HB4500 H ENG AM #1

Gaskins 3254

The Committee on Energy moved to amend the bill on page 1, by striking out everything after the enacting section and inserting in lieu thereof the following:

“Chapter 22. Environmental resources.

article 6C. Horizontal well production royalty transparency.

§22-6C-1.  Legislative findings and purpose; applicability.

The Legislature finds the following:

            (1)  That clear and open communication is essential to the good faith and fair dealings requirements necessary to enter into any fruitful oil and gas lease relationship;

            (2)  That many oil and gas producers possess unequal bargaining power in comparison to many lessors, and that such inequities leave ample opportunities for lack of trust;

            (3)   That in order to ensure fairness, a new set of requirements should be adopted in order to clearly communicate to lessors so that lessors may make educated decisions with regard to their minerals and existing leases; and

            (4)  That such additional requirements do not impose an undue financial hardship on producers, and the cost to comply is determined to be nominal. 

§22-6C-2.  Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this section unless the context clearly indicates otherwise:

(1) "Check stub."  The financial record attached to a check;

(2) "Division order."  An agreement signed by an interest owner directing the distribution of proceeds from the sale of oil, gas, casing head gas or other related hydrocarbons. The order shall direct and authorize the payor to make payment for the products taken;

(3) "Interest owner."  A person who is legally entitled to payment from the proceeds derived from the sale of oil or gas from an oil or gas well located in this State; and

            (4) "Mcf."  An abbreviation denoting a 1,000 cubic feet of natural gas.  A single unit of Mcf is equal to approximately 1,000,000 Btu (British thermal units) of energy. 

§22-6C-3.  Quarterly Reports of Oil and Gas Production.

            A quarterly report of oil and gas production for each well shall be filed with the Chief of the Office of Oil and Gas on a form prescribed by the Secretary of the West Virginia Department of Environmental Protection.  All reported data shall be made available to the public through the Office of Oil and Gas’ website in a reasonable time after such data is collected.  The Secretary has the express authority pursuant to this article, as well as pursuant to the powers enumerated in section two, article six, chapter twenty-two of this code to promulgate rules and to amend the current rules to require timely quarterly reporting of production data as well as to establish a process for collecting such data.

§22-6C-4. Payment information to interest owners.

Whenever payment is made for oil or gas production to an interest owner, whether pursuant to a division order, lease, servitude, well unitization order, or other agreement, all of the following information, at a minimum, shall be included on the check stub or on an attachment to the form of payment, unless the information is otherwise provided on a regular basis:

(1)  A name, number or combination of name and number that identifies the lease, property, unit or well or wells for which payment is being made; and the county in which the lease, property or well is located;

(2)  Month and year of gas production;

            (3)  Total barrels of crude oil or number of Mcf and MMBTU of gas or volume of natural gas liquids produced and sold;

            (4)  Price received per barrel, Mcf and MMBTU or gallon;

            (5)  Total amount of severance and other production taxes and other deductions permitted under the lease;

            (6)  Net value of total sales from the property less taxes and deductions from paragraph (5);

            (7)  Interest owner's interest, expressed as a decimal or fraction, in production from paragraph (1);

            (8)  Interest owner's share of the total value of sales prior to deduction of taxes and deductions from paragraph (5);

            (9)  Interest owner's share of the sales value less the interest owner's share of taxes and deductions from paragraph (5); and

            (10)  Contact information, including an address and telephone number.

§22-6C-5.  Accumulation of proceeds from production.

(a)  General rule. Proceeds from production of oil and gas may be accumulated and remitted to the persons entitled thereto annually for the 12 months' accumulation of proceeds totaling less than $100.

            (b)  Owner to be paid. Notwithstanding any other provision of this section to the contrary, all accumulated proceeds shall be paid to the owner thereof immediately, or as soon as practicable thereafter, when production ceases or upon relinquishment or transfer of the payment responsibility.

§22-6C-6.  Timely payment of royalties; penalties.

All royalty payments due and owing to an interest owner, whether pursuant to a division order, lease, servitude, well unitization order, or other agreement, shall be tendered in a timely manner and shall not exceed ninety days from the date that a financial gain is realized on the production of such oil and gas, and a failure to remit timely payment shall result in a mandatory additional payment of an interest penalty to be set at the prime rate plus an additional two per cent until such payment is tendered to the interest owner to be compounded semiannually.

§22-6C-7.  Conflicts.

If there is any conflict between a division order and an oil and gas lease, the terms and conditions of the oil and gas lease shall control. A division order may not amend or supplement the terms and conditions of an oil and gas lease.