News - Tag Archives: oil and gas
In 2012, the oil and gas industry created more than 1.2 million jobs. Industry experts expect this trend to continue to more than 2.3 million jobs in 2035. Those experts also expect revenues to exceed $1.9 trillion during that time. The development of hydraulic fracturing, or fracking, technology, which is the extraction process for natural gas under shale formations, has allowed the oil and gas industry to experience this exponential growth.
In concert with this expansion is the technological expansion of equipment used for fracking. Armed with these new technologies, energy companies are heading to numerous places throughout the U.S. to extract natural gas. In other words, natural gas fields are everywhere. West Virginia is a beneficiary of the expanding fracking department.
The Marcellus Shale, which is a large rock formation found throughout the eastern United States, contains significant amounts of untapped natural gas. Part of the Marcellus Shale is found in West Virginia and West Virginia is capitalizing on the Marcellus Shale’s economic opportunity. The West Virginia Department of Environmental Protection (WVDEP) controls fracking in the state’s region of the Marcellus Shale.
Refracking of Wells
In general, the price tag for digging a well to obtain natural gas is between $8 and $12 million. Another issue with digging is that it is a magnet for opposition from those who claim that such wells are environmentally unfriendly and destructive. Opponents are constantly petitioning the WVDEP and other regulatory agencies to ban or limit the fracking industry.
In regard to both cost and opposition, new technology that allows for the refracking of wells has become a boon for the economy. Well refracking, also known as Fracking 2.0, is the process wherein those who initially dug the well use technology to extract more natural gas from the same well. The process cost is a bargain at $2 million and does not involve the drilling of new wells. For consumers, the ramifications are favorable. The price of natural gas will stay flat or drop due to cheaper production costs and a reduced need to fight environmental opposition. Furthermore, the uninterrupted supply will continue, thereby reducing the odds of a significant production drop. A production drop would create a roller coaster-like supply of ups and downs that would trigger a huge price spike in natural gas.
Moreover, well refracking will keep West Virginians employed because gas companies would look to continue producing at a given well. Instead of extracting from a well and moving on, gas companies would want to stay at a given well to refrack from that well. Likely, those companies would want to continue employing those employees in the same areas who have familiarity with specific wells.
The Fifth Amendment to the U.S. Constitution requires the government to pay citizens when it interferes with their rights to property. This has been a source of controversy when private citizens want to extract oil and gas from their property. It may be less of an issue now that re-fracking is becoming more of a means to extract natural gas because there is less need to dig new wells.
If you are facing opposition due to gas and oil exploration in West Virginia, contact the law firm of Hendrickson and Long, experienced environmental defense litigators.
Commercial development of oil in the United States began in 1859 with the first producing well drilled by Colonel E.L. Drake in Titusville, Pennsylvania. At the time, there was a well-developed body of law that, both from state legislatures and case law, governed property rights to minerals and coal found on a property. These rules were fairly simple to develop because ownership of coal and similar hard-rock mineral deposits formed strata beneath the surface of the land, making a determination of ownership easy to figure.
Ownership in Place
In contrast, both oil and gas possess characteristics inconsistent with the traditional notions of “ownership in place” applied to coal and other hard-rock minerals. Ownership in place theory is a principle of oil and gas law wherein the nature of the interest of the landowner in oil and gas contained in his/her land is the same as his/her interest in solid minerals. In other words, if you own property then you own the oil and gas located beneath the property.
Issues and Capture
The issue with applying ownership in place to oil and gas rights are that oil and gas are fluid and migrate from areas of high pressure to areas of lower pressure within the reservoir, or pool, where they are found. As such, many legislatures enacted the rule of capture concerning oil and gas located beneath a property. Under this rule, a person who digs a well and captures oil and gas from beneath the property is the lawful owner of the oil and gas, even though some of that oil and gas was drained from an adjacent property. Under the rule of capture, there is no liability for capturing oil and gas from another’s property.
West Virginia and Other States
West Virginia does not apply the rule of capture to oil and gas and instead applies the ownership in place rule. In Boggess v. Milam, the court confirmed the ownership-in-place theory and stated that “the owner of the fee is vested with title in the oil and gas underlying the boundary to which he holds title . . .”
Interestingly, the majority of the U.S. states follow ownership in place theory vis-à-vis oil and gas, including Texas, New Mexico, Kansas, Mississippi, and Michigan. The ownership in place theory counters a significant issue with the capture theory wherein people race to dig and extract oil and gas from wells so they do not lose that oil and gas to someone else. This creates an environment of dense and excessive drilling and leads to premature reserve depletion.
Other states, like Oklahoma, have adopted the “exclusive-right-to-take” theory, which is a modified capture theory, that a landowner does not own the substances that underlie his land, but merely retains the exclusive right over others to capture the substances beneath the property.
If you own property that contains oil and gas, plan or have extracted the oil and gas from the property, and are facing opposition, contact the law firm of Hendrickson and Long. Hendrickson and Long are experienced and knowledgeable attorneys in defending the use of oil and gas in West Virginia.