MARGINAL WELL / PLUGGING LEGISLATION SIGNED BY GOVERNOR JUSTICE

Fulfilling a commitment to us made at our 2020 IOGAWV Winter Meeting, Governor Jim Justice has signed into law, Committee Substitute for HB-4090 (The Marginal Well / Plugging Bill).

House Bill 4090 reduces the severance tax on marginal oil and natural gas wells, excluding wells utilizing horizontal drilling techniques targeting shale formations, to 2.5% from 5% and provides  the 2.5% severance tax paid on such wells will be dedicated too and deposited in the newly created “Oil and Gas Abandoned Well Plugging Fund” and be used to plug abandoned oil and gas wells without a responsible operator.

The vertical oil and gas wells which are affected by the severance tax reduction produce on average more than 5 Mcf natural gas or one-half barrel of oil per day and on average less than 60 Mcf of natural gas or 10 barrels of oil per day.  Vertical natural gas wells producing on average less than 5 Mcf per day and oil wells producing on average less than one-half barrel per day remain exempt from state severance tax.

The new plugging fund is capped at $6 Million.  Should the plugging fund exceed the $6 Million cap, the severance tax drops to zero.  IOGAWV fully supported this bill that passed the House of Delegates on February 5 by a vote of 99-01, passed the Senate on March 2 by a vote of 33-0-1.  We applaud Governor Justice for recognizing the need to help owners of conventional, low-producing wells and assist the West Virginia Department of Environmental Protection’s Office of Oil and Gas in addressing the plugging of orphaned and abandoned oil and gas wells.