Gov. Jim Justice took a swing at the oil and gas industry’s biggest bill of the session Monday morning, saying he might veto the measure if it continues through the Senate.
Justice, speaking at a town hall meeting with teachers at Wheeling Park High School, called for a special legislative session on the so-called “co-tenancy bill,” which would allow drillers to lease a tract of land with permission of 75 percent of landowners, down from the existing-law standard of 100 percent. In the crowd, many wore red in a show of solidarity with the ongoing teacher and school service personnel work stoppage. The town hall in Wheeling was the first of three throughout the day; the other two were in Martinsburg and Morgantown.
Justice said Monday he would urge the Senate to strike down the bill and that he would take the idea of vetoing House Bill 4268 into “extreme consideration.”
“I will call us into special session to find a way out through co-tenancy and joint development and the mineral rights people — you’ve got to find a way that satisfies everybody and raises the severance tax on natural gas,” he said via his Twitter account.
H.B. 4268 is the industry’s third shot at a bill that addresses drilling on unwilling or unlocatable owners’ land. Three years ago, a measure known as the “forced pooling bill” died the last night of the session in a tied vote. Last year, the bill included a provision for “joint development” of several contiguous oil and gas leases for horizontal drilling, except for instances when leases specifically prohibited horizontal drilling, which was unheard of and uncommon when older West Virginia leases were written. The bill died on the House floor, where it originated and was passed in a 60-40 vote this year.
The co-tenancy bill was intentionally free-standing and didn’t address joint development this year, said Bill Anderson, R-Wood, lead sponsor of the bill. A bill with joint development wouldn’t pass the House, he said.
“I think, in my judgment I would like to sit down with the governor and see where he’s coming from and what he really wants. Co-tenancy, I believe, is a reasonable step for this year,” he said.
Sen. Charles Trump, R-Morgan, chairman of the Judiciary Committee, said several people had come to him to support the bill and urged him to pass it, unchanged.
“It’s going to run,” he said. “It’s going to run this week.”
House Speaker Tim Armstead, R-Kanawha, said in a statement Monday night that it was clear to him an omnibus natural gas bill, including joint development and increases in severances taxes, did not have the support necessary to to pass the Legislature.
“Many legislators, as well as landowners, farmers, land rights groups and royalty owner groups oppose joint development and believe it would be harmful to landowners in our state. This fact has been shared repeatedly with the governor,” Armstead said. “Now, the governor has decided to interject this unrelated dispute into the current discussion regarding teacher pay and benefits and PEIA in an apparent attempt to convince our teachers and public employees to support such a plan. I believe this course is headed for disaster.
“I urge the governor to abandon this approach and support the co-tenancy bill that was decisively passed by the House and is anticipated to be adopted by the Senate.”
The bill wouldn’t increase severance taxes, leaving money behind that could help pay teachers, Justice said Monday morning. According to the West Virginia Center on Budget & Policy, the state imposes a 5 percent severance tax on the value of natural gas, and 90 percent of that revenue is used by the state government. The other 10 percent is given to county and local governments.
“Co-tenancy has already passed in the House, and you know what we got for it as far as additional severance tax? Zero. Zero,” Justice said. “I didn’t want that to happen.”
But increased taxes doesn’t necessarily mean increased revenue, said Phil Reale, a lobbyist for the Independent Oil and Natural Gas Association.
“People have to look at it as a 20- or 30-year plan. Immediately, there will be a lot of drilling [and], hopefully, there will be a lot of production, which in turn, creates a lot of revenue for the state of West Virginia,” he said.
Many people following the co-tenancy bill said Justice’s announcement Monday was unexpected.
“We would be grossly disgusted with the governor if he vetoed co-tenancy when we finally had something worked out that the parties can live with, after years of going back and forth in the Legislature,” said Dave McMahon, founder of the West Virginia Surface Owners Rights Organization.
The move would compromise income in the state and ultimately hurt teachers, said Tom Huber, president of the West Virginia Royalty Owner’s Association. An amendment to the co-tenancy bill says 50 percent of unknown owners’ interest on the minerals would now go toward a PEIA Stability Fund.
“I have no idea what his random tweeting will do, but what I hope happens is we’re all going to ignore it and pass the good legislation that was, over two years, thoughtfully constructed through negotiations with all the stakeholders,” he said.
H.B. 4268 is the result of compromise and discussion, Al Schopp, chief administrative officer and regional senior vice president of Antero Resources, said in a statement.
“Not all oil and gas companies are interested in furthering the joint development measure the governor is referring to. We’ve found that West Virginians and our mineral owners simply don’t want it,” he said. “Antero worked with many sides on a reasonable co-tenancy bill that gives producers tools they need, that protects the rights of the majority, and makes sure the minority are compensated fairly.”
Justice’s move would discourage development in the state and hurt everyone, Anne Blankenship, executive director of the West Virginia Oil & Natural Gas Association, said in a statement.
“The oil and gas industry has invested billions of dollars in West Virginia and has paid over $1.3 billion in property and severance taxes over the past five years alone,” she said. “The current severance tax in West Virginia is higher than in Ohio and Pennsylvania, and raising it even more will send a chilling message to companies investing in the state.”