Debriefing the 2021 WV Legislative Session – Oil & Gas

By Brian Skinner, Esq.

Oil and gas issues were not at the top of the 85th West Virginia Legislature’s agenda during its first regular session. Only one bill directly related to the industry was enacted. Senate Bill 404 amends the Natural Gas Horizontal Well Control Act by authorizing the state Department of Environmental Protection to charge a permit modification fee of $2,500. The bill is intended to stabilize current staffing levels at the state Department of Environmental Protection’s by generating an additional $1.3 million in revenue. West Virginia joins other states with a similar modification fee. Governor Jim Justice signed the legislation on March 27, 2021, and it becomes effective on June 16, 2021.

A Department of Revenue rule implementing the Downstream Natural Gas Manufacturing Investment Tax Credit Act of 2020 was approved in S.B. 160. The Downstream Natural Gas Manufacturing Investment Tax Credit Act of 2020 was enacted during the 2020 regular legislative session in H.B. 4019. The new rule, codified as Title 110, Series 13GG of the Code of State Rules, establishes the procedures for applying for and claiming the Downstream Natural Gas Manufacturing Investment Tax Credit and contains the methodology the State Tax Commissioner will use to administer the credit.

Although not specifically applicable, other legislation that may be of some interest to the oil and gas industry includes S.B. 542, requiring any public electric utility owned coal-fired power plants to maintain a minimum 30-day aggregate coal supply under contract for the remainder of the life of those plants; H.B. 2581, modifying the process for the valuation of natural resources property and an alternate method of appeal of proposed valuation of natural resources property; and H.B. 2842, preventing municipalities enact any code, ordinance, or land use regulation to prohibit a public utility, private business, or department of public utilities from furnishing a utility service based on a particular energy source.

During the 2021 regular session the Legislature continued efforts to transform the state’s labor laws by passing legislation on the classification of workers. Senate Bill 272, the West Virginia Employment Law Workers Classification Act, was signed into law by Governor Jim Justice on March 19, 2021.

The legislation provides standards for determining who is an employee and who is an independent contractor under certain West Virginia statutes. The intent of the Workers Classification Act is to “ensure that workers who are indeed ‘employees’ are properly classified” and “afforded the legal protections and obligations that apply to [employees], and that workers who desire to be, and meet the standards of being, independent contractors will be entitled to the freedoms that such a relationship provides, which will reduce unnecessary and costly litigation and confusion in the workforce marketplace and in the courts.”

The new law is substantially based on model legislation advocated by the American Legislative Exchange Council and applies only to workers’ compensation, unemployment compensation, the Human Rights Act, and the Wage Payment and Collection Act.

Another bill involving the classification of workers is H.B. 3089, which classifies employees of public utilities, cable television operators, telecommunications carriers, and publicly or privately owned water and sewer systems as essential workers during a Governor declared state of emergency or state of preparedness. The bill signed by Governor Justice on April 26, 2021, applies to contractors, vendors, and suppliers of public utilities, cable television operators, telecommunications carriers, and publicly or privately owned water and sewer systems.

The legislature passed two resolutions of interest. House Joint Resolution 3 or the “Property Tax Modernization Amendment”, will ask voters to approve a constitutional amendment to authorize the Legislature to establish the valuation, assessment value and classification of property for purposes of ad valorem taxation, to fix maximum rates for the taxation thereof by the levying bodies, and to provide for the exemption thereof from taxation, fully or in part, all to be determined as provided by general law.

Additionally, the Legislature expressed its support for the Atlantic Coast Pipeline in Senate Current Resolution 55.

Finally, some bills of interest to the industry that did not pass this session include S.B. 538 authorizing the unitization of interests in drilling units in connection with shallow horizontal oil or gas wells; H.B. 2598, removing devices having a capacity of 210 barrels or less, containing brine water or other fluids produced in connection with hydrocarbon production activities from the definition of “above ground storage tank”, even when located in a zone of critical concern; and H.B. 2792, allowing new customers and existing customers that expand its existing service to 25 million cubic feet of natural gas per year or more to receive direct access from natural gas supplies.

Brian is the former counsel to the West Virginia House of Delegates Judiciary Committee and counsel to the West Virginia Senate Minority Caucus. He was also general counsel to the West Virginia State Health Officer and Commissioner for the Bureau for Public Health. He has almost two-decades of experience as a strategic advisor and chief legal counsel to both executive and legislative branch public officials.