Royal-ty Pain

TOWANDA – Spurred on by Wilmot Township supervisors recently adopting a resolution demanding an end to gas and oil production on leaseholders’ property within the township until post-production costs cease to be removed from royalty checks, about 750 people filled the auditorium at Towanda Junior-Senior High School for a town hall meeting Wednesday.

For the last several years, leaseholders – who by law are to receive no less than 12.5 percent of the profit from oil and gas removed from their unconventional wells – have seen a steady decrease in the amount of their royalty checks. Some checks have dropped from hundreds, or even thousands, each month down to next to nothing.

In some cases, leaseholders have received bills from Chesapeake Energy, which holds much of the leased land for natural gas drilling in Bradford County.

“We just want what was agreed upon to be followed through with,” Wilmot Township Chairman Supervisor Frank Messersmith said. “We just want them to follow the law. It’s very simple.”

Township secretary Jane Dietz read letters to legislators and the resolution passed by the township, after which she received a standing ovation:

“To the Pennsylvania House and Senate: We are the forgotten vanishing middle class, we have to work so many hours to pay our bills and taxes we can’t always make ourselves be heard.

“We elect you and stand behind you and now need your help. Please pass House Bill 1391 without amendments.”

To Chesapeake Energy, a letter read: “In the beginning, when we were being courted by you, you promised the mineral owner receives no risk, the operator incurs all risk. We signed believing you and now we are told those words didn’t mean what they said. You know that is morally wrong.

“Many landowners are being treated as if they have a working interest in the wells, yet they have no say in the business of the well, and they are being negatively impacted by the deduction of exorbitantly high post production costs. We demand a stop of production on wells where the payments have been reduced to nothing or nearly nothing. There are only about 12 session days left until they go back into recess in November.”

In a room filled with active leaseholders, Bradford County Commissioner Daryl Miller asked how many “would have signed those leases if you had known you would be billed for gas leaving your land?”

Not a hand went up.

“This is what we call the great royalty rip-off by manipulating terms and conditions of the contracts. It violates the 1979 Minimum Royalty Act,” Miller said.

He aIso noted a 2012 state Supreme Court decision that said because of lack of clarity in the 1979 legislation, the court had to decide in favor of the gas companies, “allowing them to do what they are doing right now.”

In a footnote to its ruling, the court left it up to the state Legislature to clarify the meaning and intent of the law.

“We are asking the Legislature to address this very serious issue affecting landowners across our region and state, define what it is and where the value takes place,” Miller said.

State Rep. Garth Everett, R-Muncy, said House Bill 1391 is “not complicated.”

“An eighth is 12.5 percent, the absolute minimum you should be receiving, and you are clearly not being paid the minimum,” Everett said.

He also said he “hopes that at the end of this (legislative) session, we can get this over the goal line.”

“What we are up against is a well-funded effort. They are taking money out of your pocket and paying an army of lawyers and lobbyists in Harrisburg, telling them that 1391 is unconstitutional. And if they have to pay you fairly, it will bankrupt them and run them out of the state,” Everett said.

“We lack people up here, so we need you to magnify our voices and bring this to the forefront,” he told the crowd, asking them to contact their legislators and then finding 10 people and asking them to do the same and “not let up.”

Bradford County Solicitor Jonathan Foster said the state attorney general has instituted a lawsuit against Chesapeake Energy, “dealing with deceptive practices and shortchanging leaseholders once royalties started flowing, and also the post-production costs.”

“They set up subsidiaries for things such as transporting water and gas, overpriced the contracts using the landowners’ money, taking out the costs and paying the subsidiaries. By selling them off, they made a profit based on guaranteed contracts stating the landowners would be funding them,” he added.

According to Foster, Chesapeake “will have to answer to these charges, and the state is seeking $1,000 per violation of consumer protection law for leaseholders under age 60 and $3,000 per violation for those over 60.

“This will result in a direct financial benefit, stop the practices and benefit the citizens of the county,” Foster said.

Bradford County Commissioner Doug McLinko, of Wysox, said almost 11,000 parcels of property are affected.

“Across the state, that amounts to 150,000 families, and all may not have bad operators, but what happens here tonight can affect them. The numbers are staggering. We have stuck together, and here in Bradford County we are not backing down.”

Also at the meeting were Thad Stevens, of Tioga County National Association of Royalty Owners, who urged people to join the organization, which he said was “the only way we can continue and be effective. It is a critical matter, and NARO is the only organization that represents you the royalty owner.”

Rep. Tina Pickett, R-Towanda, called those in attendance “citizen lobbyists.”

“I would say you have your homework. The endorsements from CCAP, PSATS, the Farm Bureau, NARO and the landowners association, they all carry great weight in Harrisburg, so I am hoping this is a real turn of the tide here.”

Bradford County Commissioner Ed Bustin, of Sayre, asked people not to take out their frustrations with the company on the workers here “trying to earn an honest living.”

“This is about corporations and the law,” he said. “Let’s get this done together.”