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Pennsylvania Royalty Bill Delayed Until Fall Session

A high-profile bill -- written to shield royalty owners in Pennsylvania from post-production costs, but which has languished under the weight of special interests since April -- will receive no further consideration until state lawmakers begin the fall legislative session.

After clearing the House Environmental Resources and Energy Committee by a vote of 25-0 in March, HB 1684 advanced to the full house, but shortly afterward it stalled in the face of opposition from natural gas producers, their allies and ambivalence among lawmakers on both sides of the aisle (see Shale Daily, April 24).

Pennsylvania House Republican Caucus spokesman Raymond Smith said little has changed since then, and with lawmakers working to pass a state budget by a June 30 deadline that calls for closing a $1.5 billion deficit (see Shale Daily, June 17), the legislation has been pushed to the fall session.

"We're coming down to what may be the last week before summer recess and we have to pass a budget before June 30," Smith told NGI's Shale Daily. "We're dealing with pension and liquor privatization issues, and sadly, HB 1684 is on the back burner until fall."

The legislation was prompted by an outcry from landowners who alleged that Chesapeake Energy Corp. was unfairly making deductions from their royalty checks to cover gas marketing and transportation fees. A few other operators were accused of the same thing in a series of letters to lawmakers. In February, Republican Gov. Tom Corbett called for an investigation into the matter (see Shale Daily, Feb. 18), which the state attorney general's office started in March (see Shale Daily, March 14).

The bill has stoked both strong support and opposition, with the industry's allies, such as the Marcellus Shale Coalition, calling it a "vast legislative overreach," and other groups such as the Pennsylvania Farm Bureau and the state chapter of the National Association of Royalty Owners calling for its passage by saying that such protections are long overdue (see Shale Daily, April 7).

HB 1684 would clarify the Guaranteed Minimum Royalty Act of 1979, which sets forth the minimum payment to landowners from oil and gas production at one-eighth of the value of oil and gas produced under a particular lease. But the bill does not address marketing costs or how those royalties should be calculated.

The bill’s sponsor, state Republican Rep. Garth Everett, told local news media that because the bill has been delayed, more operators are withholding royalties through post-production costs. Attempts to reach Everett's office on Friday were unsuccessful. Smith said he couldn't be sure that was the case, but he added that landowner complaints about growing deductions first prompted the legislation.

Smith said when lawmakers return to debate the bill in the fall, the goal will be to amend HB 1684 through floor votes in a way that everyone can agree on to "get this thing passed."

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