H. B. 2681
(By Delegates Davis, Fantasia, Kuhn, Flanigan, Heck
Willison and Azinger)
(Originating in the Committee on Government Organization)
[March 21, 1997]
A BILL to amend and reenact sections two, four and thirteen,
article nine, chapter twenty-two-c of the code of West
Virginia, one thousand nine hundred thirty-one, as amended,
relating to terminating the oil and gas conservation
commission; continuing certain functions relating to oil and
gas resource conservation under the oil and gas conservation
commissioner; and providing that the chief of the office of
oil and gas serve as commissioner.
Be it enacted by the Legislature of West Virginia:
That sections two, four and thirteen, article nine, chapter
twenty-two-c of the code of West Virginia, one thousand nine
hundred thirty-one, as amended, be amended an reenacted to read
as follows:
ARTICLE 9. OIL AND GAS CONSERVATION.
§22C-9-2. Definitions.
(a) Unless the context in which used clearly requires a
different meaning, as used in this article:
(1) "Commission" means the oil and gas conservation commission and "Commissioner" means the oil and gas conservation
commissioner as provided for in section four of this article;
(2) "Director" means the director of the division of
environmental protection or such other person to whom the
director has delegated authority or duties pursuant to sections
six or eight, article one, chapter twenty-two of this code;
(3) "Person" means any natural person, corporation,
partnership, receiver, trustee, executor, administrator,
guardian, fiduciary or other representative of any kind, and
includes any government or any political subdivision or any
agency thereof;
(4) "Operator" means any owner of the right to develop,
operate and produce oil and gas from a pool and to appropriate
the oil and gas produced therefrom, either for such person or for
such person and others; in the event that there is no oil and gas
lease in existence with respect to the tract in question, the
owner of the oil and gas rights therein shall be considered as
"operator" to the extent of seven eighths of the oil and gas in
that portion of the pool underlying the tract owned by such
owner, and as "royalty owner" as to one-eighth interest in such
oil and gas; and in the event the oil is owned separately from
the gas, the owner of the substance being produced or sought to
be produced from the pool shall be considered as "operator" as
to such pool;
(5) "Royalty owner" means any owner of oil and gas in place,
or oil and gas rights, to the extent that such owner is not an operator as defined in subdivision (4) of this section;
(6) "Independent producer" means a person who is actively
engaged in the production of oil and gas in West Virginia, but
whose gross revenue from such production in West Virginia does
not exceed five hundred thousand dollars per year;
(7) "Oil" means natural crude oil or petroleum and other
hydrocarbons, regardless of gravity, which are produced at the
well in liquid form by ordinary production methods and which are
not the result of condensation of gas after it leaves the
underground reservoir;
(8) "Gas" means all natural gas and all other fluid
hydrocarbons not defined as oil in subdivision (7) of this
section;
(9) "Pool" means an underground accumulation of petroleum in
a single and separate natural reservoir (ordinarily a porous
sandstone or limestone). It is characterized by a single
natural-pressure system so that production of petroleum from one
part of the pool affects the reservoir pressure throughout its
extent. A pool is bounded by geologic barriers in all
directions, such as geologic structural conditions, impermeable
strata, and water in the formations, so that it is effectively
separated from any other pools that may be presented in the same
district or on the same geologic structure;
(10) "Well" means any shaft or hole sunk, drilled, bored or
dug into the earth or underground strata for the extraction of
oil or gas;
(11) "Shallow well" means any well drilled and completed in
a formation above the top of the uppermost member of the
"Onondaga Group":
Provided,
That in drilling a shallow well the
operator may penetrate into the "Onondaga Group" to a reasonable
depth, not in excess of twenty feet, in order to allow for
logging and completion operations, but in no event may the
"Onondaga Group" formation be otherwise produced, perforated or
stimulated in any manner;
(12) "Deep well" means any well, other than a shallow well,
drilled and completed in a formation at or below the top of the
uppermost member of the "Onondaga Group";
(13) "Drilling unit" means the acreage on which one well may
be drilled;
(14) "Waste" means and includes: (A) Physical waste, as
that term is generally understood in the oil and gas industry;
(B) the locating, drilling, equipping, operating or producing of
any oil or gas well in a manner that causes, or tends to cause,
a reduction in the quantity of oil or gas ultimately recoverable
from a pool under prudent and proper operations, or that causes
or tends to cause unnecessary or excessive surface loss of oil or
gas; or (C) the drilling of more deep wells than are reasonably
required to recover efficiently and economically the maximum
amount of oil and gas from a pool. Waste does not include gas
vented or released from any mine areas as defined in section two,
article one, chapter twenty-two-a of this code or from adjacent
coal seams which are the subject of a current permit issued under article two of chapter twenty-two-a of this code:
Provided,
That
nothing in this exclusion is intended to address ownership of the
gas;
(15) "Correlative rights" means the reasonable opportunity
of each person entitled thereto to recover and receive without
waste the oil and gas in and under his tract or tracts, or the
equivalent thereof; and
(16) "Just and equitable share of production" means, as to
each person, an amount of oil or gas or both substantially equal
to the amount of recoverable oil and gas in that part of a pool
underlying such person's tract or tracts.
(b) Unless the context clearly indicates otherwise, the use
of the word "and" and the word "or" shall be interchangeable, as,
for example, "oil and gas" shall mean oil or gas or both.
§22C-9-4. Oil and gas conservation commissioner; appointment and
qualifications; general powers and duties.
(a) There is hereby continued as provided for in subsection
(h) of this section, the "Oil and Gas Conservation Commission"
which shall be composed of five members. The director of the
division 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. 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 full-time employment in an activity under the jurisdiction of the public service commission or the
federal energy regulatory commission. As soon as practical after
appointment of the members of the commission, the governor shall
call a meeting of the commission to be convened at the state
capitol for the purpose of organizing and electing a chair.
(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 sixty 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.
(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.
Notification of each meeting shall be given in writing to each
member by the chair at least five days in advance of the meeting.
Any three members, one of which may be the chair constitute a
quorum for the transaction of any business as herein provided
for. A majority of the commission is required to determine any
issue brought before it.
(d) The board 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 shall appoint the oil and gas
conservation commissioner and advise the commissioner regarding
the duties and authority under this article and consult with the
commissioner prior to his or her reaching any final decisions and
entering orders hereunder. However, the commissioner has full
and final authority under this article with the commission
serving in an advisory capacity to the commissioner. The office
of oil and gas commissioner within the division of environmental
protection is hereby continued. The commissioner chief of the
office of oil and gas, who 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,
shall serve in the capacity of oil and gas conservation
commissioner without extra compensation.
(f)(b) The oil and gas commissioner is hereby empowered and
it is the commissioner'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 section
three of this article, the commissioner has jurisdiction and
authority over all persons and property necessary therefor. The
commissioner is authorized to make such investigation of records
and facilities as the commissioner deems proper. In the event of
a conflict between the duty to prevent waste and the duty to
protect correlative rights, the commissioner's duty to prevent
waste shall be paramount. The commissioner shall serve as
secretary of the oil and gas conservation commission.
(g)(c) Without limiting the commissioner's general
authority, the commissioner shall have specific authority to:
(1) Regulate the spacing of deep wells;
(2) Make and enforce reasonable rules and orders reasonably
necessary to prevent waste, protect correlative rights, govern
the practice and procedure before the commissioner and otherwise
administer the provisions of this article;
(3) Issue subpoenas for the attendance of witnesses and
subpoenas duces tecum for the production of any books, records,
maps, charts, diagrams and other pertinent documents, and
administer oaths and affirmations to such witnesses, whenever, in the judgment of the commissioner, it is necessary to do so
for the effective discharge of the commissioner's duties under
the provisions of this article; and
(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 division of environmental protection and
to any other agency of state government having responsibility
related to the oil and gas industry.
(h) After having conducted a preliminary performance audit
through its joint committee on government operations, pursuant to
article ten, chapter four of this code, the Legislature hereby
finds and declares that the oil and gas conservation commission
should be continued and reestablished. Accordingly, pursuant to
the provisions of section five of said article, the oil and gas
conservation commission shall continue to exist until the first
day of July, one thousand nine hundred ninety-seven.
Owners of leases on oil and gas for the exploration,
development or production of oil or natural gas shall pay to the
commission commissioner a special oil and gas conservation tax of
three cents for each acre under lease, excluding from the tax the
first twenty-five thousand acres. The commission commissioner
shall deposit with the treasurer of the state of West Virginia,
to the credit of the special oil and gas conservation fund, all
taxes collected hereunder. The special oil and gas conservation
fund shall be a special fund and shall be administered by the commission commissioner
for the sole purpose of carrying out all
costs necessary to carry out the provisions of this article.
This tax shall be paid as provided herein annually on or before
the first day of July, one thousand nine hundred seventy-two, and
on or before the first day of July in each succeeding year.
NOTE: The purpose of this bill is to terminate the oil and
gas conservation commission and to continue functions related to
oil and gas conservation under the oil and gas conservation
commissioner. The 1996 preliminary performance review disclosed
that the commission was ineffective because of low attendance.
Strike-throughs indicate language that would be stricken
from the present law, and underscoring indicates new language
that would be added.
This bill is recommended for passage during the 1997 Regular
Session of the Legislature by the Joint Committee on Government
Operations.