The Future Fund Bill, which was passed by the House on February 25th, was signed into law by West Virginia governor Earl Ray Tomblin on March 20th, reports the West Virginia Metro News. As described in an earlier post on this blog, the Future Fund will be financed by 25 percent of the severance tax revenues collected from oil and gas exploration companies above a $175 million threshold. The fund would accrue interest for six years before it could be used to finance economic development projects, building infrastructure and increases in teacher salaries.
As reported by legal news website Law360, a Pennsylvania bill was approved by the House Environmental Resources and Energy Committee that would amend the Guaranteed Minimum Royalty Act of 1979 (GMRA) and will move to the House floor. House Bill 1684 would amend the GMRA to clarify the definition of the minimum royalty payable under an oil and gas lease. The GMRA already sets the minimum threshold at one-eighth, but does not clearly define how royalties should be calculated. House Bill 1684 would prevent operators from reducing royalty payments by the costs of production if the reductions would result in a payment of less than a one-eighth royalty. Supporters of the bill say that landowners should be protected from the possibility of unfair deductions and calculations of their royalty payments by oil and gas operators. Opponents of the bill argue that the bill violates both the state and federal constitutions by changing the terms of leases already in existence and that the bill would result in excessive litigation, which would not ultimately benefit the landowners that the bill seeks to protect.
As originally described in a post by Ben Milleville on February 25th, amended Senate Bill 461, known as The Future Fund Bill, has passed the Senate and now awaits ratification by Governor Earl Ray Tomblin. As the West Virginia State Journal reports, the amended bill, modified by the House of Delegates and then passed by the Senate for a second time, calls for a baseline severance tax rate on all minerals – not just on oil and gas. Despite concerns about how the severance tax would impact the coal industry, the West Virginia Legislature ultimately agreed that the Future Fund would be a constructive way to generate revenue. Specific limitations placed on the Future Fund dictate how the money may be used and how much of the fund may be allocated at one time.
As reported in The Wheeling Intelligencer, the West Virginia Legislature continues to consider H.B. 4558 and S.B. 578, which would allow oil and gas producers to create production units through “Forced Pooling.” If passed, such a law would allow natural gas producers to include un-leased acreage in their active drilling units if all of the un-leased landowner’s neighbors have been leased. Industry advocates pushing for passage of these measures argue their necessity for West Virginia production to remain competitive in the Marcellus markets, as Pennsylvania and Ohio have similar laws. Opponents of the idea fear that such a law could weaken the position of landowners when negotiating leases with oil and gas companies. The West Virginia Legislature considered similar laws in the past, without success.
The respective bills are currently in Committee in both the House and the Senate. With the current legislative session ending in early March 2014, it is unclear whether the bills will be taken up for a full vote in either house of the legislature prior to the close of the session.
The West Virginia Senate unanimously passed Senate Bill 461, known as The Future Fund Bill, on February 21st. The Bill, as described in an Associated Press story published in the Charleston Gazette, would create a new fund that would be financed by 25 percent of the severance tax revenues collected from oil and gas exploration companies above a $175 million threshold. The fund would accrue interest for six years before it could be used to finance economic development projects, building infrastructure and increases in teacher salaries. As described in a Shale Energy Law Blog post from last September, the Bill was inspired by legislation passed in North Dakota that created that state’s Legacy Fund, a fund financed by extraction taxes that can be used to finance projects after 2017. The Bill must now be approved by the West Virginia House of Delegates.
As reported in the Spirit of Jefferson newspaper, Senate Bill 474, introduced in the West Virginia Senate on Monday, February 3, would amend W. Va. Code § 22-15-8 to allow commercial waste facilities to accept drill cuttings and associated hydraulic fracturing waste above and beyond their monthly tonnage waste limits without a public approval process, provided that the drilling waste is placed in a separate cell dedicated solely to the disposal of such waste. Normally, commercial waste facilities must go through an approval process, including public hearings, to accept solid waste beyond their usual monthly tonnage limits (usually 10,000 or 30,000 tons). The bill, which was drafted by the West Virginia Department of Environmental Protection, must gain approval from the Senate Government Organizations Committee and the Senate Judiciary Committee before taking affect. A public hearing was held in regard to the bill on Monday, February 17 at 5 p.m. in Charleston.
The Ohio House Ways and Means Committee updated House Bill 375, which proposes changes to the severance tax on natural resources. Among the updates are an increase in the proposed severance tax to 2.25% from 2% for horizontal wells, a reduction in the period of time for the initial 1% tax rate from 5 years to 2 years, and an allocation of 10% of tax revenues to Eastern Ohio counties where drilling activity is concentrated. Under the proposal, operators of traditional vertical wells would not pay any severance tax for the first three years. Thereafter, the tax increases to .25% of gross receipts before falling to .1% after 20 years. A vote on updated House Bill 375 has not yet been scheduled.
Kevin Haggerty, a Democratic state representative from the northeast region of Pennsylvania, recently introduced House Bill 1947 to impose a 5% severance tax on the gross value of each unit severed, plus an additional 4.6 cents per unit. “Unit” is defined to mean a thousand cubic feet of natural gas measured at the well head. Unlike previous severance tax proposals that would spread the tax dollars across various programs and beneficiaries, this bill seeks to use the tax proceeds solely to benefit Pennsylvania’s transportation system via the Motor License Fund.
On January 13th, the Pennsylvania Senate Appropriations Committee voted in favor of a senate bill that encourages oil and gas operators to re-use mine-influenced water for hydraulic fracturing. Senator Kasunic (D-Fayette/Somerset) re-introduced the bill, known as Senate Bill 411 (previously Senate Bill 1346 of last session). The bill is set to move to the full Senate floor for a vote in the near future.
West Virginia delegates outlined their agendas for the legislative session that began last week. Among the items included in the agendas is a “future fund” that would be established with proceeds generated by the oil and gas industry in West Virginia, as reported by The Charleston Gazette. Kevin Craig, D-Cabell, indicated that the revenue from the fund should be utilized for investment in West Virginia’s future, for activities such as education, teacher salaries and infrastructure. Democratic leaders are also advocating the creation of a standing committee on energy that will be headed by Kevin Craig. The legislative session lasts for 60 days.
A bill to increase the severance tax on oil and gas drilling has been proposed in the Ohio House of Representatives. House Bill 375 would increase the severance tax for horizontal shale wells to 1% for the first five years of production, and to 2% after five years, if production remains at a high level. The bill also creates an offset against horizontal severance taxes from the commercial activities tax (CAT) and the personal income tax (PIT).
Revenue from the bill is estimated to be as much as $1.7 billion over 10 years. The revenue would fund regulations, programs to cap orphan wells and income tax cuts. The tax would not apply to operators of conventional shallow wells.
This week the U.S. House of Representatives voted to pass a trio of key energy bills. In addition to the bill that would limit federal regulation of hydraulic fracturing, the House also passed two bills that include provisions aimed at reforming federal permitting processes. By a vote of 228-192, the House passed the Federal Lands Jobs and Energy Security Act (HR 1965), which would, for example, require the Department of the Interior to decide on a federal lands drilling permit application within 60 days of receipt or the application would be deemed approved. Today, the House voted 252-165 to pass the Natural Gas Pipeline Permitting Reform Act (HR 1900), which would require the Federal Energy Regulatory Commission (FERC) to approve or deny a certificate of public convenience and necessity for a prefiled project within 12 months after receiving a complete application, and would also require other federal agencies to act on related licenses, permits or approvals within 90 days of FERC issuing an environmental impact statement. The Obama administration has reportedly threatened to veto all three bills.
The U.S. House of Representatives passed a bill prohibiting the Interior Department from enforcing regulations on hydraulic fracturing in any state that already has regulations in place. The bill recognizes the states’ authority to regulate hydraulic fracturing within their borders and was passed in reaction to recent federal regulations that have been proposed to regulate hydraulic fracturing. The House bill would not prevent the federal government from implementing baseline standards in states where none exist. However, under the legislation federal regulations would not be permitted to supersede the applicable states’ laws.
West Virginia Senate President Jeff Kessler is leading the drive to create an oil and natural gas trust fund named the “Future Fund” that would support education, economic development or tax relief decades from now, reports the Global Post. Kessler recently led a group of West Virginia lawmakers to visit North Dakota, where 30 percent of oil and gas tax collections are placed into the state’s Legacy Fund, which cannot be spent until 2017. Kessler indicated that he would like to present the Future Fund proposal as a constitutional amendment in January 2014, stating that he believes that constitutional protections would lock down the fund from lawmakers and interest groups that would like to spend the money prematurely.
West Virginia natural gas operators saw a shift in the permitting and regulation process as new rules governing horizontal drilling went into effect on July 1, 2013. Authorized by the West Virginia Legislature with its passage of the Horizontal Well Act in 2011, the West Virginia Department of Environmental Protection submitted the new regulations to the Legislature for approval after a year of work. The result is a comprehensive and somewhat technical set of regulations that will govern horizontal drilling in West Virginia. While some of the regulations merely recite requirements that are in the Horizontal Well Act, below are some of the new and noteworthy regulations in the newly-effective set:
- Provides for an expedited review process for regulatory approval of replacement bore holes (35-8-5.l.1)
- Supplemental requirements for well site safety plans (35-8-15)
- Increased recordkeeping requirements for water used in the hydraulic fracking process (35-8-9.1.b.3) and
- Additional certifications may be required on plats and plans submitted for permitting review.
A copy of the new horizontal drilling regulations can be found here.