House panel weighs gas royalty legislation

The state House Environmental Resources and Energy committee is weighing a proposal to restrict natural gas companies from withholding royalty money from Pennsylvania landowners.
A 1979 state law requires oil and gas companies to pay a minimum 12.5 percent royalty to landowners who lease their property for drilling.
House Bill 1684 was proposed in the wake of allegations some companies are cheating landowners by withholding large amounts of money and paying less than the legal minimum. The measure would limit companies’ abilities to charge landowners for the costs associated with processing and transporting natural gas.
The fees– known as post-production costs– would still be allowed, but a lease would be invalid if the deductions result in a landowner receiving less than a 12.5 percent royalty.
The bill also aims to define where the point of sale is for natural gas. The measure would prohibit a company from calculating royalties based on the price it receives from selling gas to its own subsidiary.
Rep. Chris Ross (R- Chester) raised concerns, echoed by other legislators, that the bill’s language was too broad and could potentially invalidate entire lease agreements.
“After a drilling company has made the substantial investment, they then have to start all over again with negotiations with the mineral rights owners,” said Ross. “It puts them at somewhat of a disadvantage.”
The committee voted 17-8 to table the bill today, but a vote is slated for next Monday. Rep. Garth Everett (R-Lycoming) is the prime sponsor and says he’s willing to make changes.
“I’m a little disappointed that we didn’t get the bill out of committee, but I think we’ve got the ball moving,” he says. “I think within a couple days we’ll get it out of committee and to the floor.”
Jackie Root heads the Pennsylvania Chapter of the National Association of Royalty Owners–a group that advocates for landowners and backs the bill.
“We’re going to be working hard to make sure we continue to have support,” she says. “I think the committee all senses the urgency of it.”
Marcellus Shale Coalition, a gas industry trade group, opposes the measure. In an email spokesman Steve Forde called it a “vast legislative overreach.”
“Adding additional costs to the way industry and our partners operate only serves to undermine development in Pennsylvania and make the Commonwealth’s landscape less competitive.”
A state Senate committee also approved a package of three bills today aimed at protecting royalty owners.
The measures would allow landowners to inspect gas companies records to verify proper payment, prohibit drillers from retaliating against landowners who question royalty payments, and require companies to file a document with the county Recorder of Deeds surrendering a lease that has expired or ended.

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