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Introduced Version Senate Bill 617 History

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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 617

(By Senators Green and Minard)

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[Introduced February 19, 2010; referred to the Committee on Energy, Industry and Mining; and then to the Committee on the Judiciary.]

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A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated §37-7A-1, §37-7A-2 and §37-7A-3, all relating to the exploration for or development of minerals by a cotenant or others and related rules of an action of account; providing definitions; and providing that mineral development is not waste.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new article, designated §37-7A-1, §37-7A-2 and §37-7A-3, all read as follows:
ARTICLE 7A. MINERAL DEVELOPMENT BY COTENANTS.
§37-7A-1. Declaration of public policy; legislative findings.

(a) The Legislature declares and finds that certain owners of minerals in this state are unable to effectively develop their mineral property; that mineral development has been and continues to be an integral part of the state's economy; that effective mineral development is central to our national security and our nation's stated energy policy goals; that every owner of minerals should be able to freely and fully enjoy the benefits of his or her property; and that in order to encourage and ensure the fullest practical recovery and enjoyment of the mineral resources in this state, it is in the public interest to enact this article authorizing mineral development by a cotenant and requiring a fair and impartial accounting and timely payment of net proceeds to all other cotenants.
(b) It is declared to be the public policy of this state and in the public interest to:
(1) Foster, encourage and promote the efficient, effective and thorough development of this state's energy resources by authorizing each cotenant to develop the mineral estate for the benefit of all cotenants;
(2) Maximize the potential of the natural resources of this state by promoting orderly mineral development and lessening the incidence of undeveloped mineral acreage; and
(3) Safeguard and protect the rights of each cotenant mineral owner to enjoy the mineral estate so that each such owner may obtain his or her just and equitable share of revenue from the development of minerals under this article.
§37-7A-2. Definitions.
As used in this article:
"Cotenant" means a tenant in common, joint tenant, parcener, cotenant or coowner of an undivided interest in the same mineral estate in the same parcel of real estate; when a cotenant has granted the right to develop his or her mineral interest to another, including without limitation a grant by a lease of his or her mineral interest to another, then all references in this article to a cotenant, including without limitation a majority cotenant, working cotenant and nonworking cotenant, means the person with the right to develop the cotenant's mineral interest, including without limitation a lessee;
"Mineral development" means the exploration for or development of minerals, including without limitation the testing, surveying, exploration, drilling, mining, preparation, production, processing, recovery, removal, transporting, treating, marketing, sale of minerals, maintenance and ongoing operations;
"Net proceeds" means the gross proceeds received from the sale of minerals recovered by the working cotenant, less all reasonable costs, expenditures and expenses incurred by the working cotenant in the mineral development, including without limitation:
(1) Building or maintaining roads, whether public or private;
(2) All exploration or development operations, including without limitation drilling and mining;
(3) The purchase, installation, maintenance, and operation of tools, machinery, equipment and appliances;
(4) Transporting the minerals whether by pipeline, truck, belt or otherwise, to the point of sale;
(5) Reasonable overhead costs;
(6) The reasonable value of the service actually rendered in or upon any exploration or development operations;
(7) A reasonable rate of return on any capital investment for the mineral development;
(8) Putting the mineral into a marketable condition, including without limitation all costs of crushing, washing, sizing, preparation, processing, compression or treatment and any other activity necessary to make the mineral ready for sale; and
(9) All costs, fees and expenses, including without limitation any litigation expenses, costs and attorney fees, incurred to obtain, maintain or renew any and all government authorizations, including without limitation all permits, bonds, or licenses, necessary to explore for, develop and extract the minerals, including without limitation the costs of any restoration, reclamation or remediation of the mineral properties;
"Nonworking cotenant" means a cotenant that does not engage in mineral development and has not entered into an agreement with the working cotenant relating to the mineral development, including without limitation a joint operating agreement or development agreement;
"Working cotenant" means a cotenant that engages in mineral development and that owns or controls at least fifty percent of the undivided interest in the minerals to be developed; the calculation of the percentage of control shall include the undivided mineral interest of:
(1) The cotenant that engages in mineral development; and
(2) Any other cotenant that has entered into an agreement with the working cotenant relating to the mineral development.
§37-7A-3. Cotenant right to develop minerals; requirement to provide accounting to other cotenants.

(a) Any working cotenant may engage in mineral development. Mineral development by a working cotenant is not waste and is not subject to the provisions of section two, article seven, chapter thirty-seven or section thirteen, article eight, chapter fifty-five of this code. This article does not affect the provisions of article twenty-one, chapter twenty-two of this code relating to development of coalbed methane.
(b) No later than thirty days after receipt of a permit granting approval to develop the minerals, the working cotenant shall deliver by personal service or by certified mail, return receipt requested, a copy of the permit to any nonworking cotenant whose ownership and address is known to the working cotenant or is of record in the county where the minerals are located. In the event the present identity or location of a nonworking cotenant cannot be determined from the records in the courthouse in the county where the minerals are located, the working cotenant shall publish in the county in which the minerals are located a Class III legal advertisement in compliance with the provisions of article three, chapter fifty-nine of this code, identifying the mineral property, each nonworking cotenant whose identity or location cannot be determined, and the permit which has been issued, the first date of the publication to be no later than thirty days after receipt by the working cotenant of a permit granting approval to develop the minerals.
(c) No later than ninety days from the receipt of gross proceeds from the sale of minerals recovered by the working cotenant, he or she shall remit to each nonworking cotenant, his or her proportionate share of net proceeds, if any. If the net proceeds are paid to a nonworking cotenant that has the right to develop the mineral interest of another, then the nonworking cotenant shall pay any amounts, including without limitation royalties or overriding royalties, due to any other person, including without limitation the owner of the mineral interest, pursuant to an agreement entered into with the nonworking cotenant that has the right to develop the mineral interest of another. The working cotenant shall hold the proportionate share of net proceeds due any nonworking cotenant whose ownership and address is not known to the working cotenant and is not of record in the county where the minerals are located until the earlier of:
(1) The time the nonworking cotenant's proportionate share of net proceeds are to be surrendered to the State Treasurer pursuant to article eight, chapter thirty-six of this code; or
(2) The nonworking cotenant claims his or her proportionate share of net proceeds.
(d) If the working cotenant fails to remit to any nonworking cotenant his or her proportionate share of net proceeds, if any, within ninety days of receipt of the gross proceeds by the working cotenant then the nonworking cotenant may commence an action of account under subsection (e) of this section. The sole remedy of a nonworking cotenant for mineral development by a working cotenant is an action of account under subsection (e) of this section. Within ninety days of receiving a written request from a nonworking cotenant, the working cotenant shall provide to the nonworking cotenant a statement showing the amount of costs, expenditures and expenses incurred by the working cotenant in the mineral development and the gross proceeds received from the sale of minerals recovered by the working cotenant.
(e) An action of account may be maintained against a working cotenant by a nonworking cotenant for the working cotenant retaining more than his or her proportionate share of net proceeds. In an action of account for mineral development, a nonworking cotenant is entitled to his or her proportionate share of the net proceeds. If the nonworking cotenant is granted the relief prayed for in the an action, the court shall award interest on any unpaid net proceeds due at the rate established for a civil judgment under section thirty-one, article six, chapter fifty-six of this code, and in addition, if the working cotenant is found to have willfully and intentionally withheld the unpaid net proceeds, the court may grant the nonworking cotenant reasonable costs incurred in the action, including without limitation attorney's fees.



NOTE: The purpose of this bill is to
authorize the exploration for or development of minerals by cotenants and their lessees and require payment to nonworking cotenants of their proportionate share of net proceeds. It also provides that cotenant mineral development is not waste and provides an action of account to allow the nonworking cotenant to recover his or her fair share of net proceeds.

This article is new; therefore, strike-throughs and underscoring have been omitted.
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