SB424 H JUD AM #1 3-9

The Committee on the Judiciary moves to amend the bill on page four, following the enacting clause, by striking out the remainder of the bill, and inserting in lieu thereof, the following language:

That §22C-7-1, §22C-7-2 and §22C-7-3 of the Code of West Virginia, 1931, as amended, be repealed; that §22-6-1,§22-6-2, §22-6-8, §22-6-9 and §22-6-36 of said code be amended and reenacted; that said code be amended by adding thereto a new article, designated §22-6A-1,§22-6A-2, §22-6A-3, §22-6A-4, §22-6A-5, §22-6A-6, §22-6A-7, §22-6A-8, §22-6A-9, §22-6A-10, §22-6A-11,§22-6A-12, §22-6A-13 and §22-6A-14; and that §22-7-3 of said code be amended and reenacted, all to read as follows:

ARTICLE 6. OFFICE OF OIL AND GAS; OIL AND GAS WELLS; ADMINISTRATION; ENFORCEMENT.

§22-6-1. Definitions.

Unless the context in which used clearly requires a different meaning, as used in this article and article six-a of this chapter:

(a) “Casing” means a string or strings of pipe commonly placed in wells drilled for natural gas or petroleum or both;

(b) “Cement” means hydraulic cement properly mixed with water;

(c) “Chair” means the chair of the West Virginia Shallow Gas Well Review Board as provided for in section four, article eight, chapter twenty-two-c of this code;

(d) “Coal operator” means any person or persons, firm, partnership, partnership association or corporation that proposes to or does operate a coal mine;

(e) “Coal seam” and “workable coal bed” are interchangeable terms and mean any seam of coal twenty inches or more in thickness, unless a seam of less thickness is being commercially worked, or can in the judgment of the department foreseeably be commercially worked and will require protection if wells are drilled through it;

(f) “Director” means the director of the Division of Environmental Protection as established in article one of this chapter or such other person to whom the director has delegated authority or duties pursuant to sections six or eight, article one of this chapter;

(g) “Deep well” means any well other than a shallow well or coalbed methane well, drilled and completed in to a formation at or below the top of the uppermost member of the “Onondaga Group;”

(h) “Expanding cement” means any cement approved by the office of oil and gas which expands during the hardening process, including, but not limited to, regular oil field cements with the proper additives;

(i) “Facility” means any facility utilized in the oil and gas industry in this state and including but not limited to thosespecifically named or referred to in this article or in article six-a, eight, or nine, ten or twenty-one of this chapter, other than a well or well site;

(j) “Gas” means all natural gas and all other fluid hydrocarbons not defined as oil in this section;

(k) “Occupied dwelling” means any building that is currently being used on a regular or periodic basis for human habitation;

(k) “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 reservoirs;

(l) “Owner” when used with reference to any well, shall include any person or persons, firm, partnership, partnership association or corporation that owns, manages, operates, controls or possesses such well as principal, or as lessee or contractor, employee or agent of such principal;

(m) “Owner” when used with reference to any coal seam, shall include any person or persons who own, lease or operate such coal seam;

(n) “Person” means any natural person, corporation, firm, partnership, partnership association, venture, receiver, trustee, executor, administrator, guardian, fiduciary or other representative of any kind, and includes any government or any political subdivision or any agency thereof;

(o) “Pollutant” shall have the same meaning as provided in subsection (17), section three, article eleven, chapter twenty-two of this code;

(o) (p) “Plat” means a map, drawing or print showing the location of a well or wells as herein defined;

(p) (q) “Review board” means the West Virginia Shallow Gas Well Review Board as provided for in section four, article eight, chapter twenty-two-c of this code;

(q) (r) “Safe mining through of a well” means the mining of coal in a workable coal bed up to a well which penetrates such workable coal bed and through such well so that the casing or plug in the well bore where the well penetrates the workable coal bed is severed;

(s) “Secretary” means the Cabinet Secretary of the Department of Environmental Protection as established in article one of this chapter or such other person to whom the secretary has delegated authority or duties pursuant to sections six or eight, article one of this chapter;

(r)(t) “Shallow well” means any gas well, other than a coalbed methane well, drilled no deeper than one hundred feet below the top of the “Onondaga Group” and completed in a formation above the top of the uppermost member of the “Onondaga Group”: 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 100 feet, in order to allow for logging and completion operations, but in drilling a shallow well the operator may penetrate into the “Onondaga Group” to a reasonable depth, not in excess of 100 feet, in order to allow for logging and completion operations, but in no event may the “Onondaga Group” formation or any formation below the “Onondaga Group” be otherwise produced, perforated or stimulated in any manner;

(s)(u) “Stimulate” means any action taken by a well operator to increase the inherent productivity of an oil or gas well, including, but not limited to, fracturing, shooting or acidizing, but excluding cleaning out, bailing or work over operations;

(t)(r) “Waste” means: (i) Physical waste, as the term is generally understood in the oil and gas industry; (ii) the locating, drilling, equipping, operating or producing of any oil or gas well in a manner that causes, or tends to cause a substantial reduction in the quantity of oil and gas ultimately recoverable from a pool under prudent and proper operations, or that causes or tends to cause a substantial or unnecessary or excessive surface loss of oil or gas; or (iii) 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; (iv) substantially inefficient, excessive or improper use, or the substantially unnecessary dissipation of, reservoir energy, it being understood that nothing in this chapter shall be construed to authorize any agency of the state to impose mandatory spacing of shallow wells except for the provisions of section eight, article nine, chapter twenty-two-c of this code and the provisions of article eight, chapter twenty-two-c of this code; (v) inefficient storing of oil or gas: Provided, That storage in accordance with a certificate of public convenience issued by the Federal Energy Regulatory Commission shall be conclusively presumed to be efficient; and (vi) other underground or surface waste in the production or storage of oil, gas or condensate, however caused. 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, however, That nothing in this exclusion is intended to address ownership of the gas;

(s) “Waters of the state” Shall have the same meaning as the term “waters” as provided in subsection (23), section three, article eleven, chapter twenty-two of this code;

(u)(t) “Well” means any shaft or hole sunk, drilled, bored or dug into the earth or into underground strata for the extraction or injection or placement of any liquid or gas, or any shaft or hole sunk or used in conjunction with such extraction or injection or placement. The term “well” does not include any shaft or hole sunk, drilled, bored or dug into the earth for the sole purpose of core drilling or pumping or extracting therefrom potable, fresh or usable water for household, domestic, industrial, agricultural or public use;

(v)(u) “Well work” means the drilling, redrilling, deepening, stimulating, pressuring by injection of any fluid, converting from one type of well to another, combining or physically changing to allow the migration of fluid from one formation to another or plugging or replugging of any well; and

(w)(v) “Well operator” or “operator” means any person or persons, firm, partnership, partnership association or corporation that proposes to or does locate, drill, operate or abandon any well as herein defined.

(x) “Pollutant shall have the same meaning as provided in subsection (17), section three, article eleven, chapter twenty-two of this code; and

(y) “Waters of this state” shall have the same meaning as the term “waters” as provided in subsection (23), section three, §22-6-2. Secretary -- Powers and duties generally; department records open to public; inspectors.

(a) The Secretary shall have as his or her duty the supervision of the execution and enforcement of matters related to oil and gas set out in this article and in articles eight and nine of this chapter.

(b) The Secretary is authorized to propose rules for legislative approval in accordance with the provisions of article three, chapter twenty-nine-a of this code necessary to effectuate the above stated purposes.

(c) The Secretary shall have full charge of the oil and gas matters set out in this article and in articles eight and nine of this chapter. In addition to all other powers and duties conferred upon him or her, the Secretary shall have the power and duty to:

(1) Supervise and direct the activities of the office of oil and gas and see that the purposes set forth in subsections (a) and (b) of this section are carried out;

(2) Employ a supervising oil and gas inspector and oil and gas inspectors Determine the number of supervising oil and gas inspectors and oil and gas inspectors needed to carry out the purposes of this article and articles eight, nine, ten, and twenty-one of this chapter and appoint them as such. All appointees shall be qualified civil service employees, but no person is eligible for appointment until he or she has served in a probationary status for a period of six months to the satisfaction of the secretary;

(3) Supervise and direct such oil and gas inspectors and supervising inspector in the performance of their duties;

(4) Suspend for good cause any oil and gas inspector or supervising inspector without compensation for a period not exceeding thirty days in any calendar year Make investigations or inspections necessary to ensure complete compliance with the provisions of this code and enforce the provisions of this article and articles eight, nine, ten, and twenty-one of this chapter;

(5) Prepare report forms to be used by oil and gas inspectors or the supervising inspector in making their findings, orders and notices, upon inspections made in accordance with this article and articles seven, six-a, eight, nine and ten, and eleven of this chapter;

(6) Employ a hearing officer and such clerks, stenographers and other employees, as may be necessary to carry out his or her duties and the purposes of the office of oil and gas and fix their compensation;

(7) Hear and determine applications made by owners, well operators and coal operators for the annulment or revision of orders made by oil and gas inspectors or the supervising inspector, and to make inspections, in accordance with the provisions of this article and articles eight and nine of this chapter;

(8) Cause a properly indexed permanent and public record to be kept of all inspections made by the Secretary or by oil and gas inspectors or the supervising inspector;

(9) Conduct such research and studies as the Secretary shall deem necessary to aid in protecting the health and safety of persons employed within or at potential or existing oil or gas production fields within this state, to improve drilling and production methods and to provide for the more efficient protection and preservation of oil and gas-bearing rock strata and property used in connection therewith;

(10) Collect a permit fee of four hundred dollars for each permit application filed other than an application for a deep well or a coalbed methane well; and collect a permit fee of six hundred fifty dollars for each permit application filed for a deep well: Provided, That no permit application fee shall be required when an application is submitted solely for the plugging or replugging of a well, or to modify an existing application for which the operator previously has submitted a permit fee under this section. All application fees required hereunder shall be in lieu of and not in addition to any fees imposed under article eleven of this chapter relating to discharges of stormwater but shall be in addition to any other fees required by the provisions of this article: Provided, however, That upon a final determination by the United States Environmental Protection Agency regarding the scope of the exemption under section 402(l)(2) of the federal Clean Water Act (33 U.S.C. 1342(l)(2)), which determination requires a “national pollutant discharge elimination system” permit for stormwater discharges from the oil and gas operations described therein, any permit fees for stormwater permits required under article eleven of this chapter for such operations shall not exceed one hundred dollars.

(11) Perform all other duties which are expressly imposed upon the Secretary by the provisions of this chapter;

(12) Perform all duties as the permit issuing authority for the state in all matters pertaining to the exploration, development, production, storage and recovery of this state's oil and gas;

(13) Adopt rules with respect to the issuance, denial, retention, suspension or revocation of permits, authorizations and requirements of this chapter, which rules shall assure that the rules, permits and authorizations issued by the Secretary are adequate to satisfy the purposes of this article and articles six-a, seven, eight, nine, and ten and twenty-one of this chapter particularly with respect to the consolidation of the various state and federal programs which place permitting requirements on the exploration, development, production, storage and recovery of this state's oil and gas: Provided, That notwithstanding any provisions of this article and articles seven, eight, nine and ten of this chapter to the contrary, the environmental quality board shall have the sole authority pursuant to section three, article three, chapter twenty-two-b to promulgate rules setting standards of water quality applicable to waters of the state; and

(14) Perform such acts as may be necessary or appropriate to secure to this state the benefits of federal legislation establishing programs relating to the exploration, development, production, storage and recovery of this state's oil and gas, which programs are assumable by the state.

(d) The Secretary shall have authority to visit and inspect any well or well site and any other oil or gas facility in this state and may call for the assistance of any oil and gas inspector or inspectors or supervising inspector whenever such assistance is necessary in the inspection of any such well or well site or any other oil or gas facility. Similarly, all oil and gas inspectors and the supervising inspector shall have authority to visit and inspect any well or well site and any other oil or gas facility in this state. They shall make all necessary surveys and inspections of oil and gas operations required by this article and articles six-a, eight, nine, ten, and twenty-one of this chapter; administer and enforce all oil and gas laws and rules; and perform other duties and services as may be prescribed by the secretary. Inspectors shall give particular attention to all conditions of each permit to ensure complete compliance therewith. They shall note and describe all violations of this article and articles eight, nine, ten, or twenty-one of this chapter and immediately report those violations to the secretary in writing, furnishing at the same time a copy of the report to the operator concerned. Any well operator, coal operator operating coal seams beneath the tract of land, or the coal seam owner or lessee, if any, if said owner or lessee is not yet operating said coal seams beneath said tract of land may request the Secretary to have an immediate inspection made. The operator or owner of every well or well site or any other oil or gas facility shall cooperate with the Secretary, all oil and gas inspectors and the supervising inspector in making inspections or obtaining information.

(e) Oil and gas inspectors shall devote their full time and undivided attention to the performance of their duties, and they shall be responsible for the inspection of all wells or well sites or other oil or gas facilities in their respective districts as often as may be required in the performance of their duties.

(f) (e) All records of the office shall be open to the public.

§22-6-8. Permits not to be on flat well royalty leases; legislative findings and declarations; permit requirements.

(a) The Legislature hereby finds and declares:

(1) That a significant portion of the oil and gas underlying this state is subject to development pursuant to leases or other continuing contractual agreements wherein the owners of such the oil and gas are paid upon a royalty or rental basis known in the industry as the annual flat well royalty basis, in which the royalty is based solely on the existence of a producing well, and thus is not inherently related to the volume of the oil and gas produced or marketed;

(2) That continued exploitation of the natural resources of this state in exchange for such wholly inadequate compensation is unfair, oppressive, works an unjust hardship on the owners of the oil and gas in place, and unreasonably deprives the economy of the State of West Virginia of the just benefit of the natural wealth of this state;

(3) That a great portion, if not all, of such leases or other continuing contracts based upon or calling for an annual flat well royalty have been in existence for a great many years and were entered into at a time when the techniques by which oil and gas are currently extracted, produced or marketed were not known or contemplated by the parties, nor was it contemplated by the parties that oil and gas would be recovered or extracted or produced or marketed from the depths and horizons currently being developed by the well operators;

(4) That while being fully cognizant that the provisions of section 10, article I of the United States Constitution and of section 4, article III of the Constitution of West Virginia, proscribe the enactment of any law impairing the obligation of a contract, the Legislature further finds that it is a valid exercise of the police powers of this state and in the interest of the State of West Virginia and in furtherance of the welfare of its citizens, to discourage as far as Constitutionally possible the production and marketing of oil and gas located in this state under the type of leases or other continuing contracts described above.

(b) In the light of the foregoing findings, the Legislature hereby declares that it is the policy of this state, to the extent possible, to prevent the extraction, production or marketing of oil or gas under a lease or leases or other continuing contract or contracts providing a flat well royalty or any similar provisions for compensation to the owner of the oil and gas in place, which is not inherently related to the volume of oil or gas produced or marketed, and toward these ends, the Legislature further declares that it is the obligation of this state to prohibit the issuance of any permit required by it for the development of oil or gas where the right to develop, extract, produce or market the same is based upon such flat well royalty leases or other continuing contractual agreements.

(c) Any lease or other continuing contract purporting to convey an interest in the extraction, production or marketing of oil or gas for a sum of money or for any other good and valuable consideration shall contain in bold face type of a font size not less than 16 points above the signature line the following warning language: “This is a binding contract. Before signing this contract, consult with an attorney of your choice to ensure the protection of your rights and interests.

By placing our initials at the end of this paragraph we, the lessors, acknowledge we have read and understood this paragraph: ________ (initials of lessors).”

(c)(d)In addition to any requirements contained in this article with respect to the issuance of any permit required for the drilling, redrilling, deepening, fracturing, stimulating, pressuring, converting, combining or physically changing to allow the migration of fluid from one formation to another, no such permit shall be hereafter issued unless the lease or leases or other continuing contract or contracts by which the right to extract, produce or market the oil or gas is filed with the permit application. for such permit. In lieu of filing the lease or leases or other continuing contract or contracts, the applicant for a permit described herein may file the following:

(1) A brief description of the tract of land including the district and county wherein the tract is located;

(2) The identification of all parties to all leases or other continuing contractual agreements by which the right to extract, produce or market the oil or gas is claimed;

(3) The book and page number wherein each such lease or contract by which the right to extract, produce or market the oil or gas is recorded; and

(4) A brief description of the royalty provisions of each such lease or contract.

(d) (e)Unless the provisions of subsection (e) are met, no such permit shall be hereafter issued after this article takes effect for the drilling of a new oil or gas well or for the redrilling, deepening, fracturing, stimulating, pressuring, converting, combining or physically changing to allow the migration of fluid from one formation to another, of an existing oil or gas production well, where or if the right to extract, produce or market the oil or gas is based upon a lease or leases or other continuing contract or contracts providing for flat well royalty or any similar provision for compensation to the owner of the oil or gas in place which is not inherently related to the volume of oil and gas so extracted, produced and marketed.

(e)(f) To avoid the permit prohibition of subsection (d), the applicant may file with such the application an affidavit which certifies that the affiant is authorized by the owner of the working interest in the well to state that it shall tender to the owner of the oil or gas in place not less than one-eighth of the total amount paid to or received by or allowed to the owner of the working interest at the wellhead for the oil or gas so extracted, produced or marketed before deducting the amount to be paid to or set aside for the owner of the oil or gas in place, on all such oil or gas to be extracted, produced or marketed from the well. If such that affidavit be is filed with such the application, then such the application for permit shall be treated as if such the lease or leases or other continuing contract or contracts comply with the provisions of this section.

(f) (g) The owner of the oil or gas in place shall have a cause of action to enforce the owner's rights established by this section.

(g)(h) The provisions of this section shall not affect or apply to any lease or leases or other continuing contract or contracts for the underground storage of gas or any well utilized in connection therewith or otherwise subject to the provisions of article nine of this chapter.

(h) (i) The director secretary shall enforce this requirement irrespective regardless of when the lease or other continuing contract was executed.

(i)(j) The provisions of this section shall not adversely affect any rights to free gas.

§22-6-9. Notice to property owners.

(a) At least 30 days before entering upon the surface land for surveying or staking for either proposed access routes on drill sites, new well work or roads or other work requiring disturbance of the surface that has not been disturbed before by the operator of the gas well, an operator shall provide notice of the fact that the operator is entering the surface land and of the general purposes for such entry. The 30 days begins to run from the surface owner’s actual receipt of the notice or refusal to accept the notice. The 30 days notice before entry may be waived by a surface owner in writing.

(b) The notice shall include:

(1) The name, mailing address and physical address of the operator, and a land line telephone number if one exists, a cell phone number if one exists, and an e-mail address or other electronic contact information if any exist for the actual person or persons who may come onto the land representing the operator, the person with authority to make decisions regarding the access road, well site and pipelines, and their supervisors;

(2) The anticipated, approximate dates and times of entry onto the surface land;

(3) A document referencing this article and other statutes and rules regarding the surface owner’s rights to notice of, and to comment upon, the well work permit, the soil erosion and sediment control manual of the office, the oil and gas production damages compensation act; and

(4) An offer to meet with the surface owner at an mutually agreed location. The offer to meet shall be to meet prior to or at the time of the first entry.

(c) At the meeting the operator shall point out and explain his or her preference for locations of well sites, impoundments, access roads and pipeline proposed to be located on the surface, consider owner’s suggestions for alternate locations, and if the surface owner’s suggestion cannot be used, the operator shall make a record of the reasons these suggestions cannot be used.

(a) (d) No later than the filing date of the application, the applicant for a permit for any well work or for a certificate of approval for the construction of an impoundment shall deliver, by personal service or by certified mail, return receipt requested registered or certified mail or by any method of delivery that requires a receipt or signature confirmation, copies of the application, well plat, and erosion and sediment control plan required by section six three of this article to each of the following persons:

(1) The owners of record of the surface of the tract on which the well is or is proposed to be located; and

(2) The owners of record of the surface tract or tracts overlying the oil and gas leasehold being developed by the proposed well work, if such the surface tract is to be utilized for roads or other land disturbance as described in the erosion and sediment control plan submitted pursuant to section six three of this article;

(3) The owners of record of the surface tract or tracts overlying the oil and gas leasehold being developed by the proposed well work, if the surface tract is to be utilized for the placement, construction, enlargement, alteration, repair, removal or abandonment of any impoundment as described in section five of this article; and

(4) The operator of any storage reservoir within which the proposed well work activity is to take place.

(b) (e) If more than three tenants in common or other coowners of interests described in subsection (a) (d) of this section hold interests in such the lands, the applicant may serve the documents required upon the person described in the records of the sheriff required to be maintained pursuant to section eight, article one, chapter eleven-a of this code, or publish in the county in which the well is located or is proposed to be located 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 director secretary shall prescribe by rule, with the first publication date being at least ten days prior to the filing of the permit application: Provided, That all owners occupying the tracts where the well work is or is proposed to be located at on the filing date of the permit application shall receive actual service of the documents required by subsection (a) of this section.

(c) (f) Materials served upon persons described in subsections (a) (e) and (b) (f) of this section shall contain a statement of the methods and time limits for filing comments, who may file comments, and the name and address of the director secretary for the purpose of filing comments and obtaining additional information, and a statement that such those persons may request, at the time of submitting comments, notice of the permit decision and a list of persons qualified to test water as provided in this section.

(d) (g) Any person entitled to submit comments shall also be entitled to receive a copy of the permit as issued or a copy of the order modifying or denying the permit if such that person requests the receipt thereof of them as a part of the his or her comments concerning said the permit application.

(e) (h) Persons entitled to notice may contact the district office of the division department to ascertain the names and locations of water testing laboratories in the subject area capable and qualified to test water supplies in accordance with standard accepted methods. In compiling such that list of names the division department shall consult with the state Bureau of Public Health and local health departments.

§22-6-36. Notice by owners of lessees of coal seams.

For purposes of notification under this article, any owner or lessee of coal seams shall file a declaration of the owner's or lessee's interest in such coal seams with the clerk of the county commission in the county where such coal seams are located. Said clerk shall file and index such declaration in accordance with section two, article one, chapter thirty-nine of this code, and shall index the name of the owner or lessee of such coal seams in the grantor index of the record maintained for the indexing of leases.

The declaration shall entitle such owner or lessee to the notices provided in sections twelve, thirteen, fourteen and twenty-three of this article: Provided, That the declaring owner shall be the record owner of the coal seam, and the declaring lessee shall be the record lessee with the owner's or lessee's source or sources of title recorded prior to recording such lessee's declaration.

The declaration shall be acknowledged by such owner or lessee, and in the case of a lessee, may be a part of the coal lease under which the lessee claims. Such declaration may be in the following language:

"DECLARATION OF OIL AND GAS NOTICE"

"The undersigned hereby declares:

(1) The undersigned is the ('owner' or 'lessee') of one or more coal seams or workable coal beds as those terms are defined in section one of this article.

(2) The coal seam(s) or workable coal bed(s) owned or leased partly or wholly by the undersigned lie(s) under the surface of lands described as follows:

(Here insert a description legally adequate for a deed, whether by metes and bounds or other locational description, or by title references such as a book and page legally sufficient to stand in lieu of a locational description.)

(3) The undersigned desires to be given all notices of oil and gas operations provided by sections twelve, thirteen, fourteen and twenty-three of this article, addressed as follows:

(Here insert the name and mailing address of the undersigned owner or lessee.)

_______________________________

(Signature)

(Here insert an acknowledgment legally adequate for a deed)."

The benefits of the foregoing declaration shall be personal to the declaring owner or lessee, and not transferable or assignable in any way.

For purpose of notification under this article, any owner or lessee of coal seams may file a notice with the office of oil and gas that it has an interest in coal seams on a county by county basis. The notice shall be made available to the gas operator at the office of oil and gas and by the office of oil and gas on its web site. This notice entitles the coal owner or lessee to receive any permit application filed in the county in which it has filed notification with the office of oil and gas.

ARTICLE 6A. HORIZONTAL SHALLOW WELLS.

§22-6A-1. Applicability.

The provisions of this article apply to all horizontal shallow wells as defined in section one of article six of this chapter and are additional regulatory requirements for horizontal shallow wells in addition to the provisions of article six of this chapter and article eight of chapter twenty-two-c.

§22-6A-2. Purpose and legislative findings.

(a) Findings. The drilling, transportation and processing of the gas from wells using hydraulic fracturing and horizontal drilling will result in billions of dollars’ worth of gas being harvested, will require the investment of billions of dollars in West Virginia and will generate thousands of jobs. It is the policy of this state to ensure that natural resources are harvested in an environmentally sound manner and in a manner that benefits the people and the economy of the West Virginia through the hiring of fully trained, local workers for the drilling, transport and processing of this important natural resource.

(b) Purpose. The Legislature declares that the purpose of this article is to establish additional specialized regulatory requirements for the newly developed extraction techniques associated with horizontal gas well drilling, providing further requirements to address new industry practices relating to the construction and completion of these well developments. Unlike traditional oil and gas drilling activities, horizontal gas drilling in the Marcellus formation are concentrated on large drilling pads, use large volumes of water, exist for longer times and otherwise have an significantly larger impact on the surrounding area than traditional oil and gas drilling, creating impacts to local water resources, air and noise pollution associated with construction and operation of these well sites, and necessitating additional regulatory requirements. Therefore, the Legislature hereby enacts the Horizontal Oil and Gas Well Act to provide, in addition to general regulatory requirments this chapter otherwise applicable to these activities, a regulatory program to fully address the impacts of this newly developed drilling technology to our state.

§22-6A-3. Definitions.

(a) “Horizontal shallow well” means a shallow well that utilizes 210,000 or more gallons of water during the drilling process, is first drilled on a vertical or directional plane, but which is eventually curved to become horizontal (or near horizontal) in order to parallel a particular geologic formation. Multiple horizontal wells may be drilled from the same surface well pad. A horizontal shallow well may also have multiple horizontal side laterals drilled into the same formation.

(b) “Impoundment” means a man-made excavation or diked area for the retention of fresh water and into which no wastes of any kind are placed;

(c) “Pit” means a man-made excavation or diked area that contains or is intended to contain an accumulation of process waste fluids, drill cuttings or any other liquid substance that could impact surface or groundwater;

§22-6A-4. Compliance with other programs required.

(a) Prior to the issuance of any well work permit, the secretary shall also ascertain from the Executive Director of Workforce West Virginia and the Insurance Commissioner whether the applicant is in compliance with the provisions of section six-c, article two, chapter twenty-one-a of this code and section five, article two, chapter twenty-three of this code regarding any required subscription to the Unemployment Compensation Fund or to the Workers’ Compensation Fund, the payment of premiums and other charges to the fund, the timely filing of payroll reports and the maintenance of adequate deposits. If the applicant is delinquent or has defaulted, or has been terminated by the executive director or the Insurance Commissioner, the permit may not be issued until the applicant returns to compliance or is restored by the executive director or the Insurance Commissioner under a reinstatement agreement.

(b) After issuance of a well work permit, the operator must maintain continued compliance with the programs set forth in this section and provide proof of compliance to the secretary on a quarterly basis after permit issuance.

§22-6A-5. Department of Highways approval of well road access.

As part of the permit application, the operator shall provide a letter of certification from the department of highways that the operator has entered into an agreement and is in compliance with all laws, regulations and conditions required by the department of highways relating to posting bond, use, maintenance and repair of all state and county roads to be utilized for access to a well location, including, but not limited to, those roads used for the transportation of water, machinery or any other items or materials related to the construction and operation of the well. Upon notice that the operator is failing to comply with the letter of certification as required by this section, the secretary shall deem such violation as a violation of a permit condition for construction or operation of the well pursuant to this article.

§22-6A-6. Well location restrictions.

(a) Wells may not be drilled within 1000 feet measured horizontally from any existing occupied dwelling or existing water well without the written consent of the owner thereof. Where the distance restriction would deprive the owner of the oil and gas rights of the right to produce or share in the oil or gas underlying said surface tract, the well operator may be granted a variance from said distance restriction upon submission of a plan which shall identify the additional measures, facilities or practices to be employed during well site construction, drilling and operations. The variance, if granted, shall include such additional terms and conditions as the department shall require to insure the safety and protection of affected persons and property. The provisions may include insurance, bonding and indemnification, as well as technical requirements.

(b) No well site may be prepared or well drilled within 100 feet measured horizontally from any watercourse, natural or artificial lake, pond or reservoir or within 100 feet of the boundary of a wetland or the boundary that affects the functions and values of a wetland. However, no well may be drilled using hydraulic fracturing and horizontal drilling within 1,000 feet of a surface water or groundwater intake of a public water supply. The distance from the public water supply as identified by the department, shall be measured as follows:

(1) For a surface water intake on a lake or reservoir, the distance shall be measured from the boundary of the lake or reservoir.

(2) For a surface water intake on a flowing stream, the distance shall be measured from a semicircular radius extending upstream of the surface water intake.

(3) For a groundwater source, the distance shall be measured from the wellhead or spring.

The department may waive such distance restrictions upon submission of a plan which shall identify the additional measures, facilities or practices to be employed during well site construction, drilling and operations. Such waiver, if granted, shall impose such permit conditions as are necessary to protect the waters of the State.

(c) On making a determination on a well permit, the department shall consider and may deny or condition a well permit based on the impact of the proposed well on public resources to include, but not be limited to, the following:

(1) Publicly owned parks, forests, gamelands, recreational and wildlife areas.

(2) National or State scenic rivers.

(3) National natural landmarks.

(4) Habitats of rare and endangered flora and fauna and other critical communities.

(5) Historical and archaeological sites listed on the Federal or State list of historic places.

(6) Bodies of water and watercourses, including, but not limited to, wetlands, wild trout streams and wilderness trout streams.

(d) Prior to submitting a permit application to the department for a well or well site within a wild trout stream, High Quality or Exceptional Value watershed as indicated by the 12-digit Hydrologic Unit Code, the applicant shall consult with the West Virginia Division of Natural Resources.

(e) The department shall inspect each permitted well drilled in any formation using hydraulic fracturing or horizontal drilling, or both, during each phase of cementing, completing and altering. The permittee may not proceed to the next phase of the drilling operation until an inspection by the department has been performed. The department shall allocate an appropriate portion of the well permit fees to fund the inspection and may increase the permit fees to meet an increase in the inspection costs.

(f) Upon a written request by any landowner residing within 5,500 feet of a proposed gas well using hydraulic fracturing, the well permit applicant shall conduct a predrilling or prealteration survey, using a facility or laboratory certified by the department, and send a copy of the survey by certified mail to the requestor. A predrilling or prealteration survey shall provide at a minimum the testing results for chemicals or chemical compounds known to be commonly used for hydraulic fracturing including, but not limited to, the following: all major cations and anions, arsenic, benzene, toluene, ethylbenzene, xylenes, manganese, dissolved methane, total dissolved solids, chlorides, nutrients and radionuclides.

§22-6A-7. Hydraulic fracturing chemicals and surface impoundments.

(a) Each well operator shall file a report with the department for each well that is drilled using the hydraulic fracturing process within 30 days of completion of such well. The report shall include, without limitation, the complete list of the chemicals and chemical compounds used in the fracturing fluid products, specifying the Chemical Abstract Service registry number for each constituent chemical.

(b) In case of a medical emergency, the operator shall provide a list each constituent chemical and the formula to medical emergency personnel or local emergency personnel.

(c) The well operator shall keep a copy of the report at the well site during construction and produce it upon request by the department, local emergency personnel or surface landowners residing within 5,500 feet of the well.

§22-6A-8. Hydraulic fracture fluids monitoring.

For each individual hydraulic fracturing operation performed at a well site, the well operator shall maintain the data indicating the total volume of fracturing fluids used for the operation as well as the total volume of fluids that returned to the surface. The well operator shall compile the data and the necessary records to support the data, and submit it to the department.

§22-6A-9. Construction standards for pits and impoundments.

All of the requirements set forth in 35 CSR §4-21 shall apply to pits and impoundments used in connection with operations regulated by this article, regardless of the capacity of the pit or impoundment.

§22-6A-10. Water management plan requirements for gas wells using water resources for fracturing or stimulating gas production.

(a) Prior to drilling, fracturing or stimulating gas wells which use water obtained from withdrawals of water resources of the state, gas well operators shall submit to the secretary a water management plan containing the following information:

(1) The type of water source, such as surface, underground or groundwater, and county of each source to be used by the operation for water withdrawals, and the latitude and longitude of each anticipated withdrawal location;

(2) The anticipated volume of each water withdrawal;

(3) The anticipated months when water withdrawals will be made;

(4) The planned management and or disposition of wastewater from the fracturing, stimulation and production activities;

(5) A listing of the additives as presented on material safety data sheets that are used in water used for fracturing or stimulating the well;

(6) For all surface water withdrawals, a water resources protection plan that includes the information requested in subdivisions (1) through (5) of this subsection and includes documentation of measures that will be taken to allow the state to manage the quantity of its waters for present and future use and enjoyment and for the protection of the environment. The plan shall include the following:

(A) Identification of the current designated and existing water uses, including any public water intakes within one mile downstream of the withdrawal location;

(B) For surface waters, a demonstration that a sufficient instream flow will be available immediately downstream of the point of withdrawal. A sufficient instream flow is available:

(i) If the department’s Water Use Guidance Tool demonstrates that the stream contains sufficient water for the withdrawal and a passby flow is maintained immediately downstream of the point of withdrawal that is protective of the environment. The Water Use Guidance Tool is a web based geographical information system that calculates the water resources available in streams located in specific drainage basins based upon stream flow data obtained from the United States Geological Survey; and

(ii) When the department’s Water Use Guidance Tool indicates that water withdrawals should be limited or restricted but local conditions suggest otherwise, only if the withdrawal rate is limited to maintain a passby flow in the stream immediately downstream of the point of withdrawal that is protective of the environment; and

(b) For all water used for hydraulic fracturing and for flowback water from hydraulic fracturing activities and produced water from production activities, gas well operators shall comply with the following recordkeeping and reporting requirements:

(1) For production activities, the following information shall be recorded and retained by the well operator:

(A) The quantity of flowback water from hydraulic fracturing the well;

(B) The quantity of produced water from the well; and

(2) For transportation activities, the following information shall be recorded and maintained by the operator:

(A) The quantity of water transported;

(B) The name and address of the water hauler, and the company for which the hauler was hauling the water;

(3) The information maintained pursuant to this subsection by the gas well operator shall be available for reasonable inspection by the office of oil and gas along with other required permits and records and maintained for three years after the water withdrawal activity.

(c) Within at least twenty-four hours, but no more than forty-eight hours, prior to the withdrawal of water, the operator shall identify the location of withdrawal by latitude and longitude and verify that sufficient flow exists to protect designated uses of the stream. The operator shall use methods deemed appropriate by the secretary to determine if sufficient flow is available and must check flows on a daily basis for the duration of the withdrawal. Any variation from the methods previously approved by the secretary for determining if sufficient flow is available must be requested in writing by the operator.

(d) All water withdrawal locations and facilities identified in the water management plan shall be identified with a sign that discloses that the location is a water withdrawal point and the name and telephone number of the operator for which the water withdrawn will be utilized.

(e) This section is intended to be consistent with and does not supersede, revise, repeal or otherwise modify, articles eleven and twenty-six, of this chapter, and does not revise, repeal or otherwise modify the common law doctrine of riparian rights under West Virginia law.

(f) In the event that an oil and gas driller or operator contaminates the aquifer through the process of hydraulic fracturing of the well, or contaminates the aquifer through a surface spill or spills, the secretary shall require remediation of the aquifer to clean water act standards.

§22-6A-11. Local Ordinances.

All local ordinances and enactments purporting to regulate gas operations regulated by this act are hereby preempted and superseded to the extent the ordinances and enactments regulate the method of oil and gas operations. Nothing in this act shall affect the traditional power of local government to regulate zoning and land development of gas activities as well as other aspects, such as the time and the place of operations to protect the health, safety and welfare of the general public through local ordinances and enactments.

§22-6A-12. Prohibition on drilling pad construction without surface owners consent when propery subject to pooling agreement.

The Legislature finds that the unconventional drilling practices associated with horizontal oil and gas development have only very recently been technologically feasible, require the use of substantially large areas of land previously unseen in traditional oil and gas well development, and utilize significantly more surface area than drilling methods in use when the vast majority of mineral estates in the state were severed from the fee tract. Specifically, the drilling of wells using large volumes of water, utilize large impoundments, place multiple wells on a single well pad, with a significantly longer time period of development, and the many trucking, construction and operational activities associated with the development of horizontal shallow wells have been and may still be unknown to many persons who purchase either fee simple of surface ownership of tracts of land where drilling may occur. Further, because pooling agreements encompass several tracts, the surface owner’s property may be used to extract gas and oil from land that is not owned by that surface or mineral owner, where the surface owner is not subservient to other mineral owners interests. The Legislature finds that it is inherently unfair to force a surface owner to allow, without his or her consent, the construction and operation of a well pad for a horizontal shallow well unit. Therefore, the Legislature declares it against public policy to authorize a well pad to be constructed on the surface of a property as part of a pooling agreement without the surface owner’s consent: Provided, That, if the owner of a mineral interest has pooled his or her interest with other mineral interests, surface disturbance for all other activities associated with construction of a well pad, such as access roads and gas lines may be conducted upon the surface of any leased property within the pool without consent from the surface owner, with just and proper compensation as provided pursuant to article seven of this chapter is authorized.

§22-6A-13. Applicability; exceptions; karst formations.

(a) Notwithstanding any other provision of this code to the contrary, this section shall not apply to or affect any well work permitted for a horizontal well or orders issued regarding horizontal wells prior to the effective date of this article.

(b) Because karst geology may require precautions not commonly needed in other parts of the state when exploring for or producing oil and natural gas, the secretary shall review the department’s regulatory program to determine whether the rules applicable to oil and gas wells need to be revised to address drilling in areas of karst geology. If so, the secretary may propose legislative rules, including emergency rules if it is deemed necessary, in accordance with the provisions of the administrative procedures act in chapter twenty-nine-a of this code. The secretary may require such additional safeguards as may be necessary to protect this geological formation. Special safeguards may include changing proposed well locations to avoid damage to water resources, special casing programs and additional or special review of drilling procedures. Nothing in this section shall be construed to allow the department to prevent drilling in karst geology.

§22-6A-14. Drug-free workplace policy required.

The Legislature finds that the activities associated with the construction and operation of shallow horizontal wells can create a significant safety hazard to the citizens of the State of West Virginia and requires special safety practices to protection the welfare of workers and local residences; that these operations create unique local hazards from large volume local vehicle traffic in rural areas, the handling of hazardous chemicals, the operation of large machinery, and other unique construction and drilling activities require special regulation. Therefore, it is within the police powers of this state to mandate a reasonable “drug-free workplace policy” for those persons who provide trucking, construction, drilling, operational and other services relating to horizontal shallow wells. Each operator, contractor and subcontractor shall have in place a drug-free workplace policy that is equal to and consistent with the provisions of article one-d, chapter twenty-one of this code. The Secretary shall receive verification from the commissioner of labor that the operator and any contractors or subcontractors employed in all aspects of construction of any facilities, including transportation of materials to and from gas well operations have a drug-free workplace policy in place as a pre-condition of the well work permit. The secretary may require periodic verifications from the commissioner of labor or the operator to assure continued compliance with the requirements of this section, and can revoke a permit on a determination that the operator, or a contractor or subcontractor is not in compliance with this section.

§22-6A-15. Reports to the Legislature.

The studies directed by this section to be conducted by the secretary of the department of environmental protection may be conducted by the department, or by contract with a state university, other government agency or entity, at the direction and by agreement entered into with the secretary. The studies shall be based on best available scientific information produced by objective and credible sources. For those reports required to be submitted herein by July 1, 2012, the Secretary shall provide quarterly updates to the Legislature’s Joint Committee on Government and Finance.

(a) The secretary shall, by July 1, 2012, report to the Legislature on any needed safety requirements associated with the drilling of horizontal shallow well, to assure that proper worker and resident safety protection standards are in place for these new drilling activities, to minimize risk of harm to workers at the drilling operation and to minimize risks of exposure to local residents and the environment from adverse impacts created by the newly developed drilling activities associated with horizontal shallow well drilling operation construction activities. The secretary shall report on whether other agencies need to establish these safety standards. If the secretary finds that specialized permit conditions are necessary, the Secretary shall promulgate legislative rules establishing these new requirements.

(b) The secretary shall, by July 1, 2012, report to the Legislature on the safety of pits and impoundments utilized pursuant to section eight of this article including an evaluation of whether testing and special regulatory provision is needed for radioactivity or other toxins held in the pits and impoundments. Upon a finding that greater monitoring, safety and design requirements or other specialized permit conditions are necessary, the Secretary shall promulgate legislative rules establishing these new requirements.

(c) The secretary shall, by July 1, 2012, report to the Legislature on the need for further regulation of air pollution occurring from well sites, including the possible health impacts, the need for air quality inspections during drilling, the need for inspections of compressors, pits and impoundments, and any other potential air quality impacts that could be generated from this type of drilling activity that could harm human health or the environment. If he or she finds that specialized permit conditions are necessary, the Secretary shall promulgate legislative rules establishing these new requirements.

(d) The secretary shall, by July 1, 2012, report to the Legislature on new technologies that would assist in developing safe and effective water disposal systems for waste water generated from these operations, and whether a closed loop system of water containment could be mandated. If the secretary finds that specialized permit conditions to require use of best available disposal technology, including a closed loop system are available, the Secretary shall promulgate legislative rules establishing these new requirements.

(e) The secretary shall by July 1, 2012, report to the legislature on whether special legislation or other regulatory action is needed to protect Karst formations in areas where horizontal shallow wells may be drilled, and if moratoriums or other actions, conditions or limitations are necessary to protect water quality surrounding these formations, and if he or she finds that specialized permit conditions are necessary, the Secretary shall promulgate legislative rules establishing these new requirements.

(f) The secretary shall, by December 31 of each year through and including the year 2016, report to the joint committee on government and finance on the horizontal shallow well permitting and inspection activities of the office of oil and gas. Specifically, reports shall include, but are not limited to, the number of well inspections undertaken in the prior year, the number of inspections required by law to be undertaken in the prior year, an analysis of whether permitting fees for the horizontal shallow gas and oil wells are sufficient to fund the necessary wells permit writers and inspectors adequate to fulfill their statutory duties, including time-frames associated with issuing permits, and a recommendation to whether the permit fees should be increased or decreased to provide adequate funding to the office to meet its statutory duties regarding the permitting and inspection process associated with horizontal shallow gas and oil wells.

§22-6A-16. Rulemaking.

Notwithstanding the provisions of section six, article six, there is imposed up each operator of a Horizontal shallow well permit fee for new permits, permit renewals and permit modifications. The Department shall propose legislative rules for promulgation in accordance with article three, chapter twenty-nine-a of this code establishing the fees required by this section. The fees shall be calculated to generate sufficient money to provide for the fulfillment of the duties of the office, as provided in this article.

ARTICLE 7. OIL AND GAS PRODUCTION DAMAGE COMPENSATION.

§22-7-3. Compensation of surface owners for drilling operations.

(a) The oil and gas developer shall be obligated to pay the surface owner compensation for:

(1) Lost income or expenses incurred as a result of being unable to dedicate land actually occupied by the driller's operation or to which access is prevented by such the drilling operation to the uses to which it was dedicated prior to commencement of the activity for which a permit was obtained measured from the date the operator enters upon the land until the date reclamation is completed, (2) the market value of crops destroyed, damaged or prevented from reaching market, (3) timber which must be cleared from a surface site in order to make that site useable for the development or extraction of oil, gas or mineral interests, including that cleared for access roads, shall be appraised by a certified appraiser of timber who shall be compensated by the extractor, and, such timber shall be valued at a minimum of two times the value of the present appraised value, which value shall be paid by the extractor, for the purpose of adequately compensating the surface landowner for losing the future use of this resource. Additionally, the surface owner shall retain all of the cleared timber, (3) (4) any damage to a water supply in use prior to the commencement of the permitted activity, (4) (5) the cost of repair of personal property up to the value of replacement by personal property of like age, wear and quality, and (5) (6) the diminution in value, if any, of the surface lands and other property after completion of the surface disturbance done pursuant to the activity for which the permit was issued determined according to the actual use made thereof by the surface owner immediately prior to the commencement of the permitted activity.

The amount of damages may be determined by any formula mutually agreeable between the surface owner and the oil and gas developer.

(b) Any reservation or assignment of the compensation provided in this section apart from the surface estate except to a tenant of the surface estate is prohibited.

(c) In the case of surface lands owned by more than one person as tenants in common, joint tenants or other coownership, any claim for compensation under this article shall be for the benefit of all such coowners. The resolution of a claim for compensation provided in this article shall operate as a bar to the assertion of additional claims under this section arising out of the same drilling operations.