Wins for all: W.Va. royalty owners, counties will benefit from this session

By Charles Clements | Apr 3, 2018

CHARLESTON – The second session of the 83rd Legislature of West Virginia concluded on March 10, and while the session was dominated by the teachers strike, there were several important pieces of legislation passed to benefit the citizens of West Virginia.

In the fall of 2017, the West Virginia Supreme Court ruled in the “Leggett” case (Leggett v. EQT Production Co.) that if an oil and gas lease was silent as to post-production expenses, they were not allowed. In January 2018, a new court was seated, and the court agreed to re-hear the case. The new court overturned the Leggett decision, and said that the post-production expenses were allowed. This ruling, as well as the previous decision, affected the old “flat rate” leases, most of which were signed in the early 1900s. The court, however invited the Legislature to correct the law. 

I introduced Senate Bill 360, which changed the law to correct the Leggett decision and prevent the collection of “post production” expenses on the old leases. While these “flat rate” leases cannot be changed, a law requiring that no drilling permit can be issued unless the royalty owner is paid one eighth of the revenue produced by that well. The legislation also required that the revenue from the well be calculated based on the first “arms length” sale of the gas and liquids. This is a great protection for our royalty owners. It was very much opposed by one of the major developers in our area. The legislation passed the Senate by a vote of 34-0 and passed the house 96-2 with 2 members absent. We also passed legislation to require the gas developers to list the deductions on the check stub or provide this information on request of the royalty owner.

The Legislature also passed a bill that created the Co-tenancy Modernization and Majority Protection Act, which will allow the development of minerals co-owned by seven or more people when 75 percent of the co-owners agree to develop the minerals and have signed leases. The non-consenting owners were afforded protection under the law. They will receive the highest royalty rate of any of the consenting owners and the average of the signing bonuses received by the consenting owners. This law also provides surface owner protection. 


One of the major problems has been the missing or unknown heirs to the property. Prior to this legislation, if an heir was not located, the property could not be developed. The royalties and bonus due to the unknown heirs will be deposited in the state treasury as unclaimed property. If not claimed within five years, half of the funds will be used to plug abandoned wells, and the other half will go into the PEIA Stability Fund. If after seven years there has been no claim made to the minerals, the surface owner may file a quiet title to begin taking ownership after meeting certain requirements. This legislation should open much of the undeveloped gas to development.

The Legislature also passed House Bill 4338, which will reorganize the jails and prisons in West Virginia. This legislation could result in the state taking over the operation of both the jails and prisons. The Department of Military Affairs and Public Safety (DMAPS) will study the changes over the next few years and recommend future legislation. Currently, some counties spend between 30 and 40 percent of their budget on jail fees to the regional jails. This legislation was the result of much work between legislators, counties, the Supreme Court, and DMAPS. There will substantial savings to both the counties and the state. Secretary Jeff Sandy of DMAPS has already saved the state and Regional Jail Authority more than $1 million by making changes allowed under current law. He is to be commended for his work. The department of Juvenile Services will fall under DMAPS for administrative purposes, but the operation will be independent of the jails and prisons. Also, the corrections officers under DMAPS were given a $6,000 raise over the next three years. These people, who must work under terrible conditions, were grossly underpaid. The Governor has not yet signed some of the above legislation into law. I hope he will.

With respect to the teachers strike, in his State of the State speech, Governor Jim Justice proposed a series of 1 percent raises throughout the next five years. This was unsatisfactory to the teachers and service personnel who were included in the bill that also affected employees of the State Police. Another proposal for a 2 percent raise this year and a 1 percent raise next year was also rejected by those involved. The governor, without warning to either the House of Delegates or Senate, proposed a 5 percent increase. This immediately became the goal of those involved. Then, the House, without consultation with the Senate passed the increase in their version of the pay raise bill, HB 4145. 

 The Republican caucus in the Senate was not ready to jump on this increase without a thorough examination as to the consequences. As part of the governor’s proposal, he raised the revenue estimate by $58 million. As a caucus, we were skeptical of this revenue estimate increase. We needed to do our due diligence before accepting this revenue increase. We had proposed a 4 percent increase for all state employees; this was not acceptable to those who were on strike. Much credit must be given to the Senate Finance Committee for taking necessary steps to provide the 5 percent increase to all state employees, end the strike and get the children back in the classroom. This was done without using any of the “new revenue estimate” funds. Increases in certain budgets were reduced to provide the additional funds for the raises mostly from the Department of Commerce and the Department of Tourism. If the governor’s increased revenue materializes, these funds can be restored to these departments without affecting the raises or other programs. Contrary to the past practices, no new taxes were required to provide the raises.

Most of the teachers I talked with were more concerned with PEIA than salary increases. It wasn’t until the governor proposed the 5 percent increase that salary became the major issue. The fix of PEIA will be difficult. Health care costs have increased for everyone including those on PEIA, especially the retired employees. One solution may be the privatization of the program; this could provide choices of plans to suit each employee’s lifestyle. The governor has appointed a committee to look at the issue. One of the requirements of the committee is to meet in each county. When the meeting comes to your county, be sure to attend and make your voice heard.

Clements, R-Wetzel, represents the Second Senatorial District, which includes Wetzel, Tyler, Doddridge, Richie, and Calhoun counties, and parts of Marshall, Monongalia, Marion, and Gilmer counties. He served in the West Virginia House of Delegates from 1994-1996.

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