12 Mar 2018

West Virginia Governor to Sign Co-Tenancy Bill

West Virginia Governor Jim Justice says he is going to sign the recently passed bill, known as “the co-tenancy bill” (HB 4268), which will allow oil and natural gas operators to begin operations on a tract once they have obtained lease agreements with at least 75 percent of the tract’s owners. This is a change from the previous law, which required that operators obtain leases from 100 percent of oil and gas owners of a tract of oil and gas.

In West Virginia, it is very common for oil and gas ownership to be highly fractionalized among dozens and sometimes hundreds of owners. Often, there exist owners who cannot be ascertained due to lack of heirship and estate records, or who cannot be located. The existence of the unknown and missing owners has, at times, frustrated oil and gas development in the state. The new law will help to permit develop on tracts which are owned or partially owned by unknown and/or missing owners.

Justice said he plans to sign the bill because it will benefit the state. “There is a lot of very positive benefits in co-tenancy because if, in fact, there’s more gas produced and there’s more opportunity within West Virginia, we’ll get a higher severance tax, so I will sign it,” Justice said (Source: West Virginia Metronews, “Justice Says He Will Sign Co-Tenancy Bill,” March 7, 2018).

The bill will require that landowners who do not sign an oil and gas lease (known as “non-consenting owners”) receive the highest royalty paid to the majority owners of a tract of oil and gas. Any royalties that unknown or unlocatable owners receive will be placed into an account which, if unclaimed after seven years, will go into state funds to be split between capping abandoned oil and gas wells and the Public Employees Insurance Agency.

If you are interested in learning more about how the new law will affect your oil and gas development operations, please contact the Claire Sergent Walls Legal Group: claire@cswlegalgroup.com.