What statutory conditions govern leasing of school properties for oil and gas drilling?
By Rick Boothby, Esq.
West Virginia county boards of education are permitted to lease school property for oil and gas drilling. And just like other land owners, county boards can receive up-front bonus payments and considerable royalties on the oil and gas produced. Such leases can, potentially, result in much needed new revenue for county boards. However, a county board cannot enter into a lease agreement with just any company. Instead, county boards are required to hold a public lease auction during which interested companies may bid for the right to enter into an oil and gas lease with the school district.
West Virginia Code § 18-5-7 contains the general requirements for a lease auctions. Failure to comply with these requirements can and has resulted in leases being invalidated by a Circuit Court. Among other things county boards must set the rules for the lease auction by official board action and give proper notice of the date, time and place of the auction. As with other kinds of public auctions, the lease is offered to the highest responsible bidder. It is strongly recommended that county boards have a written lease instrument prepared in advance of the lease auction which contains standard and fair terms. This lease instrument should be made available to prospective bidders for their inspection well before the day of the lease auction.
County boards planning to conduct a lease auction should take the time to consult with other boards of education that have been through this process as well as with their legal counsel. While auctioning off a few surplus old school desks might be a relatively simple and low-risk undertaking, the same cannot be said for an oil and gas lease auction. Missteps in the lease auction process could lead to unwanted litigation and considerable expense. On the other hand, taking the time to understand the legal and practical requirements for these lease auctions has the potential to benefit the students of your school district for many years.
Boothby is a partner in Bowles Rice LLP’s Parkersburg Office and is a frequent West Virginia School Board Association conference/training session presenter.