Senate Bill No. 617
(By Senators Green and Minard)
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[Introduced February 19, 2010; referred to the Committee on
Energy, Industry and Mining; and then to the Committee on the
Judiciary.]
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A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §37-7A-1, §37-7A-2
and §37-7A-3, all relating to the exploration for or
development of minerals by a cotenant or others and related
rules of an action of account; providing definitions; and
providing that mineral development is not waste.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §37-7A-1, §37-7A-2 and
§37-7A-3, all read as follows:
ARTICLE 7A. MINERAL DEVELOPMENT BY COTENANTS.
§37-7A-1. Declaration of public policy; legislative findings.
(a) The Legislature declares and finds that certain owners of
minerals in this state are unable to effectively develop their mineral property; that mineral development has been and continues
to be an integral part of the state's economy; that effective
mineral development is central to our national security and our
nation's stated energy policy goals; that every owner of minerals
should be able to freely and fully enjoy the benefits of his or her
property; and that in order to encourage and ensure the fullest
practical recovery and enjoyment of the mineral resources in this
state, it is in the public interest to enact this article
authorizing mineral development by a cotenant and requiring a fair
and impartial accounting and timely payment of net proceeds to all
other cotenants.
(b) It is declared to be the public policy of this state and
in the public interest to:
(1) Foster, encourage and promote the efficient, effective and
thorough development of this state's energy resources by
authorizing each cotenant to develop the mineral estate for the
benefit of all cotenants;
(2) Maximize the potential of the natural resources of this
state by promoting orderly mineral development and lessening the
incidence of undeveloped mineral acreage; and
(3) Safeguard and protect the rights of each cotenant mineral
owner to enjoy the mineral estate so that each such owner may
obtain his or her just and equitable share of revenue from the
development of minerals under this article.
§37-7A-2. Definitions.
As used in this article:
"Cotenant" means a tenant in common, joint tenant, parcener,
cotenant or coowner of an undivided interest in the same mineral
estate in the same parcel of real estate; when a cotenant has
granted the right to develop his or her mineral interest to
another, including without limitation a grant by a lease of his or
her mineral interest to another, then all references in this
article to a cotenant, including without limitation a majority
cotenant, working cotenant and nonworking cotenant, means the
person with the right to develop the cotenant's mineral interest,
including without limitation a lessee;
"Mineral development" means the exploration for or development
of minerals, including without limitation the testing, surveying,
exploration, drilling, mining, preparation, production, processing,
recovery, removal, transporting, treating, marketing, sale of
minerals, maintenance and ongoing operations;
"Net proceeds" means the gross proceeds received from the sale
of minerals recovered by the working cotenant, less all reasonable
costs, expenditures and expenses incurred by the working cotenant
in the mineral development, including without limitation:
(1) Building or maintaining roads, whether public or private;
(2) All exploration or development operations, including
without limitation drilling and mining;
(3) The purchase, installation, maintenance, and operation of
tools, machinery, equipment and appliances;
(4) Transporting the minerals whether by pipeline, truck, belt
or otherwise, to the point of sale;
(5) Reasonable overhead costs;
(6) The reasonable value of the service actually rendered in
or upon any exploration or development operations;
(7) A reasonable rate of return on any capital investment for
the mineral development;
(8) Putting the mineral into a marketable condition, including
without limitation all costs of crushing, washing, sizing,
preparation, processing, compression or treatment and any other
activity necessary to make the mineral ready for sale; and
(9) All costs, fees and expenses, including without limitation
any litigation expenses, costs and attorney fees, incurred to
obtain, maintain or renew any and all government authorizations,
including without limitation all permits, bonds, or licenses,
necessary to explore for, develop and extract the minerals,
including without limitation the costs of any restoration,
reclamation or remediation of the mineral properties;
"Nonworking cotenant" means a cotenant that does not engage in
mineral development and has not entered into an agreement with the
working cotenant relating to the mineral development, including
without limitation a joint operating agreement or development
agreement;
"Working cotenant" means a cotenant that engages in mineral
development and that owns or controls at least fifty percent of the undivided interest in the minerals to be developed; the calculation
of the percentage of control shall include the undivided mineral
interest of:
(1) The cotenant that engages in mineral development; and
(2) Any other cotenant that has entered into an agreement with
the working cotenant relating to the mineral development.
§37-7A-3. Cotenant right to develop minerals; requirement to
provide accounting to other cotenants.
(a) Any working cotenant may engage in mineral development.
Mineral development by a working cotenant is not waste and is not
subject to the provisions of section two, article seven, chapter
thirty-seven or section thirteen, article eight, chapter fifty-five
of this code. This article does not affect the provisions of
article twenty-one, chapter twenty-two of this code relating to
development of coalbed methane.
(b) No later than thirty days after receipt of a permit
granting approval to develop the minerals, the working cotenant
shall deliver by personal service or by certified mail, return
receipt requested, a copy of the permit to any nonworking cotenant
whose ownership and address is known to the working cotenant or is
of record in the county where the minerals are located. In the
event the present identity or location of a nonworking cotenant
cannot be determined from the records in the courthouse in the
county where the minerals are located, the working cotenant shall
publish in the county in which the minerals are located a Class III legal advertisement in compliance with the provisions of article
three, chapter fifty-nine of this code, identifying the mineral
property, each nonworking cotenant whose identity or location
cannot be determined, and the permit which has been issued, the
first date of the publication to be no later than thirty days after
receipt by the working cotenant of a permit granting approval to
develop the minerals.
(c) No later than ninety days from the receipt of gross
proceeds from the sale of minerals recovered by the working
cotenant, he or she shall remit to each nonworking cotenant, his or
her proportionate share of net proceeds, if any. If the net
proceeds are paid to a nonworking cotenant that has the right to
develop the mineral interest of another, then the nonworking
cotenant shall pay any amounts, including without limitation
royalties or overriding royalties, due to any other person,
including without limitation the owner of the mineral interest,
pursuant to an agreement entered into with the nonworking cotenant
that has the right to develop the mineral interest of another. The
working cotenant shall hold the proportionate share of net proceeds
due any nonworking cotenant whose ownership and address is not
known to the working cotenant and is not of record in the county
where the minerals are located until the earlier of:
(1) The time the nonworking cotenant's proportionate share of
net proceeds are to be surrendered to the State Treasurer pursuant
to article eight, chapter thirty-six of this code; or
(2) The nonworking cotenant claims his or her proportionate
share of net proceeds.
(d) If the working cotenant fails to remit to any nonworking
cotenant his or her proportionate share of net proceeds, if any,
within ninety days of receipt of the gross proceeds by the working
cotenant then the nonworking cotenant may commence an action of
account under subsection (e) of this section. The sole remedy of
a nonworking cotenant for mineral development by a working cotenant
is an action of account under subsection (e) of this section.
Within ninety days of receiving a written request from a nonworking
cotenant, the working cotenant shall provide to the nonworking
cotenant a statement showing the amount of costs, expenditures and
expenses incurred by the working cotenant in the mineral
development and the gross proceeds received from the sale of
minerals recovered by the working cotenant.
(e) An action of account may be maintained against a working
cotenant by a nonworking cotenant for the working cotenant
retaining more than his or her proportionate share of net proceeds.
In an action of account for mineral development, a nonworking
cotenant is entitled to his or her proportionate share of the net
proceeds. If the nonworking cotenant is granted the relief prayed
for in the an action, the court shall award interest on any unpaid
net proceeds due at the rate established for a civil judgment under
section thirty-one, article six, chapter fifty-six of this code,
and in addition, if the working cotenant is found to have willfully and intentionally withheld the unpaid net proceeds, the court may
grant the nonworking cotenant reasonable costs incurred in the
action, including without limitation attorney's fees.
NOTE: The purpose of this bill is to
authorize the exploration
for or development of minerals by cotenants and their lessees and
require payment to nonworking cotenants of their proportionate
share of net proceeds. It also provides that cotenant mineral
development is not waste and provides an action of account to allow
the nonworking cotenant to recover his or her fair share of net
proceeds.
This article is new; therefore, strike-throughs and
underscoring have been omitted.