Capitol Report

Kane Looking Into Claims Driller Cheated Landowners

The Legal Intelligencer

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A Northern Pennsylvania state senator has asked Attorney General Kathleen Kane to investigate claims from some of his constituents that Chesapeake Energy is shortchanging them on royalty checks for extracting natural gas from their lands.

"We're not just talking about five or six, but dozens of complaints from constituents," said Adam Pankake, a spokesman for state Sen. Gene Yaw, R-Lycoming.

Office of the Attorney General spokesman Adrian King Jr. said the office will be talking to Chesapeake, other drillers and lawmakers as part of an information-gathering phase.

"We will look to see if there is a case and also if we have jurisdiction," King said.

Chesapeake spokesman Gordon Pennoyer declined comment but said the company might have a statement later.

The Guaranteed Minimum Royalty Act of 1979 requires a minimum 12.5 percent royalty payment for gas or oil extracted from private land.

But Pankake, who is also the executive director of the Senate environmental resources and energy committee, said its application varies despite a 2010 state Supreme Court case, Kilmer v. Elexco Land Services, that said drillers could deduct post-production costs from the checks.

"The case said essentially that the company could subtract post-production costs required to get the gas to the point of sale," Pankake said. "But in some cases in Senator Yaw's district, landowners are getting virtually nothing—100 percent of costs are being deducted."

The constituent complaints prompted Yaw to introduce a three-bill package. One measure would allow those receiving royalties from gas wells to inspect records of companies to verify proper payments. A second would prohibit a gas company from terminating a lease or ceasing development because of questions over the accuracy of royalty payments. A third bill would require a gas company to record with the county within 30 days of a lease expiration or termination a release relinquishing all gas and oil rights.

— John L. Kennedy, for the Law Weekly
 

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