A West Virginia Circuit Court case in September 2017, Crowder and Wentz v EQT, found in favor of surface landowners ruling that EQT did not have the right to extend underground shale wells to adjacent properties where EQT also owned the mineral rights (see WV Surface Owners Win Important Case Against EQT re Drill Pad). The decision was appealed all the way to the WV Supreme Court, where arguments were heard yesterday. This is a VERY important case.
Crowder and Wentz v EQT case has far-reaching implications, not only for surface owners and drillers, but mineral rights owners too. Our explanation gets a little bit into the weeds, touching on the issue of “joint development,” but you need the history in order to properly understand the issues, and what is at stake in this case.
From the first time we read about so-called “joint development” legislation being promoted by the drilling industry in WV, in February 2017, we were not fans (see More on WV’s Push for “Joint Development” Instead of Forced Pooling). In brief, there are a number of existing old leases in WV, signed before shale drilling began, that prevent E&Ps from drilling a horizontal well across an individual property boundary line–until a new lease is signed.
Joint development says if the driller already owns the leases on all adjoining properties that they want to combine into a single drilling unit, they can do so without signing a new lease. The proposed joint development law seemed to us to be a way for drillers to avoid negotiating and paying more for new leases, which they should be willing to do! However, Crowder and Wentz v EQT puts joint development in a new light for us.
The case appears to us to be an abuse of power by surface owners against both drillers and mineral rights owners, by (ab)using the current prohibition against joint development. They use a technicality to block shale drilling in cases where all of the adjoining properties are leased.
We certainly understand why surface rights owners would resist having a drill pad on their property. However, that’s life. They bought land (or inherited it) that doesn’t have mineral rights attached. Under existing WV law, a well pad can be drilled, taking 10-15 acres of the surface land (against the surface landowner’s wishes, but with compensation), in order to access the minerals under that specific piece of property.
However, the court ruled in the Crowder and Wentz v EQT case that a driller cannot then use that same already-constructed well pad to further drill wells that access minerals under other, adjacent properties.
In our book, Crowder and Wentz v EQT makes a strong case for a joint development law in WV, to avoid this kind of abuse by surface landowners.
Here’s a summary of what happened yesterday when the Supremes came down from On High to hear oral arguments:
The state Supreme Court of Appeals heard arguments Tuesday morning in a case that could have profound impacts on the ability of natural gas companies to use horizontal drilling to tap into the Marcellus Shale.
EQT, the state’s second largest natural gas producer, appealed a lower court’s decision that found the company trespassed on property in Dodd-ridge County.
EQT company began drilling on the property in 2012. Margot Beth Crowder and David Wentz owned the surface rights for the land, and EQT owned the mineral rights.
EQT drilled a handful of wells on the property to access natural gas underneath, as well as to access gas located underneath adjacent properties.
The work entailed a significant expansion of the company’s presence on the Wentz and Crowder property.
Nicolle Bagnell, an attorney for EQT, argued that surface rights should be subservient to mineral rights, since the owners of mineral rights are allowed to do what’s “reasonably necessary” to access the minerals.
She referenced a more than 100-year-old case in which the state Supreme Court ruled that mineral rights owners have the “implied right” to access the surface if they own the minerals beneath.
“A horizontal well is required to produce the Wentz and Crowder gas, but a horizontal well could not just be limited to the Wentz and Crowder property to economically produce the gas,” Bagnell said.
Neither surface owner wanted EQT to use horizontal drilling on their property, and they told the company it would be trespassing if it continued. EQT did continue, and Wentz and Crowder took the company to court.
Circuit Judge Timothy Sweeney sided with Crowder and Wentz in a 2016 summary judgment, finding that while EQT still had the right to access their property to extract minerals from beneath the surface, the company did not have the right to access their property to extract minerals from neighboring properties.
Bagnell said the court should take a number of considerations into account, including whether the surface owners can still use the property and how much of it they can use. She also said the court should determine whether the burden of EQT’s wells on the surface owners is “reasonable and necessary.”
Justice Margaret Workman questioned EQT’s case.
“The concern I have with that argument is, before you come to the ‘reasonable and necessary’ analysis, you have to have some kind of claim of right to the surface. You can’t just say, ‘It’s going to be more profitable if we drill on this surface and not the adjoining.’ You can’t go to ‘reasonable and necessary’ if you don’t have a claim of right to use that surface for that purpose.”
Bagnell said the mineral rights owner in this case cannot enjoy the rights to those minerals without a horizontal well, because it would not be “economically feasible” to access the Marcellus Shale without such a well.
David McMahon, an attorney representing Crowder and Wentz, said technology has changed since the court ruled that mineral owners have an implied reasonable use to the surface to access the minerals underneath.
He said when that implied right was established, the only way to access minerals underneath land was to drill vertically from the surface.
“But now, with a horizontal well, they can entirely drain my client’s property from a mile away,” McMahon said.*
We’ll keep a close eye for the outcome of this one.
*Clarksburg (WV) WV News (Mar 12, 2019) – WV Supreme Court hears major natural gas cases
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