The House Environmental Resources and Energy Committee is scheduled to hold a hearing on House Bill 1684 (Everett-R-Lycoming) guaranteeing minimum royalty payments to oil and gas well owners.

“(Pennsylvania’s ) Guaranteed Minimum Royalty Act (Act 60 of 1979) provides royalty owners with a guaranteed minimum one-eighth royalty for oil, natural gas or gas of any other designation in order to protect landowners from unfair or deceptive leases for the recovery of these natural resources,” said Rep. Garth Everett, prime sponsor of the bill. 

“The development of unconventional shale gas wells in the Commonwealth has been accompanied by an effort by some companies to reduce royalties below the statutory minimum by transferring post-production costs to royalty owners,” said Rep. Everett.  “These are costs that are incurred between the wellhead and a final market point of sale and typically include dehydration and transportation.  When these expenses are deducted, final payments often result in royalty shares of less than one-eighth.

“In 2010, the Pennsylvania Supreme Court considered this issue in Kilmer v. Elexco Land Services, Inc. and determined that the “General Assembly is the branch of government best suited to weigh the public policies underlying the determination of the proper point of royalty valuation,”  explained Rep. Everett. “When PA landowners signed leases stating that they would receive one-eighth of the value of the gas produced, they assumed that an eighth is an eighth – not something significantly less than that because of deductions.  Accordingly, we believe it is within the legitimate police power of the Commonwealth to address and clarify this issue for our royalty owners, gas developers and the Courts.”

A sponsor summary of the bill is available.

The House Committee hearing will be held in Room G-50 of the Irvis Building starting at 9:00.

Last week, Sen. Gene Yaw (R-Lycoming), Majority Chair of the Senate Environmental Resources and Energy Committee, introduced his own package of bills on the royalty issue: Senate Bill 1236 amends the Oil and Gas Lease Act further providing for payment of royalties, Senate Bill 1237 establishing the Natural Gas Lease Anti-Retaliation Act to protect royalty interest owners,  Senate Bill 1238 establishing the Oil and Gas Lease Satisfaction Act providing for certain forms and damages.  Sponsor summary of all three bills are available.

Rep. Ron Miller (R-York) serves as Majority Chair and Rep. Greg Vitali (D-Delaware) serves as Minority Chair.

2/3/2014