H. B. 2693
(By Mr. Speaker (Mr. Chambers) and Delegates Carper,
Moore, Preece, Browning, Staton and Collins)
[Introduced March 24, 1993; referred to the
Committee on the Judiciary.]
A BILL to amend chapter twenty-two of the code of West Virginia,
one thousand nine hundred thirty-one, as amended, by adding
thereto a new article, designated article fourteen,
relating to coalbed methane gas wells and units; declaring
public policy; making certain findings; defining certain
terms; providing for a system of issuing permits for coalbed
methane gas wells; providing for an application procedure;
providing the chief of the office of oil and gas with
authority to manage the program, promulgate rules and issue
permits; providing that provisions of the statue apply to
certain lands; classification of coalbed methane wells and
coalbed methane; permit for coalbed methane well required,
consent of coal owner and operator required; performance
bonds and other surety required; certain notices required;
comments, objections and review board hearings; notice to
owners of hearing; application review; providing orders;
conflicting claims and division order; drilling units; unit
agreements; spacing; plugging abandoned wells; judicial
review; injunctive relief; providing certain penalties and
providing for liberal construction of the provisions of the
bill.
Be it enacted by the Legislature of West Virginia:
That chapter twenty-two of the code of West Virginia, one
thousand nine hundred thirty-one, as amended, be amended by
adding thereto a new article, designated article fourteen, to
read as follows:
ARTICLE 14. COALBED METHANE WELLS AND UNITS.
§22-14-1. Declaration of public policy; legislative findings.
(a) The Legislature hereby determines and finds that coalbed
methane found in West Virginia in certain coalbeds is hazardous
to life and property; that the venting of coalbed methane from
mine areas and degasification of coal seams has been and
continues to be approved by the state for the purpose of ensuring
the safe recovery of coal; that commercial recovery and marketing
of coalbed methane should in some cases be facilitated because
the energy needs of this state and the United States indicate
that the fullest practical recovery of both coal and coalbed
methane should be encouraged; that the Energy Policy Act of 1992
was enacted in part to encourage coalbed methane development and
the state of West Virginia should enact legislation which carries
out the purposes of said act; that in order to encourage and
ensure the fullest practical recovery of coal and coalbed methane
in this state and to further ensure the safe recovery of bothnatural resources, it is in the public interest to enact this
article authorizing coalbed methane well permits, regulating the
design of coalbed methane wells and recovery techniques,
authorizing coalbed methane well units and pooling of interests
therein to provide all coalbed methane operators and coalbed
methane royalty owners with an opportunity to recover their just
and equitable share of production.
(b) It is hereby declared to be the public policy of this
state and in the public interest to:
(1) Facilitate the expeditious, safe evacuation of hazardous
coalbed methane from the coalbeds of this state, maintain the
ability of coal operators at all times to vent coalbed methane
from mine areas, and preserve coal seams for future mining;
(2) Foster, encourage and promote the commercial development
of this state's coalbed methane by establishing procedures for
issuing permits and forming drilling units for coalbed methane
wells without adversely affecting the safety of mining or the
mineability of coal seams;
(3) Safeguard, protect and enforce the correlative rights of
coalbed methane well operators and coalbed methane royalty owners
in a pool of coalbed methane to the end that each such operator
and royalty owner may obtain his or her just and equitable share
of production from coalbed methane recovered and marketed under
this article;
(4) Safeguard and protect the mineability of coal during the
removal of coalbed methane, as permitted under this article; and
(5) Create a state permitting procedure and authority to
encourage coalbed methane development as encouraged by the Energy
Policy Act of 1992;
(6) Seek the deletion of the state of West Virginia from the
list of affected states by the secretary of the United States
department of the interior as provided for in the Energy Policy
Act of 1992.
§22-14-2. Definitions.
Unless the context in which used clearly requires a
different meaning, as used in this article:
(a) "Review board" or "board" means the West Virginia
shallow gas well review board provided for in article seven of
this chapter;
(b) "Coalbed" or "coal seam" means a seam of coal, whether
workable or unworkable, and the noncoal roof and floor of said
seam of coal;
(c) "Coalbed methane" means methane or any associated gases
formed with and being a constituent of coal and which becomes
occluded in a coal seam and the rock strata associated with or
surrounding a coal seam;
(d) "Coalbed methane royalty owner" means any owner of
coalbed methane in place;
(e) "Coalbed methane well" means any shaft, hole or well
sunk, drilled, bored or dug into the earth for the extraction of
coalbed methane, or which may otherwise be completed in a coal
seam for the commercial production of coalbed methane. The term"well" shall mean a coalbed methane well unless the context
indicates otherwise. The term " coalbed methane well" does not
include any shaft, hole or well sunk, drilled, bored or dug into
the earth for core drilling, production of water, venting gas
from a mine area, or degasification of a coal seam;
(f) "Coalbed methane well operator" or "operator" means any
person who has the right to operate or does operate a coalbed
methane well;
(g) "Coal operator" means any person who has the right to
mine the coal or operates a coal mine;
(h) "Coal owner" means any person who owns or leases a coal
seam;
(i) "Chief" means the chief of the office of oil and gas of
the division of environmental protection provided for in section
eleven, article one of this chapter;
(j) "Director" means the director of the division of
environmental protection;
(k) "Division" means the division of environmental
protection;
(l) "Office" means office of oil and gas provided for in
section seven, article one of this chapter;
(m) "Person" means any natural person, corporation, firm,
partnership, partnership association, venture, receiver, trustee,
executor, administrator, guardian, fiduciary, other
representative of any kind, any recognized legal entity, or
political subdivision or agency thereof;
(n) "Stimulate" means any action taken to increase the
natural flow of coalbed methane or the inherent productivity of
a coalbed methane well, including, but not limited to,
fracturing, shooting, acidizing or water flooding;
(o) "Waste" means (i) physical waste as the term is
generally understood in the gas industry and as provided for in
article one, chapter twenty-two-b of this code, but giving
special consideration to coal mining operations and the safe
recovery of coal; (ii) the locating, drilling, equipping,
operating, producing or transporting of coalbed methane in a
manner that causes or tends to cause a substantial reduction in
the quantity of coalbed methane recoverable from a pool under
prudent and proper operations, or that causes or tends to cause
a substantial or unnecessary or excessive surface loss of coalbed
methane; or (iii) the drilling of more wells than are reasonably
required to recover efficiently and economically the maximum
amount of coalbed methane from a pool. Waste does not include
coalbed methane vented or released from any mine area, the
degasification of a coal seam for the purpose of mining coal, the
plugging of coalbed methane wells for the purpose of mining coal,
or the conversion of coalbed methane wells to vent holes for the
purpose of mining coal;
(p) "Workable coalbed" or "workable coal seam" means any
seam of coal twenty inches or more in thickness, or any seam of
less thickness which is being commercially mined or can be shown
to be capable of being commercially mined.
§22-14-3. Chief -- Powers and duties generally.
(a) The chief of the office of oil and gas shall have the
duty of issuing permits and otherwise supervising the execution
and enforcement of the provisions of this article, all subject to
the review and approval of the director.
(b) The chief of the office of oil and gas is authorized to
promulgate legislative rules necessary to effectuate the purposes
of this article, subject to the review and approval by the
director.
(c) In addition to all other powers and duties conferred
upon the chief, the chief shall have the power and duty to:
(1) Perform all duties which are expressly imposed upon him
by the provisions of this article, as well as duties assigned to
him by the director;
(2) Perform all duties as the permit issuing authority for
the state in all matters pertaining to the exploration,
development, production, and recovery of coalbed methane in
accordance with the provisions of this article;
(3) Perform such acts as may be necessary or appropriate to
secure to this state the benefits of federal legislation by
establishing programs relating to the exploration, development,
production, and recovery of coalbed methane, which programs are
assumable by the state;
(4) Visit and inspect any coalbed methane well or well site
and call for the assistance of any oil and gas inspectors or
other employees of the office of oil and gas in the enforcementof the provisions of this article;
(5) Collect the permit application fee for the drilling of
a coalbed methane well;
(6) Collect the permit application fee for a drilling unit.
§22-14-4. Application of article; exclusions; application of
chapter twenty-two-b to coalbed methane wells.
(a) The provisions of this article apply to (1) all lands
located in this state under which a coalbed is located, including
any lands owned or administered by the state or any agency or
subdivision thereof, and (2) any coalbed methane well.
(b) This article does not apply to or affect (1) any well
which is not a coalbed methane gas well, or (2) any ventilation
fan, vent hole, mining apparatus, or other facility utilized
solely for the purpose of venting any mine or mine area, as the
said terms are defined in section one, article one-a, chapter
twenty-two-a of this code, or (3) the ventilation of any mine or
mine area or degasification of any coal seam for the mining of
coal.
(c) To the extent that coalbed methane wells are similar to
wells, as defined in section one, article one, chapter twenty-
two-b of this code, and the production of coalbed methane is
similar to the production of natural gas, coalbed methane wells
shall be treated as wells and coalbed methane treated as natural
gas and subject to the following sections of article one of
chapter twenty-two-b of this code:
(1) The provisions of section three pertaining to thefindings and orders of inspectors concerning violations,
determination of reasonable time for abatement, extensions of
time for abatement, special inspections, notice of findings and
orders;
(2) The provisions of section four providing for the review
of findings and orders by the chief, special inspection,
annulment, revision of order and notice;
(3) The provisions of section five providing for the
requirements of findings, orders and notices; posting of findings
and orders; and judicial review of final orders of the chief;
(4) The provisions of section eleven providing for the
review of applications, issuance of permits in the absence of
objection and copy of permits to county assessor. For the
purposes of such section eleven a coalbed methane well permit or
a drilling unit permit shall be treated the same as a well work
permit;
(5) The provisions of section twenty-one providing for
protective devices--installation of freshwater casings;
(6) The provisions of section twenty-two providing for a
well log to be filed, contents, and authority to promulgate
regulations. In addition to the requirements of such section,
the operator shall certify that the well was drilled and
completed as shown on the well plat required for a coalbed
methane well, or in the alternative, file a revised well plat
showing the actual location of the well and the coal seams in
which the well is completed for production. Such log andcertificate shall be served on all coal owners and operators who
must be named in the permit application under section five of
this article;
(7) The provisions of section twenty-eight providing for
supervision by the chief over drilling and reclamation
operations, complaints, hearings and appeals;
(8) The provisions of section twenty-nine providing for
special reclamation funds and fees;
(9) The provisions of section thirty providing for
reclamation requirements;
(10) The provisions of section thirty-one providing for
preventing waste of gas, plan of operation required for wasting
gas in process of producing oil and rejection thereof;
(ii) The provisions of section thirty-two providing for the
right of adjacent owner or operator to prevent waste of gas and
recovery of costs;
(12) The provisions of section thirty-three providing for
restraining waste;
(13) The provisions of section thirty-four providing for
offenses and penalties;
(14) The provisions of section thirty-five providing for
civil action for contamination or deprivation of freshwater
source or supply and presumption;
(15) The provisions of section thirty-nine providing for
injunctive relief.
In addition to the foregoing and subject to the samequalifications, the provisions of article five of chapter twenty-
two-b shall apply to coalbed methane wells. Any well which is
abandoned or presumed to be abandoned under the provisions of
this article shall be treated as an abandoned well under said
article five.
§22-14-5. Permit required for coalbed methane well; permit fee;
application; soil erosion control plan; penalties.
(a) It is unlawful for any person to commence, operate,
deepen or stimulate any coalbed methane well, to conduct any
horizontal drilling from the surface for the purpose of
commercial production of coalbed methane, or to convert any
existing well, vent hole or other hole to a coalbed methane well,
including in any case site preparation work which involves any
disturbance of land, without first securing from the chief a
permit pursuant to this article.
(b) Every permit application filed under this section shall
be verified and shall contain the following:
(1) The names and addresses of (i) the well operator, (ii)
the agent required to be designated under subsection (e) of this
section, and (iii) every person or entity whom the applicant must
notify under any section of this article;
(2) The name and address of each coal operator and each coal
owner of any coal seam which is (i) penetrated by, or (ii) within
seven hundred fifty feet of any portion of the proposed well
bore;
(3) The well name or such other identification as the chiefmay require;
(4) The approximate depth to which the well is to be
drilled, deepened or converted, the coal seams (stating the depth
and thickness of each seam) in which the well will be completed
for production, and any other coal seams (including the depth and
thickness of each seam) which will be penetrated by the well;
(5) A description of any stimulation or other means to be
used for obtaining or enhancing production from the well;
(6) If the proposed well will require casing or tubing to be
set, the entire casing program for the well, including the size
of each string of pipe, the starting point and depth to which
each string is to be set, and the extent to which each such
string is to be cemented;
(7) If the proposed operation is to convert an existing
well, as defined in section one, article one, chapter
twenty-two-b of this code, to a coalbed methane well, all
information required by this section, all formations from which
production is anticipated, and any plans to plug any portion of
the well;
(8) If the proposed coalbed methane well will be completed
in some but not all coal seams for production, a plan and design
for the well which will protect all workable coal seams which
will be penetrated by the well;
(9) If the proposed operations will include horizontal
drilling of a well commenced on the surface, a description of
such operations, including both the vertical and horizontalalignment and extent of the well from the surface to total depth;
(10) Any other relevant information which the chief may
require by rule.
(c) Each application for a coalbed methane well permit shall
be accompanied by the following:
(1) The applicable bond prescribed by section seven of this
article;
(2) A permit application fee of two hundred fifty dollars;
(3) The erosion and sediment control plan required under
subsection (d) of this section;
(4) The consent and agreement of the coal owner as required
by section six of this article;
(5) A plat prepared by a licensed land surveyor or
registered engineer showing the district and county in which the
drill site is located, the name of the surface owner of the drill
site tract, the acreage of the same, the names of the surface
owners of adjacent tracts, the names of all coal owners
underlying the drill site tract, the proposed or actual location
of the well determined by a survey, the courses and distances of
such location from two permanent points or landmarks on said
tract, the number to be given the coalbed methane well, the
proposed date for completion of drilling, the proposed date for
any stimulation of the well, and if horizontal drilling of a well
commenced on the surface is proposed, the vertical and horizontal
alignment and extent of the well; and
(6) A certificate by the applicant that the noticerequirements of section eight of this article have been satisfied
by the applicant. Such certification may be by affidavit of
personal service, or the return receipt card, or other postal
receipt, for certified mailing.
(d) An erosion and sediment control plan shall accompany
each application for a permit. Such plan shall contain methods
of stabilization and drainage, including a map of the project
area indicating the amount of acreage disturbed. The erosion and
sediment control plan shall meet the minimum requirements of the
West Virginia erosion and sediment control manual as adopted and
from time to time amended by the office of oil and gas in
consultation with the several soil conservation districts
pursuant to the control program established in this state
throughs section 208 of the federal Water Pollution Control Act
Amendments of 1972. The erosion and sediment control plan shall
become part of the terms and conditions of a permit and the
provisions of the plan shall be carried out where applicable in
operations under the permit. The erosion and sediment control
plan shall set out the proposed method of reclamation which shall
comply with the requirements of section thirty, article one,
chapter twenty-two-b of this code.
(e) The well operator named in such application shall
designate the name and address of an agent for such operator who
shall be the attorney-in-fact for the operator and who shall be
a resident of the state of West Virginia, upon whom notices,
orders or other communications issued pursuant to this articlemay be served, and upon whom process may be served. Every well
operator required to designate an agent under this section shall
within five days after the termination of such designation notify
the office of such termination and designate a new agent.
(f) The well owner or operator shall install the permit
number as issued by the chief in a legible and permanent manner
to the well upon completion of any permitted work. The
dimensions, specifications and manner of installation shall be in
accordance with the rules of the chief.
(g) The chief shall deny the issuance of a permit if he
determines that the applicant has committed a substantial
violation of a previously issued permit, including the erosion
and sediment control plan, or a substantial violation of one or
more of the rules promulgated hereunder, and has failed to abate
or seek review of the violation. In the event that the chief
finds that a substantial violation has occurred with respect to
existing operations and that the operator has failed to abate or
seek review of the violation in the time prescribed, he may
suspend the permit on which said violation exists, after which
suspension the operator shall forthwith cease all work being
conducted under the permit until the chief reinstates the permit,
at which time the work may be continued. The chief shall make
written findings of any such determination made by him and may
enforce the same in the circuit courts of this state and the
operator may appeal such suspension pursuant to the provisions of
section seventeen of this article. The chief shall make awritten finding of any such determination.
(h) Any person who violates any provision of this section
shall be guilty of a misdemeanor, and, upon conviction thereof,
shall be fined not more than five thousand dollars, or be
imprisoned in the county jail not more than twelve months, or
both fined and imprisoned.
§22-14-6. Consent and agreement of coal owner or operator.
No permit shall be issued for a coalbed methane well unless
and until the applicant has obtained and filed with the chief a
consent and agreement from each coal owner and each coal operator
of any workable coal seam which is within seven hundred fifty
horizontal feet of the well bore and one hundred vertical feet
above and below each coal seam completed for production:
Provided,
That such consent and agreement shall not be necessary
with respect to any seam which is owned or operated by the
applicant and the applicant so certifies. Such consent and
agreement must provide: (i) That such coal owner or operator has
been provided with a copy of the application for permit as
required by section four of this article and with a copy of all
plats and documents which must accompany the application and (ii)
that such coal owner or operator consents and agrees to the
drilling and operation of the well and any stimulation of the
coal seam as described in such application.
§22-14-7. Performance bonds; corporate surety or other security.
(a) No permit shall be issued pursuant to this article
unless a bond is or has been furnished as provided in thissection.
(b) A separate bond may be furnished for a particular
coalbed methane well in the sum of ten thousand dollars, payable
to the state of West Virginia, conditioned on full compliance
with all laws, rules relating to the drilling, operation and
stimulation of such wells, to the plugging, abandonment and
reclamation thereof, and for furnishing such reports and
information as may be required by the chief.
(c) When an operator makes or has made application for
permits to drill, operate or stimulate more than one coalbed
methane well or a combination of coalbed methane wells and wells
regulated under article one, chapter twenty-two-b of this code,
the operator may in lieu of furnishing a separate bond furnish a
blanket bond in the sum of fifty thousand dollars, payable to the
state of West Virginia, and conditioned as stated in subsection
(b) of this section.
(d) All bonds submitted hereunder shall have a corporate
bonding or surety company authorized to do business in the state
of West Virginia as surety thereon, or in lieu of a corporate
surety, the operator may elect to deposit with the chief cash,
collateral securities or any combination thereof as provided for
in subsection twenty-six-d, article one, chapter twenty-two-b of
this code.
(e) For purposes of bonding requirements, a coalbed methane
well shall be treated as a well, as defined and regulated in
article one, chapter twenty-two-b of this code, and theprovisions of subsections (e), (g), (h), (i) and (j) of section
twenty-six thereof shall apply.
§22-14-8. Notice to owners.
(a) Prior to filing an application for a permit for a
coalbed methane well under this article, the applicant shall
deliver by personal service or by certified mail, return receipt
requested, copies of the application, well plat and erosion and
sediment control plan to the following:
(1) The owners of record of the surface of the tract on
which the coalbed methane well is to be located;
(2) The owners of record of the surface of any tract which
is to be utilized for roads or other land disturbance;
(3) Each owner and each operator of any coal seam (i) from
whom a consent and agreement provided for in section six of this
article is not required, and (ii) whose coal seam will be
penetrated by the coalbed methane well or is within seven hundred
fifty feet of any portion of the well bore; and
(4) Each owner and lessee of record and each operator of
natural gas surrounding the well bore and existing in formations
above the top of the uppermost member of the "Onondaga Group" or
at a depth less than six thousand feet, whichever is shallower.
Notices to gas operators shall be sufficient if served upon the
agent of record with the office of oil and gas.
(b) If more than three tenants in common or other coowners
of interests described in subsection (a) of this section hold
interests in such lands, the applicant may serve the documentsrequired upon the person described in the records of the sheriff
required to be maintained pursuant to section eight, article one,
chapter eleven-a of this code, and publish in the county in which
the well is located or to be located a Class II legal
advertisement as described in section two, article three, chapter
fifty-nine of this code, containing such notice and information
as the chief shall prescribe by rule, with the first publication
date being at least ten days prior to the filing of the permit
application:
Provided,
That all owners and operators occupying
or operating on the tracts where the well work is, or is proposed
to be located at the filing date of the permit application shall
receive actual service of the documents required by subsection
(a) of this section.
(c) Materials served upon persons described in subsections
(a) and (b) of this section shall contain a statement of the
methods and time limits for filing comment and objection, who may
file comment and objection, the name and address of the chief
with whom the comment and objection must be filed, the ability to
obtain additional information from the chief, the fact that such
persons may request notice of the permit decision, and a list of
persons qualified to test water as provided in this section.
(d) Any person entitled to submit comment or objection shall
also be entitled to receive a copy of the permit as issued or a
copy of the order denying the permit if such person requests the
receipt thereof as a part of the comment or objection concerning
said permit application.
(e) Persons entitled to notice may contact the district
office of the office of oil and gas to ascertain the names and
location of water testing laboratories in the area capable and
qualified to test water supplies in accordance with standard
accepted methods. In compiling such list of names the office of
oil and gas shall consult with the state and local health
departments.
§22-14-9. Procedure for filing comments.
All persons described in subsection (a), section eight of
this article may file comments with the chief as to the location
or construction of the applicant's proposed well within fifteen
days after the application is filed with the chief.
§22-14-10. Objections to coalbed methane wells by coal owner or
operator; hearings.
The owner or operator of any coal seam whose interests may
be adversely affected by a coalbed methane well may, within
fifteen days from the receipt of notice required by section eight
of this article, file objections in writing to such proposed
drilling with the chief, setting out the grounds on which such
objections are based.
§22-14-11. Review board hearing; findings; order.
(a) If comment or objection is filed under sections nine or
ten of this article, the chief shall forthwith provide to the
chairman of the review board a copy of any such objection or
comment, together with the application for a permit for the
coalbed methane well in question, the plat filed therewith andsuch other information accompanying the permit as may relate to
the comment or grounds for the objection.
(b) The review board shall forthwith schedule a hearing for
the purpose of considering such objection or comment. Notice
shall be given fifteen days in advance to any person filing
comment or objection and to any applicant, and the review board
shall hold such hearing within thirty days after the deadline for
filing objection or comment.
At such hearing the review board shall consider the matters
raised in any objection or comment and shall base its decision
upon the ability to mine any affected coal seam safely and the
protection of any such seam for future mining, considering in
this regard the following:
(1) Whether the drilling location is above or in close
proximity to any mine opening, shaft, entry, travelway, airway,
haulageway, drainageway or passageway or to any proposed
extension thereof, any abandoned, operating coal mine or any coal
mine already surveyed and platted but not yet being operated;
(2) Whether the proposed drilling can reasonably be done
through an existing or planned pillar of coal, or in close
proximity to an existing or planned pillar of coal, taking into
consideration the surface topography;
(3) Whether the proposed well can be drilled safely, taking
into consideration the dangers from creeps, squeezes or other
disturbances due to the extraction of coal;
(4) The extent to which the proposed drilling locationunreasonably interferes with the safe recovery of coal and gas;
(5) The extent to which the proposed drilling location will
unreasonably interfere with present or future coal mining
operations on the surface including, but not limited to,
operations subject to the provisions of article three, chapter
twenty-two-a of this code;
(6) The feasibility of moving the proposed drilling location
to a mined-out area, below the coal outcrop, or to some other
location;
(7) The feasibility of a drilling moratorium for not more
than one year in order to permit the completion of imminent coal
mining operations;
(8) The methods proposed for the recovery of coal and gas;
(9) The practicality of locating the well on a uniform
pattern with other wells;
(10) The surface topography and use; and
(11) Whether any stimulation of the coal seam will render
such seam or any other workable coal seams unmineable or unsafe
for mining.
(c) The review board shall enter a written order containing
findings of fact and conclusions which address any relevant
considerations in subsection (b) of this section and based
thereon shall issue and file with the chief a written order
directing him to:
(1) Refuse a drilling permit; or
(2) Issue a drilling permit for the proposed drillinglocation; or
(3) Issue a drilling permit for an alternate drilling
location different from that requested by the applicant; or
(4) Issue a drilling permit either for the proposed drilling
location or for an alternative drilling location different from
that requested by the applicant, but not allow the drilling of
the well for a period of not more than one year from the date of
issuance of such permit.
Upon receipt of such board order, the chief shall promptly
undertake the action directed by the board:
Provided,
That all
other provisions of this article have been complied with. All
permits issued by the chief pursuant to this section shall be
effective ten days after issuance unless the review board orders
the chief to stay the effectiveness of a permit for a period not
to exceed thirty days from the date of issuance.
If a permit is issued, the chief shall indicate the approved
drilling location on the plat filed with the application for a
permit and shall number and keep an index of and docket each
plat, the name of the well operator, the names and addresses of
all persons notified, the dates of conferences, hearings and all
other actions taken by the chief and the review board. The chief
shall also prepare a record of the proceedings, which record
shall include all applications, plats and other documents filed
with the chief, all notices given and proof of service thereof,
all orders issued, all permits issued and a transcript of the
hearing. The record prepared by the chief shall be open toinspection by the public.
§22-14-12. Drilling units and pooling of interests.
(a) In the absence of a voluntary agreement, an operator
having an interest in forming a drilling unit may file an
application with the chief to pool (i) separately owned interests
in a single tract, (ii) separately owned tracts, (iii) separately
owned interests in any tract, and (iv) any combination of (i),
(ii) and (iii) to form a drilling unit for the production of
coalbed methane from one or more coalbed methane wells.
(b) The application for a drilling unit may accompany the
application for a permit for a coalbed methane well or be filed
as a supplement to the permit application. Such application
shall be verified by the applicant and contain the following
information for each well in the proposed unit:
(1) The identity of each well and operator as set out in the
well permit application;
(2) Each well number, if one has been assigned;
(3) The acreage of the proposed unit, the identity and
acreage of each separate tracts to be included in the proposed
unit, and where parts of tracts are included, the acreage of such
parts;
(4) The district and county in which the unit is located;
(5) The names and addresses of the owners of the coal and
gas underlying each separate tract, or the portion thereof which
is to be included in the unit, any lessees or operators thereof,
any coalbed methane royalty owners not otherwise named, and anyother claimants thereto known to the applicant. When any coal
seam is separately owned, the list of names shall identify such
separate ownership giving the names of the separately owned
seams;
(6) Other pertinent and relevant information as the chief
may prescribe by rules.
(c) The application for a drilling unit shall be accompanied
with the following:
(1) A plat prepared by a licensed land surveyor or
registered professional engineer showing the location of the
coalbed methane well or wells, or proposed well or wells, the
boundary and acreage of the proposed drilling unit, the boundary
and acreage of each tract contained in the unit and, where parts
of tracts are included, the boundary and acreage of such parts,
a name identification of each tract, and the district and county
in which the unit is located. All boundaries must be shown with
courses and distances;
(2) A permit application fee of two hundred fifty dollars;
(3) A certificate by the applicant that the notice
requirements of section thirteen of this article were satisfied
by the applicant. Such certification may be by affidavit of
personal service, or the return receipt card, or other postal
receipt, for certified mailing;
(4) An estimate of the cost, or the actual cost if known, of
drilling, completing, equipping, operating, plugging and
abandoning any well or wells in the proposed unit.
§22-14-13. Same -- Notice to owners.
(a) At least thirty days prior to the date set for hearing
under section fourteen of this article, the applicant shall
deliver by personal service or by certified mail, return receipt
requested, notice to the following:
(1) Each coal owner and coal operator of any coal seam
underlying any tract or portion thereof which is proposed to be
included in the unit;
(2) Each owner and lessee of record and each operator of
natural gas surrounding the well bore and existing in formations
above the top of the uppermost member of the "Onondaga Group" or
at a depth less than six thousand feet, whichever is shallower.
Notices to gas operators shall be sufficient if served upon the
agent of record with the office of oil and gas;
(3) Any coalbed methane royalty owner to the extent not
otherwise named; and
(4) Any other person or entity known to the operator to have
an interest in the coal or natural gas.
(b) The notice required by subsection (a) of this section
shall specify a time and place for a hearing on this application,
shall advise the persons notified that the applicant has filed an
application for a drilling unit for the production of coalbed
methane, that they may be present and object or offer comments to
the formation of the proposed unit, and shall be accompanied with
copies of (i) the permit application for the coalbed methane
well, (ii) the permit application for the drilling unit, and(iii) the plat of the drilling unit.
§22-14-14. Same -- Review of application; hearing; pooling
order; spacing; operator; elections; working
interests, royalty interests, carried interests,
escrow account for conflicting claims, division
order.
(a) The chief shall, upon request of a proposed applicant
for a drilling unit, provide a convenient date and time for a
hearing on the application for a drilling unit, which hearing
date shall be no sooner than thirty-five days nor more than sixty
days of the date the request for hearing is made. The chief
shall review the application and on the date specified for a
hearing shall conduct a public hearing. The chief shall take
evidence, making a record thereof and consider:
(1) The area which may be drained efficiently and
economically by the proposed coalbed methane well or wells;
(2) The plan of development of the coal and the need for
proper ventilation of any mines or degasification of any affected
coal seams;
(3) The nature and character of any coal seam or seams which
will be affected by the coalbed methane well or wells;
(4) The surface topography and property lines of the lands
underlaid by the coal seams to be included in the unit;
(5) Evidence relevant to the proper boundary of the drilling
unit;
(6) The nature and extent of ownership of each coalbedmethane royalty owner or claimant and whether conflicting claims
exist;
(7) Whether the applicant for the drilling unit proposes to
be the operator of the coalbed methane well or wells within the
unit; and if so, whether such applicant has a lease or other
agreement from the owners or claimants of a majority interest in
the proposed drilling unit;
(8) Whether a disagreement exists among the coalbed methane
royalty owners or claimants over the designation of the operator
for any coalbed methane wells within the unit, and if so,
relevant evidence to determine which operator can properly and
efficiently develop the coalbed methane within the unit for the
benefit of the majority of the coalbed methane royalty owners;
(9) If more than one person is interested in operating a
well within the unit, the estimated cost submitted by each such
person for drilling, completing, operating and marketing the
coalbed methane from any proposed well or wells; and
(10) Any other available geological or scientific data
pertaining to the pool which is proposed to be developed.
(b) The chief shall take into account the evidence
introduced, comments received and any objections at the hearing,
and if satisfied that a drilling unit should not be established,
shall enter an order denying the application. If the chief is
satisfied that a drilling unit should be established, he shall
enter a pooling order establishing a drilling unit. Such pooling
order shall:
(1) Establish the boundary of the proposed unit, making such
adjustments in the boundary as is just;
(2) Authorize the drilling and operation of a coalbed
methane well or wells for production of coalbed methane from the
pooled acreage;
(3) Establish minimum distances for any wells in the unit
and for other wells which would drain the pooled acreage;
(4) Designate the operator who will be authorized to drill,
complete and operate any well or wells in the unit;
(5) Establish a reasonable fee for the operator for
operating costs, which shall include routine maintenance of the
well and all accounting necessary to pay all expenses, royalties
and amounts due working interest owners;
(6) Such other findings and provisions as are appropriate
for each order.
(c) The operator designated in such order shall be
responsible for drilling, completing, equipping, operating,
plugging and abandoning the well, shall market all production
therefrom, shall collect all proceeds therefor, and shall
distribute such proceeds in accordance with the division order
issued by the chief.
(d) Upon issuance of the pooling order the coalbed methane
royalty owners or any lessee of any such owners or any claimants
thereto may make one of the following elections:
(1) An election to sell or lease its interest to the
operator on such terms as the parties may agree, or if unable toagree, to take its fractional interest in the royalty;
(2) An election to become a working interest owner by
participating in the risk and cost of the well; or
(3) An election to participate in the operation of the well
as a carried interest owner.
Any entity claiming an ownership interest in the coalbed
methane within the unit which does not make an election within
the time prescribed in a pooling order shall be deemed to have
leased its coalbed methane interest to the operator and shall be
entitled to its fractional interest in the royalty.
(e) The working interest in the well shall include the right
(i) to participate in decisions regarding expenditures in excess
of operating costs, taxes and other costs and expenses allowed in
the pooling order and (ii) the obligation to pay for all
expenditures. The working interest shall exist in; (i) all
owners who participate in the risk and cost of drilling and
completing the well; and (ii) carried interest owners after
recoupment provided in subsection (g) of this section. The
working interest owners' net revenue share shall be seven eighths
of the proceeds of sales of coalbed methane at the wellhead after
deduction of operating costs, taxes and other costs and expenses
allowed in a pooling order. Unless the working interest owners
otherwise agree, the working interest owners shall share in all
costs and decisions in proportion to their ownership interest in
the unit. If any working interest owner deposits or contributes
amounts in the escrow account which exceed actual costs, suchowner shall be entitled to a refund; and if amounts deposited or
contributed are less than actual costs, such owner shall make a
deposit or contribution for the deficiency.
(f) The royalty interest in a well shall include the right
to receive one eighth of the gross proceeds resulting from the
sale of methane at the wellhead and such interest shall exist in
the coalbed methane royalty owners. Each such owner shall be
entitled to share in the royalty in proportion to his or her
fractional interest in the unit.
(g) Where a coalbed methane royalty owner elects to become
a carried interest owner, such owner shall be entitled to his
proportionate share of the working interest after the other
working interest owners have recouped three hundred percent of
the reasonable capital costs of the well or wells, including
drilling, completing, equipping, plugging and abandoning and any
further costs of reworking or other improvements of a capital
nature.
Each pooling order issued shall provide for the
establishment of an escrow account into which the payment of
costs and proceeds attributable to any conflicting interests
shall be deposited and held for the interest of the claimants as
follows:
(1) Each participating working interest owner, except for
the operator, shall deposit in the escrow account its
proportionate share of the costs allocable to the ownership
interest claimed by such working interest owner.
(2) The operator shall deposit in the escrow account all
proceeds attributable to the conflicting interests of any coalbed
methane royalty owners who lease, or are deemed to have leased,
their interest, plus all proceeds in excess of operational
expenses, as allowed in the pooling order, attributable to the
conflicting working and carried interest owners.
(i) After each coalbed methane royalty owner has made, or
has been deemed to have made, an election under subsection (d) of
this section, the chief shall enter a division order which shall
set out the net revenue interest of each working interest owner,
including each carried interest owner, and the royalty interest
of each coalbed methane royalty owner. Thereafter payments shall
be made to working interest owners, carried interest owners and
royalty interest owners in accordance with the division order,
except that payments attributable to conflicting claims shall be
deposited in the escrow account. The fractional interest of each
owner shall be expressed as a decimal carried to the sixth place.
(j) Upon resolution of conflicting claims either by
voluntary agreement of the parties or a final judicial
determination, the chief shall enter a revised division order in
accordance with such agreement or determination and all amounts
in escrow shall be distributed as follows:
(1) Each legally entitled working interest owner shall
receive its proportionate share of the proceeds attributable to
the conflicting ownership interests;
(2) Each legally entitled carried interest owner shallreceive its proportionate share of the proceeds attributable to
the conflicting ownership interests, after recoupment of amounts
provided in subparagraph (g) of this section;
(3) Each legally entitled entity leasing, or deemed to have
leased, its coalbed methane shall receive a share of the royalty
proceeds attributable to the conflicting interests; and
(4) The operator shall receive the costs contributed to the
escrow account by each legally entitled participating working
interest owner.
(k) The chief shall enact rules and regulations for the
administration and protection of funds delivered to escrow
accounts.
(l) No provision of this section or article shall obviate
the requirement that the coal owner's consent and agreement be
obtained prior to the issuance of a permit as required under
section six of this article.
§22-14-15. Operation on drilling units.
All operations including, but not limited to, the
commencement, drilling or operation of a well upon a drilling
unit for which a pooling order has been entered, are hereby
deemed to be operations on each separately owned tract in the
drilling unit by the several owners. That portion of the
production allocated to a separately owned tract included in a
drilling unit is hereby deemed to be produced from that tract.
§22-14-16. Validity of unit agreements.
No agreement between or among coalbed methane operators orowners entered into for the development of coalbed methane or
forming drilling units therefor may be held to violate the
statutory or common law of this state prohibiting monopolies or
acts, arrangements, contracts, combinations or conspiracies in
restraint of trade or commerce.
§22-14-17. Spacing.
No coalbed methane well may be drilled closer than one
hundred feet of the outside boundary of the coal tract from which
coalbed methane is or will be produced. Spacing shall otherwise
be as provided in a pooling order issued by the chief or order
issued by the review board.
§22-14-18. Dry or abandoned wells.
Any coalbed methane well which is completed as a dry hole or
which is not in use for a period of twelve consecutive months
shall be presumed to have been abandoned and shall promptly be
plugged by the operator in accordance with the provisions of this
article, unless the operator furnishes satisfactory proof to the
chief that there is a bona fide future use for such well in
accordance with the rules promulgated under article one, chapter
twenty-two-b of this code.
§22-14-19. Plugging and reclamation of well; notice; objection;
plugging order.
All dry or abandoned coalbed methane wells, or coalbed
methane wells presumed to be abandoned, shall be plugged and
reclaimed. Prior to the commencement of plugging operations the
operator shall give thirty days' advance notice to the chief andto all coal owners and operators whose names and addresses would
be required for a permit application under subdivision (2),
subsection (b), section five of this article as of the date of
the notice. Such notice shall set out the number and other
identification of the well, a copy of the well plat, the date
plugging will commence, and the manner and method of plugging.
Any coal owner or operator whose coal seam is penetrated by
such well shall have the right to convert the well to a vent hole
or otherwise take the well upon a determination by the chief that
the coal owner or operator has placed the well under a mining
permit, the chief shall release the operator's bond and the
operator shall be relieved of further responsibility for the
well.
Any coal owner or operator whose seam is affected by the
well shall have the right within fifteen days after receipt of
notice to file comment or objection with the chief with respect
to the proposed manner or method of plugging. The chief shall
consider any such comment or objection and issue an order
specifying the manner and method of plugging and reclamation.
The chief shall promulgate rules specifying the manner and
method of plugging coalbed methane wells and in doing so, or in
entering any order for such plugging and reclamation, shall give
special consideration to the ability to mine any affected coal
seam safely and the protection of any affected coal seam for
future mining.
§22-14-20. Judicial review; appeal to supreme court of appeals;
legal representation for board.
(a) Any person adversely affected by an order of the chief
or board is entitled to judicial review. All of the pertinent
provisions of section four, article five, chapter twenty-nine-a
of this code apply to and govern the judicial review.
(b) The judgment of the circuit court is final unless
reversed, vacated or modified on appeal to the supreme court of
appeals in accordance with the provisions of section one, article
six, chapter twenty-nine-a of this code.
(c) Legal counsel and services for the chief or board in all
appeal proceedings in any circuit court and the supreme court of
appeals shall be provided by the attorney general or his or her
assistants and in any circuit court by the prosecuting attorney
of the county, all without additional compensation. The chief or
board, with the written approval of the attorney general, may
employ special counsel to represent the chief or board at any
appeal proceedings.
§22-14-21. Injunctive relief.
(a) Whenever it appears to the chief or board that any
person has been or is violating or is about to violate any
provision of this article, any rule promulgated by the chief or
board, any order or any final decision of the chief or board, the
chief or board may apply, in the name of the state, to the
circuit court of the county in which the violation occurred, is
occurring or is about to occur, or to the judge thereof in
vacation, for injunctive relief against the person and any otherpersons who have been, are or are about to be, involved in any
practices, acts or omissions, in violation, enjoining the
violation or violations. The application may be made and
prosecuted to conclusion whether any violation or violations have
resulted or may result in prosecution or conviction under the
provisions of section seventeen of this article.
(b) Upon application by the chief or board, the circuit
courts of this state may by mandatory or prohibitory injunction
compel compliance with the provisions of this article, the rules
promulgated by the chief or board and all orders of the chief or
board. The court may issue a temporary injunction in any case
pending a decision on the merits of any application filed. Any
other section of this code to the contrary notwithstanding, the
state may not be required to furnish bond or other undertaking as
a prerequisite to obtaining mandatory, prohibitory or temporary
injunctive relief under the provisions of this article.
(c) The judgment of the circuit court upon any application
permitted by the provisions of this section is final unless
reversed, vacated, or modified on appeal to the supreme court of
appeals.
(d) The chief or board shall be represented in all such
proceedings by the attorney general or his or her assistants and
in proceedings in the circuit courts by the prosecuting attorneys
of the several counties as well, all without additional
compensation. The chief or board, with the written approval of
the attorney general, may employ special counsel to represent thechief or board in any proceedings.
(e) If the chief or board refuses or fails to apply for an
injunctive relief to enjoin a violation or threatened violation
of any provision of this article, any rule promulgated by the
chief or board hereunder or any order or final decision of the
chief or board, within ten days after receipt of a written
request to do so by any person who is or will be adversely
affected by such violation or threatened violation, the person
making such request may apply in his or her own behalf for an
injunction to enjoin the violation or threatened violation in any
court in which the chief or board might have brought suit. The
chief or board shall be made a party defendant in the application
in addition to the person or persons violating or threatening to
violate any provision of this article, any rule promulgated by
the chief or board hereunder or any order of the chief or board.
The application shall proceed and injunctive relief may be
granted without bond or other undertaking in the same manner as
if the application had been made by the chief or board.
§22-14-22. Penalties.
(a) Any person, who violates any term or condition of a
permit issued under this article, and the violation is found by
the chief or board to have rendered unmineable all or a portion
of a workable coal seam, is subject to civil penalties, to be
imposed and collected by the chief or board in an amount not to
exceed the reasonably expected net profit lost to the coal owner
as a result. All penalties collected shall be transferred to thespecial reclamation fund as provided by section twenty-nine,
article one, chapter twenty-two-b of this code.
(b) Any person who violates any provision of this article,
any of the rules promulgated by the chief or board or any order
of the chief or board other than a violation governed by the
provisions of subsection (c) of this section, is guilty of a
misdemeanor, and, upon conviction thereof, shall be fined not
more than one thousand dollars.
(c) Any person who, with the intention of evading any
provision of this article, any of the rules promulgated by the
chief or any order of the chief or board, who makes or causes to
be made any false entry or statement in any application or other
document permitted or required to be filed under the provisions
of this article, shall be guilty of a misdemeanor, and, upon
conviction thereof, shall be fined not more than five thousand
dollars, or imprisoned in the county jail not more than six
months, or both fined and imprisoned.
(d) Any person who knowingly aids or abets any other person
in the violation of any provision of this article, any of the
rules promulgated hereunder or any order or final decision of the
chief or board or director, shall be subject to the same penalty
as that prescribed in this article for the violation by such
other person.
§22-14-23. Construction.
This article shall be liberally construed so as to
effectuate the declaration of public policy set forth in sectionone of this article.
NOTE: The purpose of this bill is to establish a procedure
to develop coalbed methane wells and units and to provide the
shallow gas well review board with certain powers and to hold
hearings to resolve disputes. The bill also provides for pooling
of interests and assurance of health and safety factors for
workable coalbeds.
This article is new; therefore, strike-throughs and
underscoring have been omitted.