(Harrisburg) – Legislation sponsored by Reps. Garth Everett (Lycoming), Tina Pickett (Bradford/Sullivan/Susquehanna), Sandra Major (Susquehanna/Wayne/Wyoming) and Matt Baker (Tioga/Bradford) to clarify minimum royalty payments in state law was the subject of a meeting of the House Environmental Resources and Energy Committee Tuesday in Harrisburg.
House Bill 1684 would directly respond to concerns by landowners that their royalty payments have decreased due to post-production costs. Last year, some energy companies attempted to reduce or succeeded in reducing royalties below the statutory minimum by transferring post-production costs to royalty owners. 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, which is equivalent to about 12.5 percent.
“During the committee meeting, the bill was vetted at length, and of particular discussion, was an amendment that would provide further clarification to the 1979 state law and to respond to the changing industry,” Pickett said. “A couple of technical details in the language are currently being worked and as a result, the committee tabled the bill. We expect the committee to hold another meeting to consider the bill very shortly.”
“It is my sense that we took a big step forward today toward ensuring that Pennsylvania landowners with gas leases are treated fairly by gas developers,” Everett said. “Now we just need to keep the momentum going and get this bill through the House and over to the Senate.”
The goal with this legislation is in seeking fairness and in making sure that landowners receive the minimum royalty payment of one-eighth, as guaranteed by a 1979 state law, and that companies do not deduct post-production costs from that payment. A recent Supreme Court case ruled that the General Assembly must further clarify these terms, and this bill does so.
“The committee process is the appropriate time to work out any problems there might be with the bill or its amendments,” said Major. “Members of the committee suggested alternative language that will strengthen the bill language and make it move through the rest of the legislative process more quickly. The legislation is expected to be corrected quickly and brought back up before the committee in a timely fashion.”
“We owe it to our landowners to get this right the first time and not have any confusion pertaining to the bill and the minimum royalty payment amounts it seeks to clarify as law,” said Baker. “There is no significant loss of time in order to correct some minor language within the legislation, and I look forward to greater support for the bill once it comes back up before the committee next week.”
The Environmental Resources and Energy Committee will continue its discussion of the legislation at its next meeting for Monday, March 17, at 11 a.m., at which time a vote on the bill is expected.
In the meantime, the legislators have asked the attorney general to begin a formal investigation into one of the companies and the circumstances in which they believe the law was violated.