House Panel To Take Up Gas Royalties Bill, But Not The One Advocates Hoped For

Oct 8, 2018

A state House committee plans to vote this week on a bill that could offer some help to people who allege they've been cheated out of royalty money from natural gas companies, but the measure falls short of what many landowners had hoped for.

Senate Bill 138 gives people the opportunity to inspect gas companies' records, which could help leaseholders verify proper royalty payment. Sponsored by Sen. Gene Yaw (R- Bradford), the measure comes amid continuing landowner allegations that the industry has charged exorbitant fees, misreported the sale price of gas and volume produced, and failed to adhere to lease language.

The bill was unanimously approved by the Senate in January. The House Environmental Resources and Energy committee plans to vote Tuesday.

Rep. John Maher (R- Allegheny) chairs the committee and did not respond to requests for comment.

Maher previously told StateImpact that he's tried to stall this bill, calling it "good, but not good enough." In a 2017 interview, he said he was concerned that if it passed, the legislature would claim the issue had been addressed.

The Pennsylvania chapter of the National Association of Royalty Owners (NARO-PA), which represents the state's mineral owners, has been pushing for different legislation that's been stalled in Harrisburg for years.  The group has repeatedly asked the legislature to clarify the Guaranteed Minimum Royalty Act -- a 1979 law which states oil and gas leases are not valid unless leaseholders receive a one-eighth (or 12.5 percent) royalty.

The 1979 law does not define how royalties are to be calculated, and a 2010 state Supreme Court decision permitted gas companies to deduct expenses they incur moving natural gas from wells to the market.

Many mineral owners say that court decision opened the door to the current problems -- with some people now receiving little to no money from the production of their gas. Earlier this year, West Virginia passed a new law aimed at addressing similar landowner complaints of improper royalty payments.

Rep. Garth Everett (R- Lycoming) has worked closely with the mineral group and has been the prime sponsor of much more controversial bills aimed at updating Pennsylvania's Guaranteed Minimum Royalty Act. The natural gas industry has lobbied against his efforts, arguing they amount to unconstitutional attempts to rewrite contracts. They say any disputes between landowners and companies should be left to the courts.

Everett calls SB 138 "a good step forward" but added, "it's not where I would ultimately like to go."

Robert Sher, president of NARO- PA, would only say, "We're happy the legislators are moving forward on landowner issues," when asked for his comments on the measure.

Everett added that he will not put the bill "in jeopardy" by trying to amend language about the Guaranteed Minimum Royalty Act.

"I was asked by everybody to let [the bill] run clean," he said. "So, I'm going to let it run clean."

Yaw spokesman Nick Troutman said he's pleased the committee is considering the measure.

"We'll see if it comes through clean or if there are amendments that are thrown at it," Troutman said.

Read this story and more from our partners, StateImpact Pennsylvania

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