Pennsylvania

Energy. Environment. Economy.

Royalties bill on the back burner until fall

A controversial bill aimed a limiting gas companies from withholding royalty money from landowners will be set aside until the fall legislative session.

House Bill 1684 would limit the practice of charging landowners for post-production costs– the expenses associated with processing and transporting natural gas.

Rep. Garth Everett (R- Lycoming) is the prime sponsor of the bill. He says House leadership told him the measure is on the back burner.

“They just said it’s not going to be a top priority for them right now, and I understand that. We have got the budget to do.”

At issue is a 1979 state law that requires oil and gas companies to pay a minimum 12.5 percent royalty. Some landowners have alleged companies are fraudulently withholding money, citing post-production costs.

Most of the royalty complaints have been centered on Oklahoma-based Chesapeake Energy, but Everett says he gets complaints from constituents about other drillers too.

“It appears, since the bill has gone away, that there are more companies starting to nibble away at royalty money with post-production costs,” he says.

The oil and gas industry has lobbied heavily against the measure, which it calls a “vast legislative overreach” interfering with a legitimate business practice. They note many people signed leases which explicitly allow for post-production costs to be shared between landowners and gas operators.

Chesapeake’s royalty practices have sparked lawsuits across the country, including a class-action suit in Pennsylvania. In response to a request earlier this year by Governor Corbett, state Attorney General Kathleen Kane is investigating the company’s business practices.

Comments

  • Victoria Switzer

    I would really like to see a public hearing in Harrisburg-inviting all the folks who signed those carefully crafted leases and truly believed they were going to get 12.5%. If the law states 12.5% IS the minimum royalty even a dime less should be illegal. A lease that allows less than 12.5 should in my mind be illegal? This issue was brought to the attention of elected officials many years ago. In their fear of having the “Golden Goose” fly back to WV, it was ignored as were many other issues regarding leasing and permitting. Hmmm, the pre election interest in doing the right thing for the landowners/constituents has passed.

    • NorthernTier

      Afaik, the leases in question do specify (at least) a 1/8 royalty. The gotcha is that they contain language that allows for deduction of post-production costs from the royalty.
      Also, how would the proposed legislation impact landowners who signed for higher royalty percentages? Any legislation should guard against operators taking them down to the “floor” (12.5%).

  • Jack Wolf

    Of course…

  • shedpiney

    Guess we have to wait for the elections to pass, before they just drop the issue. Do I hear kickbacks.

  • drad

    Some firms are applying the costs even though the lease is SILENT. They know that average landowners can’t fight them. This is WRONG and needs corrected. The law was meant to get the landowner a minimum of 12.5% and the legal community was able to convince our courts that it could be reduced. IT’S JUST WRONG AND NEEDS CORRECTED.

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