The WV Securities Commission has recently started contacting entities with oil and gas operations in West Virginia to point out the requirement to comply with state securities laws. The term ?securities? includes not only limited partnership interests and other recognizable investments, but also oil and gas interests which at first blush do not appear to be a ?security." For instance, non-operating working interests in oil and gas leases may be ?securities."
The basic rule to keep in mind is that it is unlawful to offer or sell any security, including an interest in the working interest in a well coupled with a Joint Operating Agreement, unless the security is:
(i) registered, or
(ii) exempt from registration.
Most regulatory schemes are intended to protect PASSIVE investors and typically do not apply to farmout agreements, sales of leases with retained participation rights, etc.
We are available to assist you in evaluating whether the securities laws apply to your situation and to work with you in responding to federal or state securities administrators.