Pennsylvania Senate passes bills to protect royalty owners

A trio of bills expanding the rights of landowners who are leased with natural gas companies passed the state Senate with an overwhelming majority this week. It awaits a House vote.

State Sen. Gene Yaw, R-Loyalsock Township, sponsored the Oil and Gas Lease Protection Package and said royalty owners’ feedback spurred the genesis of the bills.

“I think that every one of these bills addresses issues that have been brought to my attention by my constituents,” Yaw said. “… These bills are the theme of many questions that have been raised, and that’s what we try to address.”

The first bill’s intent is to provide more transparency in the royalty process, Yaw said. It allows royalty interest owners the opportunity to inspect records of natural gas companies to verify proper payments. Plus, the bill requires all royalty payments be made within 60 days of production unless otherwise stated in the contract. Any delinquent payments are to be paid with interest.

State Rep. Rick Mirabito, D-Williamsport, said he likely will vote for the package. He highlighted the first bill, saying it requires records to be held in Pennsylvania instead of where the gas company is based, with a reasonable inspection time.

The next bill prohibits gas companies from retaliating against any royalty interest owner by terminating their lease agreement or ceasing development on leased property if a royalty owner questions the accuracy of current royalty payments. If companies violate this, they will face civil penalties of up to $1,000 per day.

The third bill requires gas companies to record a surrender document in the county Recorder of Deeds office where the oil and gas well is located within 30 days upon expiration, termination or forfeiture of an oil and gas lease. The surrender document will release the gas company’s interests in the oil and gas.

“This was tailored after mortgage satisfaction. When a mortgage is paid off, the lending institution has a legal obligation to file a satisfaction. This bill requires the lessee to file a document to say it’s ended,” Yaw said.

In summary, “These are additional tools we try to provide to landowners to be able to look at records and make a decision and see if they’re being treated fairly,” Yaw said of the bills.

Yaw expects strong support in the House, as two of the three bills passed with no negative votes, and one passed with four votes against it.

“These are bills that will help royalty owners right now,” Yaw said, saying he saw “no reason” for lacking House support.

Meanwhile, state Rep. Garth Everett, R-Muncy, continues to refine pending legislation he is co-sponsoring with Rep. Matt Baker, R-Wellsboro, and others. The bill is designed to clarify the existing state law on how natural gas royalty payments to Pennsylvania landowners are calculated.

In the process, he’s trying to find a balance for landowners and gas companies.

“We want to be fair to both,” he said. “One version of legislation is very, very landowner friendly, but … it might go beyond the intent of the guaranteed minimum (royalty) law.”

Everett’s colleagues in western Pennsylvania have concerns of destroying gas companies’ profit margin and putting them out of business.

“That’s not our intent, either,” Everett said. “We’re looking to make sure that landowners that sign leases get a fair deal.”

The state’s oil and gas law supposedly guarantees a 12.5-percent minimum royalty payment, but gas companies have been dipping into that with post-production charges. Everett’s bill deals with that issue, but the royalty calculation process is part of what’s causing the delay, as Everett described it as a “very complicated” process.

“12.5 percent of what? That question is not super simple to solve,” he said. “Where did it get sold, who did it get sold to, how do you verify the price it was – and that it wasn’t a sweetheart deal between two affiliated companies? The bottom line is, it’s a very complicated process.

“We want to do this legislation right, we want it fair and equitable for all involved, so it’s taking a little longer than anticipated,” Everett said.

Part of that process will be going through the 40-plus bill amendments and picking the best, he said.

Everett said his bill will complement Yaw’s bills, not overlap or conflict. Everett and Yaw will support the other’s bills, they said.

Mirabito said he’s supportive of both efforts.

“This is a very important issue because when these landowners lease the land, they leased it with an expectation and understanding they’ll get the 12.5-percent royalty, so we should make sure gas companies honor the practice,” Mirabito said.

However, Kristen Hayes, of Jersey Shore, seeking the Democrat bid for the 84th Legislative District seat, does not favor Everett’s bill, saying, “It does little more than reinforce the minimum royalty act.”

She said the issue deserves more than “watered-down legislation with broad language that can be exploited into another Pennsylvania loophole that may deprive Pennsylvanian’s, especially our farmers, of the royalty checks they deserve.”

Instead, she supports House Bill 1650, sponsored by state Rep. Jesse White, D-Cecil Township, which would prohibit any post-production costs from being deduced from royalty payments.

“I believe that is the way we need to go,” Hayes said.

She declined to comment on Yaw’s bills.

Lycoming County Commissioner Jeff Wheeland, seeking the Republican bid for the 83rd Legislative District seat, also declined to comment, saying he wanted to research the bills further.