Bill could hurt thousands with old oil and gas leases, say advocates

Language recently slipped into a state budget bill could harm thousands of people with oil and gas leases, say advocates for Pennsylvania mineral owners.

The annual budget-related bill, known as the fiscal code, frequently contains questionable earmarks and controversial provisions lawmakers don’t pass through a more transparent, traditional process. This year’s fiscal code was approved by the state Senate last week.

The language angering royalty owners (section 1610-E) limits a landowner’s ability to negotiate new lease terms for older, non-producing oil and gas wells.

“We want to see this taken out of the fiscal code,” says Jackie Root, head of the state chapter of the National Association of Royalty Owners. “It’s really inappropriate.”

For example, right now, if a modern Marcellus Shale drilling company buys a lease dating back to the early 20th century, a landowner may successfully argue this lease has expired, if the well has not been producing for decades.

Attorney Robert Burnett of the Pittsburgh firm Houston Harbaugh says he represents people in such situations, and they can often negotiate new and better lease terms.

But he says this new fiscal code language gives the industry the upper hand—allowing drillers to revive expired leases and avoid negotiating with people. He says this issue is particularly relevant in western Pennsylvania, where there is a long legacy of drilling.

“It is a dramatic and unnecessary change to Pennsylvania oil and gas law,” Burnett says. “It really creates a risk of drillers going out to acreage where there is a suspect lease and just starting operations. I think it would cause a lot of litigation.”

The gas industry trade group, the Marcellus Shale Coalition, says it’s still reviewing the bill’s language, “But it’s clear the proposed triple tax on natural gas in the form of a severance tax, impact tax, and utilities tax, will absolutely harm landowners, consumers, and job-creators throughout the Commonwealth,” writes Coalition spokeswoman Erica Clayton Wright in an email.

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