It is declared to be the public policy of this state and in the public interest to:

(a) Foster, encourage and promote exploration for and development, production, utilization and conservation of oil and gas resources;

(b) Prohibit waste of oil and gas resources and unnecessary surface loss of oil and gas and their constituents;

(d) Safeguard, protect and enforce the correlative rights of operators and royalty owners in a pool of oil or gas to the end that each such operator and royalty owner may obtain his or her just and equitable share of production from that pool of oil or gas;

(e) Safeguard, protect and enforce the rights of surface owners; and

(f) Protect and enforce the clear provisions of contracts lawfully made.

§37B-1-3. Definitions.

As used in this article, and in the absence of specific contract language to the contrary:

“Operator” means any owner of the right to develop, operate and produce oil and gas from a pool and to appropriate the oil and gas produced therefrom, either for that person or for that person and others; and in the event the oil is owned separately from the gas, the owner of the substance being produced or sought to be produced from the pool is the “owner” as to that pool.

“Person” means any individual, corporation, partnership, limited liability company, association, receiver, trustee, executor, administrator, guardian, fiduciary or other representative of any kind, and includes any government or any political subdivision or any agency thereof.

“Pool” means an underground accumulation of petroleum or gas in a single and separate reservoir (ordinarily a porous sandstone or limestone). It is characterized by a single natural-pressure system so that production of petroleum or gas from one part of the pool affects the reservoir pressure throughout its extent.

“Post-production expense” means an expense or cost subsequent to production including, but not limited to, an expense or cost related to pipelines, surface facilities, telemetry, gathering, dehydration, transportation, fractionation, compression, manufacturing, processing, treating, or marketing of the oil or natural gas or any severance or other taxes of any nature paid on the production thereof.

“Pro-rata share” means the allocation of revenues and costs attributable to the lawful use of a mineral property that is calculated based on the proportion that the net acreage of such ownership interest bears to the total net acreage of jointly developed tracts in a development or production unit that includes, all or part of, that mineral property, if any.

“Royalty owner” means any owner of oil and gas in place, or oil and gas rights, to the extent that the owner is not an operator as defined in this section.

“Unknown and unlocatable interest owner” means a person vested with a present ownership interest in the oil and gas in place in a mineral property whose present identity or location cannot be determined from:

(A) A reasonable review of the records of the clerk of the county commission, the sheriff, the assessor and the clerk of the circuit court in the county or counties in which the interest is located, and includes unknown heirs, successors and assigns known to be alive;

(B) Diligent inquiry in the vicinity of the owner’s last known place of residence; and

§37B-1-4. Lawful use of mineral property; unknown or unlocatable cotenant; electable interests for non-consenting cotenant.

(a) If, after a reasonable effort to negotiate by the operator with all royalty owners in an oil and gas mineral property, tenants in common, joint tenants or coparceners representing three-fourths of the royalty interest in the oil and gas mineral property consent to a lawful use of the mineral property, then that use is permissible, is not waste and is not a trespass. In that case, the consenting cotenants and their lessees, operators, agents, contractors or assigns, are not liable for damages if they pay non-consenting cotenants in accordance with subdivision (1) and reserve the amounts specified in subdivision (2) in a trust account held for the benefit of unknown and unlocatable interest owners in a state or federally-insured financial institution.

(1) A non-consenting cotenant is entitled to receive, based on his or her election, either:

(A) A production royalty, free of post-production expenses, equal to the highest royalty percentage of his or her consenting cotenants in the same mineral property, and a lease bonus payment equal to the average amount paid to such consenting cotenants calculated on a net mineral acre basis; or

(B) To participate in the development and receive his or her pro-rata share of the revenue and cost equal to his or her share of production attributable to the tract or tracts being developed according to the interest of such non-consenting cotenant, exclusive of any royalty or overriding royalty reserved in any lease, assignments thereof or agreements relating thereto, after the market value of such non-consenting cotenant’s share of production, exclusive of such royalty and overriding royalty, equals double the share of such costs payable or charged to the interest of such non-consenting cotenant.

A non-consenting cotenant shall have forty-five days following the operator’s written delivery of its best and final lease offer in which to make his or her election for either a production royalty or a revenue share, as specified in paragraph (A) or paragraph (B) of this subdivision. If the non-consenting cotenant fails to deliver a written election to the operator prior to the expiration of such forty-five day period, he or she shall be deemed to have made the election set forth in paragraph (A), subdivision (1) of this subsection.

(2) Unknown and unlocatable interest owners shall be deemed to have made the election set forth in paragraph (A), subdivision (1) of this subsection.

§37B-1-5. Information reporting.

(a) The developing cotenant, his or her lessees, operators, agents, contractors or assigns shall provide the following information to all cotenants receiving production royalties resulting from the development of mineral property pursuant to this chapter;

(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, MMBTU or DTH of gas or volume of natural gas liquids produced and sold;

(4) Price received per unit of oil or natural gas produced;

(5) Total amount of severance and other production taxes associated with the volume of oil, natural gas or natural gas liquids produced, and other deductions provided under the terms of the governing lease;

(6) Net value of total proceeds from the sale of oil, natural gas or natural gas liquids from the property less taxes and deductions set forth in subdivision (5) of this subsection;

(7) Interest owner’s interest, expressed as a decimal or fraction, in production from the unit or well reported pursuant to subdivision (1) of this subsection;

(8) Interest owner’s ratable share of the total value of the proceeds of the sale of oil, natural gas or natural gas liquids prior to the deduction of taxes and other deductions set forth in subdivision (5) of this subsection;

(9) Interest owner’s ratable share of the proceeds from the sale of oil, natural gas or natural gas liquids less the interest owner’s ratable share of taxes and other deductions set forth in subdivision (5) of this subsection; and

(10) Contact information of the producer of the oil, natural gas or natural gas liquids, including a mailing address and telephone number.

(b) Notwithstanding any of the other provisions of this article, proceeds from production of oil, natural gas or natural gas liquids may be accumulated by the developing cotenant, his or her lessees, operators, agents, contractors or assigns until such time as proceeds attributable to any cotenant exceeds $100 before making a remittance: Provided, That in any event regardless of the amount of money accumulated, the developing cotenant, his or her lessees, operators, agents, contractors or assigns shall remit proceeds attributable to his or her cotenants not less than once annually. All accumulated proceeds shall be paid to the person entitled thereto immediately, or as soon as practicable thereafter, upon cessation of production of oil, natural gas or natural gas liquids at a particular well or upon relinquishment or transfer of the payment responsibility to another party.

(c) All production royalties due and owing to a royalty owner shall be tendered in a timely manner which shall not exceed one hundred-eighty (180) days from the date that a sale of oil, natural gas or natural gas liquids is realized, unless such failure to remit is due to lack of record title in the royalty owner. 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 percent until such payment is made to be compounded semiannually. The prime rate shall be the rate published on the day of the sale of oil, natural gas or natural gas liquids in the Wall Street Journal reflecting the base rate on corporate loans posted by at least seventy-five percent of the nation’s thirty largest banks.

(d) A quarterly report of the volume of oil or natural gas produced from any horizontal well drilled pursuant to this article shall be filed with the Chief 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’s website within 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 the establish a process for collecting such data.

§37B-1-6. Limitation of liability of non-consenting cotenant.

With respect to any tract of mineral property where an interest in the oil and gas in place is owned by a non-consenting cotenant and is developed pursuant to section four of this article, in no event shall drilling be initiated upon, or other surface disturbance occur on, the surface of or above such tract of minerals without the surface owner’s consent; Provided, That this section shall not require surface use owner consent for tracts of mineral property otherwise subject to an existing surface use agreement or other valid contractual arrangement in which the owner of the surface has granted rights to the operator to use the surface in conjunction with oil and gas operations.

§37B-1-8. Severability.

The provisions of this chapter are severable and accordingly, if any part of this chapter is adjudged to be unconstitutional or invalid, that determination does not affect the continuing validity of the remaining provisions of this chapter.