Deductions from landowners' shale gas royalties digging too deep, committee told

By Laura Legere / Pittsburgh Post-Gazette

Deductions for gas transportation and processing costs have reduced some Pennsylvania landowners’ monthly shale gas royalties to less than a quarter of what they expected to receive based on their lease contracts, sometimes leaving them with a monthly balance of $0, according to testimony presented Tuesday during a House committee meeting in Harrisburg.

Gas leaseholders hit by steep deductions include the state Department of Conservation and Natural Resources, which saw its 20 percent royalty stake brought down to 4.6 percent in one month — an adjustment worth $34,000 — even though the agency’s shale gas leases on state forestlands explicitly forbid the practice, in one example highlighted at the meeting.

State forester Daniel Devlin said DCNR works with companies to get paid its full share when it finds deductions and, for the most part, the agency has been successful in getting reimbursed. He called the example “an outlier.”

“We are very aware of it,” he said. “We are pursuing it to the extent that we possibly can.”

The bill under discussion Tuesday, House Bill 1391, would prohibit companies from taking deductions that would leave a mineral owner with less than the one-eighth, or 12.5 percent, minimum royalty defined by the 1979 Guaranteed Minimum Royalty Act.

The bill’s primary sponsor, Rep. Garth Everett, R-Lycoming, unsuccessfully pushed for a broader royalty protection bill in a past legislative session. This proposal is much narrower, but constitutional concerns persist about the bill’s potential interference with existing gas lease contracts, many of which either allow for or are silent about deductions.

An attorney for Downtown-based EQT Corp. — the only invited company that agreed to appear at the meeting, according to the committee’s chairman Rep. John Maher, R-Upper St. Clair — was clear that the industry will swiftly challenge the law if it is adopted.

“I’m positive the producers will tackle this issue as to whether or not it’s fair to go back and change these negotiated royalties,” EQT attorney Jessica Brisendine said.

Advocates for royalty owners said the bill would provide necessary relief to landowners who are otherwise forced to fight unfair deductions in court one by one. Bradford County landowner David DeCristo shook a thick stack of paper in the air — his legal bills, he said — to prove the point.

The Pennsylvania attorney general’s office sued Oklahoma City-based Chesapeake Energy Corp. in December for allegedly deceiving and underpaying thousands of landowners in violation of their lease terms.

Added up, unfair deductions are taking millions of dollars from the state’s roughly 80,000 royalty recipients, said Jackie Root, president of the Pennsylvania chapter of the National Association of Royalty Owners.

“We believe the intent was clear in 1979 — Pennsylvania royalty owners should not receive less than 12.5 percent — and the legislature should clearly define royalty to prevent the theft of our resources through creative accounting,” she said.

The meeting on Tuesday was informational only and a vote has not yet been scheduled for the bill.

Read more: http://powersource.post-gazette.com/powersource/policy-powersource/...

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Permalink Reply by searcherone on March 15, 2016 at 5:12pm

Just sayin' here that the anti frackers are against the oil and gas companies and if the oil and gas companies upset the royalty owners the long term affect will not be positive for the oil and gas companies.

Seems like keeping royalty owners happy would be a priority in our anti fracking and lawsuit happy culture of the 21st century. 

Permalink Reply by Joseph-Ohio on March 15, 2016 at 11:05pm

Appears to me based on numerous entries / posts on these pages and elsewhere that the short term / the long term / any term affects on the entire hydrocarbon natural resources industry is already anything but positive.

Everyone especially the politicians / so-called leaders need to act to correct this mess if you ask me.

To me it appears to be crippling our domestic economy / living standards and undermining our faith in our industry and political leadership.

Looks like they're all leading our country and population straight to hell.

It all looks like a train wreck to me.

Permalink Reply by Joseph-Ohio on March 15, 2016 at 11:44pm

What do the rest of you folks think ?

Are we headed for disaster ?

Or are we all already collectively epically inundated ?

If we are, can our 'ship' be 'righted' ? ?

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 16, 2016 at 2:26am

In Ohio Chesapeake has violated our leases at every opportunity from non arms length sales below fair market price sales/product handover to themselves, to in their fraudulent deductions, owner share number manipulations, theft of Total E&P payout to landowners and more.

The proof is in the Hope Fellowship Church vs Chesapeake Complaint.

Now they are going back to 2014 on Buck Well 1H &6H along with the rest of the wells in Ohio to say CEMI has over paid for the well products, which has never been the case.

I didn't mention the under reporting of well products to the Landowners compared to the volumes being under reported to the ODNR.

Oil and Gas companies have cheated US Citizens and the US Government during their long history, but Chesapeake is now taking it all free of charge. 

Ohio has lost Billions in Natural Gas Liquids alone. Based on last nights election results, the people of Ohio are still unaware of what is taking place. With no news outlet willing to carry the bad news, this story may take a while getting out. 

There is absolutely no way this theft is going to go unnoticed much longer.

Those involved are going to do real time in State and Federal facilities, regardless of their current positions in life. Those who try to stop the laws from being enforced will be added to the list of Co-conspirators that currently exists.

Permalink Reply by bo boboski on March 16, 2016 at 10:40am

Maybe someone should tell the Donald what Kasich is letting the oil companies get away with in Ohio! Trump probably already knows that the reason for the 400,000 jobs and balanced budget in Ohio came by Fracking, not government.

Permalink Reply by william Allen. Ladd on March 16, 2016 at 11:15am

Our roads, bridges are have all been much improved within the last 5 years or longer in part because of the oil and gas activity in our area.  However some of these roads suffered great damage until enough folks complained.  Our own road had the bridge upgraded and several short sections repaved or at least beefed up.  However As it was being done, I stopped by the contractor to ask if the entire mile and a half would be repaved.  He told me that it should be all repaved but the supervisors said no. So now the areas that were up graded are in good shape. Those sections not beefed up  are now falling apart.

Permalink Reply by paleface on March 16, 2016 at 11:53am

Bo,Donald Trump said what you wrote almost word for word.He said fracking made those jobs not Kasich.

Permalink Reply by Joseph-Ohio on March 16, 2016 at 1:24pm
Agreed.The jobs come and go with hydrocarbon natural resources development.

Anti hydrocarbon natural resources development is anti jobs.

Question is when will it begin again ?

Need to select leaders that are pro jobs / therefore pro hydrocarbon natural resources development.

A no-brainer if I ever saw one.

Hoping we end up with leadership that has enough brains to see that much and also with enough brains to honor the landowners  mineral owners / lessors.

Good luck to all of us we need it.
Permalink Reply by st. croix on March 23, 2016 at 1:09am
I've sent him a couple of emails and so did my mom
Permalink Reply by David on March 17, 2016 at 2:53am

bottom line fair is nothing less than 12.5%, My god if they can't make it work with 87.5% of the money they should not be in business. Seems to me 12.5% is too low to begin with but that is another matter.

Permalink Reply by david starcher on March 17, 2016 at 4:04am

I am in the sterwart/winland unit in Tyler CO WV. We started in production in Sept 14. The first few months we had 0 deductions. Then they started hiting us with large trans fees on ngl and minimal fees on gas. Then in Sept 15 the gas trans fees went up 10 times and the ngl fees went so high that sometimes we owed them. I'm afraid to see where this going.

Permalink Reply by Kyle Nuttall on March 18, 2016 at 2:27pm

You owed them?  That's nuts.  That just goes completely against the way a royalty should be.  Did you get a Market Enhancement clause or a Gross Proceeds at the Wellhead clause with them?

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