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Landowners Angered Over Bill Giving Drillers Power To Combine Leases

Oil and gas lease

Marie Cusick/StateImpact Pennsylvania

An organization representing Pennsylvania’s mineral owners is angered over a bill that sailed through the state legislature over the weekend. It now awaits Governor Corbett’s signature.
The Pennsylvania chapter of the National Association of Royalty Owners (NARO-PA) says Senate Bill 259 allows gas companies to combine, or “pool” leases.
They argue it could adversely impact some people who signed leases years ago and didn’t anticipate modern shale gas drilling.
Vertical or “conventional” drilling techniques worked more like, “you stick a straw in and suck it all out,” explains NARO-PA Vice President Trevor Walczak.
Newer horizontal, or “unconventional” drilling techniques don’t just go straight down — they move sideways. So drillers can extract oil and gas from under multiple land parcels at the same time. It’s often more efficient for companies to pool the parcels together.
The legislation would give companies the ability to combine parcels for horizontal drilling, unless it’s explicitly prohibited in the lease.
The bill was introduced by Senator Gene Yaw (R- Lycoming). His district includes some of the most drilled-on areas in Pennsylvania.
The legislation was originally promoted as an effort to bring more transparency to the deductions companies take out of royalty payments. Complaints over those deductions lead to a Senate hearing on the issue last week.
Yaw disagrees with NARO’s interpretation of the bill.
“This is not pooling,” he says. “I don’t understand what their concern is.”
Yaw says the bill only allows gas companies that have already leased a contiguous piece of land to go underneath the parcels– minimizing the disturbance on the surface.
“We’re giving the gas company the right to make the decision,” he says,  “They don’t have to go on the property and drill, but they could go under it horizontally. Actually, it’s an environmental piece of legislation because we’re cutting down the number of well pads.”
Governor Corbett has said publicly he would not sign a bill containing language related to “forced pooling” — which would give drillers the right to take gas from a property owner who has not signed a lease. This bill only allows companies to combine existing leases.
But Jackie Root, NARO-PA president, says the bill’s language still leaves landowners at a disadvantage– hindering their ability to renegotiate old leases.
“[The legislature] just said: ‘Here, oil and gas industry. You can pool, and you can make the rules,” she says.
Walczak stresses NARO-PA supports the gas industry, but wants to make sure its business practices are fair to landowners.
“The Republican caucus doesn’t understand the difference between supporting the industry and holding the industry in check,” he says.
You can read Senate Bill 259 below:


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