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Pennsylvania Lawmakers Pledge Action on Oil/Gas Royalties Protection Bill

Republican lawmakers in the Pennsylvania House of Representatives have renewed their push to shield royalty owners in the state from post-production costs by reintroducing a bill to guarantee payment of the statutory minimum of 12.5% of the value of oil and gas produced under leases.

Rep. Garth Everett, who first sponsored a similar bill early last year that stalled in the face of special interests, has joined four other Republican House lawmakers to sponsor the bill. HB 1391 would clarify the state's Guaranteed Minimum Royalty Act of 1979, which sets forth the minimum payment to landowners with oil and gas leases. Currently, the statute does not address marketing costs and how they should be factored into royalty payments.

"It's very simple legislation, very narrowly focused," Everett, of northeast Pennsylvania, said after he reintroduced the bill on Tuesday. "All it does is make sure that our landowners are paid fairly by these huge multinational gas companies and that they're not using our landowners' royalties for their profits."

The last bill, HB 1684, unanimously cleared the House Environmental Resources and Energy Committee last year, but languished after it faced strong opposition from natural gas producers, their allies and ambivalence from lawmakers on both sides of the aisle (see Shale Daily, June 20, 2014). Although it had some bipartisan support, it never received a full floor vote.

The legislative efforts were prompted by an outcry from landowners who alleged that Chesapeake Energy Corp. was unfairly making deductions from their royalty checks to cover post-production costs, such as compression, dehydration and transmission (see Shale Daily, Feb. 18, 2014). A few other operators were accused of the same thing and former Republican Gov. Tom Corbett called for an investigation, which the state attorney general's office started last March (see Shale Daily, March 14, 2014).

Earlier this year, Attorney General Kathleen Kane confirmed a wide-ranging royalties investigation during state budget testimony. At the time, she said the investigation was nearly finished (see Shale Daily, March 18).

"This shortchanging of property owners in Pennsylvania adds up to the loss of millions of dollars each year," said co-sponsor Rep. Karen Boback of northeast Pennsylvania. "Beyond property owners, it affects school districts, townships and other municipalities. It is time for action to make sure property owners are being paid fair."

While industry groups, such as the Marcellus Shale Coalition have called the royalty efforts a "vast legislative overreach," the bills have received strong support from groups such as the Pennsylvania Farm Bureau and the state chapter of the National Association of Royalty Owners.

The state Senate Environmental Resources and Energy Committee earlier this year also voted unanimously to advance a pair of bills that would give landowners more transparency and protection when making inquiries about their lease agreements (see Shale Daily, Jan. 22). SB 147 and SB 148 would give landowners the ability to inspect gas company records to verify proper payment, require operators to pay royalties within 90 days from the start of production and prevent them from retaliating against landowners who make inquiries.

No action has been taken on those bills since the Senate energy committee's vote, while HB 1391 is currently awaiting a committee assignment in the House.

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