Capitol Report

Gas Royalty Payments Measure Introduced in House

The Legal Intelligencer

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Legislation that would standardize how natural gas royalty payments to landowners are calculated has been introduced in the state House of Representatives.

State law requires a 12.5 percent payment, but different drillers apply the percentage different ways, according to one of the bill's sponsors, state Representative Garth Everett, R-Lycoming.

"Some subtract post-production costs from the payments," Everett said. "The method has to be clarified because with the Marcellus, we're dealing with big numbers, not just mom-and-pop operations."

Everett's legislation, HB 1684, would require that the 12.5 percent be applied against the price of the gas when it's sold for transmission, after any post-production work is done on the gas.

"Sometimes the gas has to be compressed. Sometimes it's run through a dehydrator," Everett said. "Those costs should be on the company, not the landowner."

Steve Forde, a spokesman for the Marcellus Shale Coalition, which represents the drillers in Pennsylvania, wrote in an email that the legislation, and other similar bills, serve as the latest reminder that landowners, consumers and industry all have a great deal at stake in Pennsylvania's natural gas development.

"Proposals like this equate to a vast legislative overreach that could place much of it at risk," he wrote. "Adding additional costs to the way industry and our partners operate only serves to undermine development in Pennsylvania and make the commonwealth's landscape less competitive. In the end, this would be a loss for businesses, landowners and families alike."

Everett said part of the problem lies with the 1979 Guaranteed Minimum Royalty Act.

"It really isn't clear in the law how the calculation should be made," Everett said.

— John L. Kennedy, for the Law Weekly

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