WV Senate and House Pass Co-Tenancy Bill, Awaits Governor’s Signature

Today, the West Virginia Senate passed HB 4268, popularly known as the “co-tenancy” bill.  Formally titled as the Co-tenancy Modernization and Majority Protection Act, the bill was designed to streamline the oil and gas leasing process and facilitate further development without unnecessary delay.  The bill passed the House of Delegates on February 15, 2018.

If accepted by the governor, HB 4268 would carve out an exception to the West Virginia statute governing waste between certain co-tenants (individuals that all own an undivided interests in the same tract of land).  Under the existing law (W. Va. Code § 37-7-2) development of oil and gas from a tract of land without the consent of all the owners, or co-tenants, of the same will result in waste, with any party committing such waste being subject to their operations being enjoined and/or treble damages.  The new law states that development of oil and gas under certain conditions will not constitute waste.

Upon final passage of the bill, any tract held by seven or more co-tenants can be developed upon the consent of 75% of such co-tenants.  However, the proposed operator must make reasonable efforts to negotiate leases with all of the oil and gas owners before they can find protection under the proposed new law.  Non-consenting co-tenants can either accept royalties equal to 12.5% of the oil or gas produced, proportionally reduced to their respective fractional interest, or elect to participate in the development and bear equal development and other costs with the lessee.  Unknown or unlocatable owners will be limited to receiving the 12.5% royalty.  The statute also allows surface owners to reclaim the oil and gas title held by any unknown or unlocatable owners after seven years.

Governor Justice of West Virginia said earlier this week that he would veto the co-tenancy bill if it found his desk, but has purportedly changed his mind.  The bill must obtain the concurrence of the West Virginia House of Delegates before being sent to the Governor’s desk.