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Diversified presses F36 compulsory‑pooling petition, cites majority lease rights and exclusive CBM provisions
Summary
Diversified Energy told the Virginia Gas and Oil Board it holds majority coal‑bed methane lease rights in unit F36 and urged the board to enter a pooling order that would allow allocation of production; lessors warned forced pooling could alter contract protections and reduce royalties if downstream deductions are allowed.
Diversified Energy asked the Virginia Gas and Oil Board Feb. 17 to enter a compulsory pooling order for unit F36 under Oakwood‑2 rules, arguing its lease holdings give it majority control that the board should recognize when appointing an operator for production and royalty allocations.
Robbie Stillwell, who testified for Diversified, described Diversified’s acquisition history and operations in the region and said Diversified holds roughly 74.56% of coal‑bed methane interest in the F36 unit. "Diversified has the coal‑bed methane lease and the right to drill, remove and market coal‑bed methane from our property," he said, confirming Diversified has the blanket bond and filings required for the Division of Gas and Oil.
Diversified’s exhibits included an allocation worksheet (Exhibit M) that apportions estimated capital and production cost across panels 18 and 19 and values the share attributable to F36. Diversified submitted contractor estimates giving an average gob‑well cost for its planning model ($715,677 per well in Diversified’s estimate) and a full allocation spreadsheet showing the company’s proportionate capital responsibility within the panels.
Opponents objected to aspects of Diversified’s mapping and asked why the acreage totals for panel 19 changed between earlier filings (one map showed ~254.35 acres during October filings; a revised map filed for the Feb. 17 hearing showed ~171.40 acres). Counsel for other landowners pressed witnesses to show how each tract’s acreage over an unsealed panel was calculated and whether percentages in Exhibit B3 were updated consistently when the panel acreage was revised.
Separately, Buchanan/Beccan witnesses reiterated concerns raised in other parts of the docket: that an order requiring deemed lease or forced pooling would give a participating operator the statutory mechanism to allocate production and pay royalties under the board’s order terms, but it could also, in practice, reduce what lessors receive if the order permits post‑production deductions. Jason Davidson read lease language that says certain deductions from sales price "shall not be deducted from royalty" for CBM gas not sold at the wellhead, and he warned forced pooling could cut into expected royalties.
Diversified witnesses said the company can operate wells if needed and has discussed mine coordination with Coronado, which mines the coal seams. Travis Cook, who helped prepare mapping exhibits, testified that the company changed some mapping (e.g., excluded ventilation areas in later calculations) and that some acreage shifts reflected updated mine plans provided by the coal operator.
Board members asked for clarification exhibits and noted mapping and calculation inconsistencies that parties agreed to correct. The hearing record remains open to additional submissions to reconcile the panel acreage numbers and the division‑of‑interest math.
Why it matters: The question of who controls units and how production and costs are allocated affects which entity is appointed operator and how royalties are computed and paid. For lessors, contract language promising royalty at a certain basis can be materially affected by whether an order allows particular deductions.
What’s next: The board recessed to allow parties to confer and promised to accept clarifying filings. Board counsel said decisions on the contested petitions will be issued in writing within 30 days.
