By Pat McGeehan

In the wake of the legislative session in Charleston, much attention in the media has been given towards the policy known as “Forced Pooling”, a policy forwarded by the largest, and most politically-connected companies in the Oil and Gas industry. Though I am much supportive of oil and gas drilling, I strongly opposed this particular policy—and with the help of many like-minded colleagues—garnered enough votes to see its defeat, in the final hours of the regular legislative session this past month.

Since the Forced Pooling bill’s demise, the talk in the press from those legislators who strongly supported the policy— including the President of the State Senate, and the Speaker of the House—wraps around the vague rhetoric of “job creation.” Since this seems to be the overt reason why the bill was so strongly supported by those in key, powerful leadership positions in the West Virginia Legislature— it is right to examine the policy of Forced Pooling closer. In so doing, we can uncover why the assertion that this bill “creates jobs” is simply a fallacy in economic thinking—as well as a colossal violation of the individual’s natural claim to private property.

Forced Pooling—now re-labeled by many in the Oil and Gas Industry as “Lease Integration”— is a concept which runs diametrically opposed to the American traditions of private property and free markets. Under easily attainable conditions set forth in the bill, the legislation if passed, would have transferred to certain Natural Gas drilling companies the extreme power of government compulsion. With this new-found radical power, any individual who owns the deed to the mineral rights of their property, could be forced to sell their own mineral rights, so long as the private drilling outfit was able to sign-up a few others around them.  The price one would receive—well, that would then be arbitrarily established by a government commission.

At the Capitol in Charleston, the lobbyists representing these mammoth companies gave arguments that were all over the board, filling the heads of Delegates and Senators with many distractions.  “Well, some people just won’t sell us their property rights, and we can’t have people standing in the way of our operations.” Or—”Well, sometimes we just can’t locate the property owners to bargain and negotiate with them. We need this power to overcome this inconvenience.” And of course, this one—“By the way, did I tell you this will create jobs?” All these reasons, as convincing as some elected officials may have found them, were mere diversions from the heart of what was at stake.

At the core of the 68-page bill---which yes, I required to be read aloud, in its entirety on the House Floor—lies this premise: Government could coercively take what justly belongs to one individual, and hand it over to someone else, all against the rightful owner’s free will. Forget the rest, because this was what was truly desired. And why not? Sounds like a good deal, if you’re the one bestowed with raw government power. But if you’re a farmer, who owns the mineral rights to your 50 acres of land, you might not think so. This is the moral reason why Forced Pooling is a detrimental policy to enact in West Virginia. But as mentioned, it’s also bad economics.

The reason this policy is not economically sound has to do with a term called time preference. Time preference is the individual’s choice to consume now, or hold off, to potentially consume more in the future. For instance, a person who wishes to save most of their income, abstaining from consuming all of it now, has a lower time preference than say an individual, who receives their paycheck— and then immediately spends it all at the shopping mall.

Applying this concept of time preference to mineral ownership, and natural gas operations—we can see that some people may want to sell their mineral rights to a gas drilling company now, even though market prices for leasing their minerals are relatively low. These individuals may want to take a lesser amount of cash in the present—in spite of the possibility, that if they save their mineral rights, they may receive a larger return if and when market prices rise in the future. Make no mistake, nothing is wrong with this option at all. Some people may need the money, or some people may just not want to risk the wait. However, others—who have a lower time preference, and are typically referred to as ‘the savers’ in the economy—they may indeed want to wait before they sell. Forecasting that prices will rise in the future, these individuals postpone immediate consumption, in order to receive a higher return for their mineral and property rights down the line (and it is typically the individuals who save, that also indirectly lift the standard lease value for everyone involved over the course of time). This is ‘the seen and the unseen’ of economics. The advocates of Forced Pooling see only the immediate potential benefits in the short run—that if they use the government to force people to sell now, jobs will be created now. What is not seen though are the long run consequences. That forcing the vast majority of our state’s population to sell now, at lower prices, will forego the large amounts of income our residents will likely receive in the future—potentially costing the citizens of our state billions of dollars in lost opportunity over the next decade of gas drilling.

Of course, the politically-connected natural gas companies greatly desire this outcome. At the expense of those individuals who wish to wait, this policy awards private oil and gas companies the use of government power in order to “escape” the natural requirement the market imposes. No longer would these large, government-connected companies have to seek out property owners, and negotiate a price.  The time and capital private natural gas businesses would otherwise have to set-aside in the future—to offer higher prices to West Virginia residents for their mineral rights—would essentially be waived by our government. In other words, under a Forced Pooling policy, market forces are dismantled—providing special-privileges to one group at the detriment of another.

In essence, the misguided policy of Forced Pooling merely coerces massive amounts of individuals across our state to sell for artificially lower prices now, in the present—thereby transferring future wealth from the residents of our state, into the hands of large, favored oil and gas companies. Government reallocation of wealth and resources does not “create jobs”. Unless one considers the man who robs a bank, and uses the loot to start-up his own business a “job creator”—all this policy does is provide the illusion of short-term economic growth. The market takes time to develop, and in the long run, the best method of ensuring that this prosperous development transpires is to protect private property.

Yes, this policy is very damaging to the residents of West Virginia—and in spite of this, I’m sure many politicians will try to resurrect such legislation again. Some with less than noble intentions, and others with good ones—albeit misguided. But as James Madison wrote, “All men having power, ought to be mistrusted.”

Pat McGeehan represents the 1st District of Hancock and northern Brooke Counties in the House of Delegates. A graduate of the US Air Force Academy in Colorado Springs, he is the author of the book, Printing Our Way to Poverty—The Consequences of American Inflation. His newest book, Liberty and the Christ: Why Christians Should Embrace Political Freedom, is due out this spring.