Keith B. Hall
LSU Law Center
In Hull-Wright v. Arsenal Resources, LLC, 2026 WL 125974 (W. Va. Ct. App. 2026), four owners of mineral royalties (“Petitioners”) appealed a unitization order from the Oil and Gas Conservation Commission of West Viriginia.
Background
In May 2025, Arsenal Resources, LLC (“Arsenal”) filed an application with the Oil and Gas Conservation Commission of West Virigina (“Commission”),[1] seeking an order creating a drilling unit for a horizontal well to be drilled to the Marcellus Shale in Harrison County, West Virginia. The application was filed pursuant to West Virginia Code § 22C-9-7a, which was enacted in 2022.[2] This statute requires that, prior to filing an application for a drilling unit, a prospective applicant must obtain approval from at least 75% of the royalty interests in the proposed unit,[3] and that the applicant make good-faith offers to pool or unitize, and negotiate in good faith with, all known and locatable owners of royalty interests in the unit.[4] At the time Arsenal filed its application, it had obtained consent from 88.03% of the royalty interests. In addition, Arsenal attached to its application an affidavit stating that the company had made good faith offers to all owners of oil and gas interests in the proposed unit.
The Commission held an evidentiary hearing in early July 2025. At the hearing, a landman for Arsenal testified about the company’s good faith efforts to negotiate with Petitioners, who own royalty interests. On the other hand, the Petitioners asserted that Arsenal had not negotiated in good faith. The Petitioners’ lawyer cross-examined Arsenal’s landman, attempting to undermine his testimony. In addition, one of the Petitioners testified, seeking to support the Petitioners’ contention that Arsenal had not negotiated in good faith.
About two weeks after the hearing, the Commission issued an order that combined fifty-eight tracts, totaling 361.52 acres into a drilling unit and designating Arsenal as operator for the unit. The order noted that Arsenal’s landman had testified about the company’s good faith efforts to negotiate. The order also noted that the Petitioners asserted that Arsenal had not negotiated in good faith and that one of the Petitioners had testified. The order then stated the Commission’s determination that Arsenal had negotiated in good faith.
Keith Hall
Professor, LSU Law
The appeal
The Petitioners appealed, pursuant to West Virginia Code § 22C-9-11. This section of West Virginia’s conservation laws provides that any person adversely affected by an order of the Commission has the right judicial review of the order, with such review being governed by West Virginia Code § 29A-5-4, part of the state’s Administrative Procedures Act (“APA”). The appellate court noted that another section of West Virginia’s conservation laws, West Virginia Code § 22C-9-10, states that the Commission’s hearings are governed by § 29A-5-3 of West Virginia’s APA. That provision of the APA states that final orders issued in contested cases must contain findings of fact. Further, if findings of fact are “set forth in statutory language,” they must be “accompanied by a concise and explicit statement of the underlying facts supporting the findings.” The appellate court went on to state that the West Virginia Supreme Court has explained that “[a] simple recitation of findings of fact in bare statutory language will not suffice.”
Applying this standard to the Commission’s order creating the contested unit, the appellate court concluded that the order was deficient. The order noted the witnesses each party had called to testify and what exhibits had been admitted into evidence. The order also contained “conclusory statements” that Arsenal had negotiated in good faith, but the order did not include findings of fact regarding the dates on which Arsenal had made offers or the amount of compensation included in the offers that it made. The order did not discuss the credibility of the opposing testimony or reconcile conflicting evidence. The court stated that these “deficiencies in the order prevent this Court from engaging in a meaningful appellate review.” Therefore, the court vacated the Commission’s order and remanded the matter to the Commission for further proceedings.
[1] The Commission is part of the West Virginia Department of Environmental Protection.
[2] West Viriginia Code § 22C-9-7a is entitled “Unitization of interests in horizontal well drilling units.” Before enactment of this statute, the only statutory authority for the Commission to create drilling units and pool interests within a unit was found in West Virginia Code § 22-9-7, and it only applies to formations developed by “deep wells,” with “deep well” being defined by West Viriginia Code § 22-9-2 as being wells drilled for formations below the top of the “Onondaga Group.” The Onondaga Group is deeper than the Marcellus Shale. Thus, § 22-9-7 did not provide a basis for the Commission to create drilling units for development of the Marcellus Shale.
[3] West Virginia Code § 22C-9-7a(c)(2)(A).
[4] West Virginia Code § 22C-9-7a(c)(2)(C)(i).