistent with such finding.
(b) The review board shall, upon request of a proposed
applicant for a drilling unit or upon request of a coal owner or
operator, provide a convenient date and time for a hearing on the
application for a drilling unit, which hearing date shall be no
sooner than thirty-five days nor more than sixty days of the date
the request for hearing is made. The review board shall review the
application and on the date specified for a hearing shall conduct
a public hearing. The review board shall take evidence, making a
record thereof, and consider:
(1) The area which may be drained efficiently and economically
by the proposed coalbed methane well or wells;
(2) The plan of development of the coal and the need for
proper ventilation of any mines or degasification of any affected
coal seams;
(3) The nature and character of any coal seam or seams which
will be affected by the coalbed methane well or wells;
(4) The surface topography and property lines of the lands
underlaid by the coal seams to be included in the unit;
(5) Evidence relevant to the proper boundary of the drilling
unit;
(6) The nature and extent of ownership of each coalbed methane
owner or claimant and whether conflicting claims exist;
(7) Whether the applicant for the drilling unit proposes to be
the operator of the coalbed methane well or wells within the unit;
and if so, whether such applicant has a lease or other agreement
from the owners or claimants of a majority interest in the proposed
drilling unit;
(8) Whether a disagreement exists among the coalbed methane
owners or claimants over the designation of the operator for any
coalbed methane wells within the unit, and if so, relevant evidence
to determine which operator can properly and efficiently develop
the coalbed methane within the unit for the benefit of the majority
of the coalbed methane owners;
(9) If more than one person is interested in operating a well
within the unit, the estimated cost submitted by each such person
for drilling, completing, operating and marketing the coalbed
methane from any proposed well or wells; and
(10) Any other available geological or scientific data
pertaining to the pool which is proposed to be developed.
(c) The review board shall take into account the evidence introduced, comments received and any objections at the hearing,
and if satisfied that a drilling unit should not be established,
shall enter an order denying the application. If the review board
is satisfied that a drilling unit should be established, it shall
enter a pooling order establishing a drilling unit. Such pooling
order shall:
(1) Establish the boundary of the proposed unit, making such
adjustment in the boundary as is just;
(2) Authorize the drilling and operation of a coalbed methane
well or wells for production of coalbed methane from the pooled
acreage;
(3) Establish minimum distances for any wells in the unit and
for other wells which would drain the pooled acreage;
(4) Designate the operator who will be authorized to drill,
complete and operate any well or wells in the unit;
(5) Establish a reasonable fee for the operator for operating
costs, which shall include routine maintenance of the well and all
accounting necessary to pay all expenses, royalties and amounts due
working interest owners;
(6) Such other findings and provisions as are appropriate for
each order.
(d) The operator designated in such order shall be responsible
for drilling, completing, equipping, operating, plugging and
abandoning the well, shall market all production therefrom, shall collect all proceeds therefor, and shall distribute such proceeds
in accordance with the division order issued by the review board.
(e) Upon issuance of the pooling order, the coalbed methane
owners or any lessee of any such owners or any claimants thereto
may make one of the following elections within thirty days after
issuance of the order:
(1) An election to sell or lease its interest to the operator
on such terms as the parties may agree, or if unable to agree, upon
such terms as are set forth by the board in its order;
(2) An election to become a working interest owner by
participating in the risk and cost of the well; or
(3) An election to participate in the operation of the well as
a carried interest owner.
Any entity which does not make an election within said thirty
days prescribed herein shall be deemed to have elected to sell or
lease under election (1) above,
and the well operator shall not be
liable to such entity for damages for trespass, conversion, waste
or otherwise in connection with such coalbed methane well.
(f) The working interest in the well shall include (i) the
right to participate in decisions regarding expenditures in excess
of operating costs, taxes, any royalties in excess of one eighth,
and other costs and expenses allowed in the pooling order and (ii)
the obligation to pay for all expenditures. The working interest
shall exist in (i) all
well operators and owners who participate in the risk and cost of drilling and completing the well and (ii)
carried interest owners after recoupment provided in subsection (h)
of this section. The working interest owners' net revenue share
shall be seven eighths of the proceeds of sales of coalbed methane
at the wellhead after deduction of operating costs, taxes, any
royalties in excess of one eighth, and other costs and expenses
allowed in a pooling order. Unless the working interest owners
otherwise agree, the working interest owners shall share in all
costs and decisions in proportion to their ownership interest in
the unit. If any working interest owner deposits or contributes
amounts in the escrow account which exceed actual costs, such owner
shall be entitled to a refund; and if amounts deposited or
contributed are less than actual costs, such owner shall make a
deposit or contribution for the deficiency.
(g) The royalty interest in a well shall include the right to
receive one eighth of the gross proceeds resulting from the sale of
methane at the wellhead and such interest shall exist in the
coalbed methane owners:
Provided, That any coalbed methane owner
who in good faith has entered a lease or other contract prior to
receiving notice of an application to form the drilling unit as
provided herein, shall be entitled to such owner's fractional
interest in the royalty calculated at a rate provided for in such
contract. Each such owner shall be entitled to share in the
royalty in proportion to his or her fractional interest in the unit.
(h) Where a coalbed methane owner elects to become a carried
interest owner, such owner shall be entitled to his or her
proportionate share of the working interest after the other working
interest owners have recouped three hundred percent of the
reasonable capital costs of the well or wells, including drilling,
completing, equipping, plugging and abandoning and any further
costs of reworking or other improvements of a capital nature.
(i) Each pooling order issued shall provide for the
establishment of an escrow account into which the payment of costs
and proceeds attributable to any conflicting interests shall be
deposited and held for the interest of the claimants as follows:
(1) Each participating working interest owner, except for the
operator, shall deposit in the escrow account its proportionate
share of the costs allocable to the ownership interest claimed by
such working interest owner.
(2) The operator shall deposit in the escrow account all
proceeds attributable to the conflicting interests of any coalbed
methane owners who lease, or are deemed to have leased, their
interest, plus all proceeds in excess of operational expenses, as
allowed in the pooling order, attributable to the conflicting
working and carried interest owners.
(j) After each coalbed methane owner has made, or has been
deemed to have made, an election under subsection (e) of this section, the review board shall enter a division order which shall
set out the net revenue interest of each working interest owner,
including each carried interest owner and the royalty interest of
each coalbed methane owner. Thereafter payments shall be made to
working interest owners, carried interest owners and royalty
interest owners in accordance with the division order, except that
payments attributable to conflicting claims shall be deposited in
the escrow account. The fractional interest of each owner shall be
expressed as a decimal carried to the sixth place.
(k) Upon resolution of conflicting claims either by voluntary
agreement of the parties or a final judicial determination, the
review board shall enter a revised division order in accordance
with such agreement or determination and all amounts in escrow
shall be distributed as follows:
(1) Each legally entitled working interest owner shall receive
its proportionate share of the proceeds attributable to the
conflicting ownership interests;
(2) Each legally entitled carried interest owner shall receive
its proportionate share of the proceeds attributable to the
conflicting ownership interests, after recoupment of amounts
provided in subsection (h) of this section;
(3) Each legally entitled entity leasing, or deemed to have
leased, its coalbed methane shall receive a share of the royalty
proceeds attributable to the conflicting interests; and
(4) The operator shall receive the costs contributed to the
escrow account by each legally entitled participating working
interest owner.
(l) The review board shall enact rules for the administration
and protection of funds delivered to escrow accounts.
(m) No provision of this section or article shall obviate the
requirement that the coal owner's consent and agreement be obtained
prior to the issuance of a permit as required under section seven
of this article.
NOTE: The purpose of this bill is to make certain
clarifications in the current law providing for and governing
coalbed methane in order to facilitate greater production of
coalbed methane gas and the role of coalbed methane gas in West
Virginia's economy.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added.