Less than a month into the new year, Pennsylvania lawmakers will gather on Tuesday for a legislative hearing about an oil and natural gas lease protection package that would, among other things, make it easier for landowners to verify proper royalty payments.
Lawmakers returned to the capital on Monday to start the 2017-2018 regular session. For years they’ve failed to pass legislation that would ensure greater protections for landowners that have been crying foul about post-production costs and shorted royalty payments.
The Senate Environmental Resources and Energy Committee is scheduled to meet on SB 138 and SB 139, both sponsored by Republican committee Chairman Gene Yaw, who represents leading shale producing counties in Northeast Pennsylvania. Both bills stalled last year after they failed to gain traction in the House energy committee.
SB 138 would allow royalty interest owners the opportunity to inspect the records of a gas company to verify proper payment. That information would be confidential and could not be disclosed to anyone else. It would also require that royalties be paid within 60 days of production.
SB 139 would prohibit a gas company from “retaliating” against a landowner by terminating a lease agreement or ceasing development because a landowner questions the accuracy of payments. The package, Yaw said in a December memo, is meant to “support leaseholders who seek more transparency and protection while engaging the gas industry on their lease agreements.”
Landowners across the state, primarily in Northeast Pennsylvania, have consistently voiced their concerns about post-production costs being deducted from royalty payments to cover expenses such as compression, dehydration and transmission. The issued culminated in 2015 when the state Attorney General’s office filed a lawsuit against Chesapeake Energy Corp. for allegedly deceptive business practices related to post-production expenses. That case is still in state court.
Local elected officials in Northeast Pennsylvania, led by those in Bradford County, have hosted public meetings, staged protests and have pressured lawmakers to pass legislation for greater royalty protections. Bradford County launched a public relations campaign last year to help their efforts and several counties in the region are discussing forming a coalition to increase pressure in the state capitol.
Another bill that would have been key to resolving some of those goals also has failed for years. HB 1391 would have clarified the state’s Guaranteed Minimum Royalty Act of 1979, which sets forth the minimum payment to landowners but doesn’t address marketing costs and how they should be factored into royalties. The clock ran out on the bill at the end of last year’s legislative session as it has in the past.
The bill’s sponsor, Republican Rep. Garth Everett of Northeast Pennsylvania, said at the time that he would reintroduce the legislation this session. But thus far, legislative records show he hasn’t done so. Jackie Root, president of the Pennsylvania chapter of the National Association of Royalty Owners (NARO), said she expects that legislation to be reintroduced soon.
“We do expect traction this year. I wouldn’t say that bill fell by the wayside; we almost made it,” Root said of HB 1391. “At the end of the session, what we got from leadership is that they understand this is a huge problem; it has to be fixed and it’s not going away.”
NARO hosted a public meeting in Southwestern Pennsylvania on Saturday, where Root said more than 100 people attended to air concerns similar to those voiced in the northeast part of the state.
“We’re doubling down on our efforts to provide factual information on why this is so important,” she added. “It’s not a matter of saying that everyone is [deducting post-production costs] — that every company is doing it. We’re saying specific companies are doing it.”
While Root acknowledged that Yaw’s legislation doesn’t address how post-production deductions should be handled, she said the bills and similar legislation are also important.
SB 138 and SB 139 were referred to the Senate energy committee last week. Senators will meet to discuss the bills at 10:30 a.m. EST in Room 461 of the Capitol Building in Harrisburg.
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