Landowners leased with natural gas companies aren't getting nearly the royalties they thought they would due to exorbitant post-production fees, and Chesapeake Energy Co. seems to be the biggest player in the alleged malpractice, said state Rep. Garth Everett, R-Muncy.
Thus, Everett, state Rep. Matt Baker, R-Wellsboro, and others have joined the fight calling for an attorney general investigation into Chesapeake's practice of deducting gas royalty payments for post-production costs.
Everett said he thinks Chesapeake not only violated contract law, but the state's oil and gas law, taking more than permitted for post-production costs from royalty payments. Everett said Chesapeake has been approached but would not cooperate independently.
If Chesapeake is found to have taken more money than allowed, "We'd make them pay it back and punish them. They've not been playing fair, we've given up on them, and we're very frustrated," Everett said.
Baker agreed Chesapeake needs to be held accountable. "The natural gas industry is continuing to grow and Chesapeake Energy is a big player in the market that needs to be held accountable for commitments it made to landowners."
While the retroactive action is necessary, the 1979 oil and gas law needs to be clarified to ensure landowners are getting the minimum 12.5-percent royalty payments starting the day the amendment would be signed, Everett said.
Legislation sponsored by Everett, and others, would ensure the minimum royalty payments to landowners, and legislation sponsored by state Sen. Gene Yaw, R-Loyalsock Township, would make gas companies more accountable. Everett's bill is expected to be voted out of committee next week, while Yaw's trio of bills were voted out of committee this week.
State Rep. Rick Mirabito, D-Williamsport, said he would vote for the legislation but would want to ensure the legislation does not violate private contracts, saying that many leases may include language that specifies certain costs are deducted from royalties, and some automatically renew every year.
Mirabito agreed the law needs to be clarified.
"We need to make sure we clarify that the intent of the law was there be a minimum royalty," he said.
The first of Yaw's three bills in the Oil and Gas Lease Protection Package would allow royalty interest owners to inspect records of natural gas companies to verify proper payments. Plus, the bill would require royalty payments be made within 60 days of production unless otherwise stated in the contract. Any delinquent payments are to be paid with interest.
The second bill would prohibit a gas company from retaliating against any royalty interest owner by terminating their lease agreement or ceasing development on leased property because a royalty interest owner questions the accuracy of current royalty payments. Companies that violate that face civil penalties of up to $1,000 per day.
The third bill would require a gas company to record a surrender document in the county Recorder of Deeds office where the oil and gas well is located within 30 days of an ending of the lease. The document will release the gas company's interests in the oil and gas, similar to what a mortgage company would be required to do after a mortgage was paid in full.
"The goal here is to provide more weapons for landowners to level the playing field with gas producers," Yaw said. "Hopefully, these bills, along with other legislative and investigative efforts, will resolve many of the royalty issues, which have been brought to the attention of legislators."