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PA Royalties Fight Escalates as County Kicks Off PR Campaign Against Operators

Commissioners in one of Pennsylvania's leading shale gas producing counties have voted to spend $15,000 for a public relations campaign that would tell how landowners are being cheated out of royalty payments.

The Bradford County Commissioners said they would hire a public relations firm to make a short film that would feature the stories of landowners who have allegedly seen their royalty checks reduced by operators deducting post-production costs to cover the expenses for things like compression, dehydration and transmission. The county would use money it’s made from gas royalties to pay for the campaign, which would also buy media ads.

The move is part of a broader effort under way in the county to influence state lawmakers that have for years tried but failed to pass legislation that would clarify the state's Guaranteed Minimum Royalty Act of 1979, which sets forth the minimum payment to landowners with oil and gas leases.

The statute does not address marketing costs and how they should be factored into royalty payments. The latest legislation, HB 1391, was again referred to the Rules Committee in June after it failed in 2014 (see Shale Daily, June 26, 2015).  

There have been 3,736 shale permits issued in the county, which was the fourth highest producing county in the state last year at 353.8 Bcf, according to the Pennsylvania Department of Environmental Protection. The commissioners also voted in favor of a resolution that calls for lawmakers to immediately act on HB 1391.

The moves came just days after Wilmot Township, a small town of about 1,200 residents in the county, passed a resolution to limit natural gas production over the post-production deductions (see Shale DailySept. 7). That resolution demands "production be discontinued from wells where the landowners are having their royalty checks diminished to nothing or nearly nothing, or in some cases having their accounts accrue a negative balance due to companies deducting exorbitantly high post-production costs."

Wilmot's ordinance is largely symbolic, with township supervisors there saying it's meant to pressure lawmakers into passing legislation that would better guarantee minimum royalties. The issue of post-production costs and royalties in the state has continued to escalate in recent years, culminating last December with the state attorney general filing a wide-ranging lawsuit against Chesapeake Energy Corp. over alleged royalty deductions (see Shale DailyDec. 9, 2015). Other companies have battled landowners in private cases in the state.

The Bradford County Commissioners did note in conversations with local news media that certain companies in the county are paying royalties properly. In Wilmot, township supervisors singled out Chesapeake and Chief Oil and Gas LLC as the companies shorting royalties. The companies haven't commented, but the Marcellus Shale Coalition said after the Wilmot resolution that landowners have economic and contractual obligations that are best contested in state courts.

Bradford County has also scheduled a town hall meeting on Wednesday (Sept. 14) to discuss the issue. State Rep. Garth Everett, who represents parts of nearby Lycoming County and is HB 1391's prime sponsor, will be there to answer questions about his efforts.

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