Officials Trade Barbs in PA Gas Royalties Issue

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BradCo Commish

Photo and Story By Rick Hiduk (Dec. 11, 2013)

Bradford County Commissioners (from left) Doug McLinko, Daryl Miller, and Mark Smith renewed their calls for state officials to take action against unfair gas royalty reductions at their Dec. 5 meeting.

Statements made to the press at last Thursday’s meeting of the Bradford County Commissioners about post-production costs taken from landowners by the largest gas company operating in Bradford did more than reach their intended ears.

The offices of Gov. Tom Corbett and Sen. Gene Yaw, the two state officials that the commissioners accuse of dragging their heals on enacting legislation that would ensure lease-holders the 12.5-percent minimum royalty guaranteed by state, fought back with stinging statements that only served to fan the flames.

The Corbett administration blamed Commissioner Mark Smith, who is running for lieutenant governor as a Democrat, for utilizing partisan tactics to promote his own efforts. In fact, Smith and fellow commissioners Doug McLinko and Daryl Miller – both republicans – have been united in the fight for fair royalty payments for landowners across the state since the spring.

They’re coming up with more excuses not to fix it,” McLinko said on Dec. 5.

This is about doing what the court asked to be done,” Miller added in reference to the 2010 Pennsylvania Supreme Court decision in the Kilmer vs. Elexco case in which the court determined that the definition of “royalty” in the state’s Guaranteed Minimum Royalty (GMR) Act of 1979 was vague under today’s circumstances.

The court decided that it was up to the Commonwealth’s legislature to come up with a clearer definition of “royalty” than that suggested in a decade’s-old law that was never updated to reflect modern drilling and fuel transportation practices.

The court implied that it needed that clarification from the legislator in order to interpret the act for existing and future leases. Smith was the most aggressive in pointing the finger of blame at Yaw, but McLinko and Miller were supportive of his statements.

Senator Gene Yaw is the ringleader to not getting things done,” Smith remarked. “He’s a lawyer. He thinks that this is a legal issue.”

Only a lawyer would ask the residents of Bradford County to figure this out for themselves,” said Miller, who exhibited an email from Mary Jean Foelster of Sayre, who has been watching the royalty checks associated with her property in Litchfield Township shrink with each passing month. Most recently, she received a check for $47 that was supposed to represent her earnings for two months in the summer.

Using the 12.5-percent GMR equation, Foelster related to the commissioners that she should have received a little more than $1,000. Miller noted that gas from the same well head might be purchased by three or four different companies, and “Each of them interpret the lease differently.” Neither Southwestern Energy nor Talisman Energy are taking any post-production costs, McLinko noted.

Companies like Chesapeake are taking monstrous deductions,” Smith explained, adding that representatives of the energy giant feel that they have Harrisburg’s blessingand are therefore not motivated to make any changes.

Mark Smith

Bradford County Commissioner Mark Smith

In my most recent sit-down with them, they basically told me they have the governor and guys like Gene Yaw on their side,” Smith stated. “So, they are going to fight (any changes in the law) tooth and nail.” The deductions by Chesapeake have reportedly reached as much as 95 percent in Bradford County.

The three commissioners are each pro gas to varying degrees. Smith was in favor of Act 13, by which gas companies were required by the state to make payments into a general fund through which the most impacted municipalities could recoup costs for infrastructure and other improvements.

Despite its passage, McLinko and Miller generally opposed the measure based on concerns that companies like Chesapeake, which had invested greatly in infrastructure and enamored much of the populous with sizable donations of both cash and used vehicles to nonprofit groups, would be less philanthropic in the future.

Ultimately, once the corporation had shored up its lease holdings in Pennsylvania, Ohio, and West Virginia, Chesapeake subsequently released most of its public relations, outreach, and development staff. This had little if anything to do with Act 13, which West Virginia and Ohio do not have, and was seen as primarily a housecleaning maneuver by a mismanaged, cash-strapped energy company.

In his defense, Lycoming County-based Sen. Yaw stated via Facebook on Tuesday, that, “The Bradford County Commissioners (and their entourage) have ventured to Harrisburg numerous times in the past year. During this period, it’s unfortunate that they have never found time to stop by my office and talk to me or any member of my staff. Instead, newspaper articles like this are their ONLY form of communication.” He also offered links to old press releases about a senate hearing to which he had invited the commissioners and bills that he has endorsed to affect the situation.

In a release from Smith’s campaign camp, Patrick Henderson, Deputy Chief of Staff and Energy Executive to Gov. Corbett was quoted as alleging that “Commissioner Smith’s comments are inaccurate and unprofessional.” If the statements Smith attributes to Chesapeake representatives from the meeting to which Smith had referred in the Dec. 5 meeting were true, Henderson continued, “He ought to have the decency and forthrightness to state who, exactly, made the claims.” he asserted that the governor “is committed to…ensuring Pennsylvania landowners are treated fairly.”

Yaw has long contended that the court is the forum for making lasting changes to the law. He insists that even State House Bill 1684, sponsored by Representatives Tina Pickett, Sandra Major, Matt Baker, and Garth Everett and intended to provide a better definition of royalties is not the magic potion that landowners are seeking. He has indicated that he will support the bill but asserts that it too will be interpreted differently by separate parties and end up in court.

Now, it’s not just the commissioners, however, who are voicing negative opinions about Corbett and Yaw. A growing number of Bradford County residents feel that the two want to prevent gas and oil companies from deducting from landowners royalty checks charges for transportation, dehydration, and other aspects of gas drilling that they feel should be reflected in the base market price.

A link to an article in the Daily Review of Towanda that contained quotes by the commissioners was in the same posting. James story prompted a less than civil debate among readers. The Daily Review’s website offered an open forum for accusations and counter punches that continued to rage through the day on Wednesday.

There were some respondents who accused the landowners of being short-sided, but most expressed support for the commissioners and encouraged them to keep up the pressure on Harrisburg. Likewise, responses to Yaw’s own posting were less than flattering. Even those who came off as general supporters of the Senator were nudging him to take more affirmative action.

Constituent Doug Morrow responded to Yaw, “Gene, this is your district. You shouldn’t be waiting for a House bill. You should be leading the charge. If you’re aware of the problem, don’t leave it up to other people. You are their Senator. No offense, but Lead!”

Chris M. James wrote back to the senator, “Here’s an opportunity to rebut the commissioners right here. Have at it.”

In response to James, Yaw’s staff members posted the aforementioned links, which did little to impress James. “Those are nice, feel-good public relation pieces,” he retorted. “Now, address the 12.5 per cent royalty issue.”

Scott Miller sided with the landowners but also faulted the inexperienced lawyers who helped to draft the original contracts between the lessors and the gas companies when they first arrived. “It seems to me one phrase: ‘A guaranteed minimum of 12.5 percent royalty shall be paid to the lease.’ One simple, easy to understand phrase would have made everything so much better.”

Daily Review readers took shots at both Smith and McLinko, referring Smith’s comments as self-serving and calling McLinko “the single most influential voice in getting the gas boom started here without giving us time for fully researching all the ramifications.”

More than not, the online debaters took Republicans Tom Corbett and Gene Yaw to task.

Yaw and Corbett care nothing for the people. I am sure that they are getting great perks from the gas companies, like they think we are stupid,” stated a reader identified only as darlnewton, who related that he had called Yaw’s and Corbett’s offices numerous times and never received a response.

As a landowner, I signed (a lease) to bring opportunity to this area, giving people hope that their children would be able to further their education and get better jobs,” darlnewton continued. “I want the royalty law fixed. They all know that those making the (1979) law did not mean for (the gas companies) to steal it!”

If they tried stealing from me, I would make sure that no gas flowed from the well, ever again,” responded Fred Pyro. “If they do not want to pay for the gas, don’t take it.”

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