Royalty payments cause concern BY STACI WILSON Susquehanna Independent

Posted by Independent Weekender Editor on 7/31/13 • Categorized as News

Concerns about natural gas royalty payments were brought to light at the Wednesday, July 24 meeting of the county commissioners.

Gloria DiGirolamo said that with the gas companies taking the readings at the wells, there is no way to prove exactly what royalty-owners should be paid.

“They can not give us a formula,” DiGirolamo said. “Without (a formula) we can’t find out if we’re being ripped off or not.”

She also said that Senate Bill 259 – recently signed into law by the governor – did nothing to address the underlying issue. She also suggested pursuing the matter through Securities & Exchange Commission regulations.
SB 259 requires royalty check stubs to include production taxes and deductions taken from the royalty payment but does not protect the royalty owners from the production costs.

Earlier this summer, Susquehanna County Commissioners passed a resolution requesting the legislature to define the state’s “guaranteed minimum royalty” set at 12-1/2 percent advising that post-production costs should not part of the minimum royalties paid to property owners.

Commissioner Michael Giangrieco said that a 2010 Pennsylvania Supreme Court decision noted the legislature should better define “guaranteed royalties.”
“None (of the legislators) stepped up to the plate,” Giangrieco said.

The commissioner said that Sen. Gene Yaw had said that existing contracts could not be amended.

Some of the early leases signed in the county did not provide for royalty payments without post-production costs. Many leases written more recently keep the gas companies from charging a portion of the post-production costs back to the landowner.

Giangrieco said he had worked with Rep. Sandra Major on the issue in 2008. “There was no support from anyone to look at it then,” he said.

The commissioner said he felt SB 259 hurt the landowners even more.

“Who’s looking out for the landowners?” he questioned. “It should be our elected officials who are supposed to be looking out for us.”

“Whose pockets are being taken care of,” questioned DiGirolamo.

“Nothing has been passed in favor of the landowner,” replied Giangrieco.

Jackie Root, of NARO-PA (National Association of Royalty Owners of Pennsylvania), said the grassroots group has now hired a consultant in order to have “boots on the ground” in Harrisburg.

“We’re the only ones out there making the argument (for the royalty owners),” Root said.

Root said there are over 150,000 royalty owners but she feels the group’s role was marginalized when SB 259 was drafted.

According to Root, NARO-PA plans to hold town hall style meetings and coffee shop talks over the next few months for its members.

Another audience member, Edna Paskoff said she had spoken with Rep. Tina Pickett’s office regarding the “rule of capture.”

Paskoff said she was advised to hire an attorney to determine if she should be receiving any royalties from nearby gas drilling.

“Now I have to employ an attorney,” Paskoff said, adding the person’s she spoke with said to her, “Good luck in your pursuit.”

Vera Scroggins, also in attendance at the meeting, asked why none of the legislators had come forward on the issue.

“Call them,” Giangrieco said. “They think they’re doing a wonderful job.”
But DiGirolamo wasn’t just at the meeting to discuss royalties. She also spoke about the nine-mile drilling moratorium still in place in parts of Dimock Twp. For the complete article go to --->

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I wish you the  best on the legislative efforts. In the mean time, there are ways you might increase your royalty payments even before new legislation. 

I expect most of the leases have an audit clause. Under that  clause you can (and should) demand an accounting of the cost of the well and the royalty payments with the back-up material. It is entirely possible that the royalty payment is not being calculated properly and that the cost of the well was understated so that costs could be capitalized and included in production costs. In addition, the lessee may be including inflated prices paid to affilites for production, transportation and marketing  costs used in the royalty calculation. You should be able to get information on affiliate payments in your audit request.  You also may want to request the back up data for the cost of drilling the well and see if any of those costs are being treated as current production costs and being charged against royalties.

As to the metering being done by the producer, you probably have the right to put in you own meter.  However, that can be expensive.  You could ask when the producer last calibrated the meter and ask the  meter be calibrated again.  

Thank you for your intelligent response and useful information. Refreshing change from anti-frack rants.

I am not aware of any production costs being deducted from anyone's royalties, only post production costs.

an implied covenant to produce lays the costs of getting the gas to the wellhead on the lessee, beyond that point the lessor may have obligations to bear their proportionate share of certain or all post production costs depending on their lease.

meters are calibrated regularly. some companies calibrate weekly. they depend on the accuracy of those meters the same as us to ensure full payment. beyond that, there are revenue meters operated by other companies, midstream operators and transportation pipeline companies to ensure that the producer is actually shipping what they say that they are. a bigger issue than meter accuracy is whether or not mineral owners are given the benefit of any line gains which occur downstream. differences in metering are common at various points in the system, but it needs to be spelled out in your lease if you want to benefit from it.


I understand the legal obligations for the production costs.  I am merely suggesting that without examining the documents you do not know if the producer has allocated the costs in compliance with the leas and state law. 

 With respect to downstream transportation, your producer will allocate the costs it pays for transportation over all the gas it has transported.  There are two questions.  First, has the pipeline allocated costs based on the volume each shipper put into the system at the wellhead meter or is it using some other method?  Second, if there is shrink so that the producer is charged for line loss during transportation, how is that cost being allocated between shippers on the producer line?  likewise, if there is a gain in volume even if your contract says you are to get part of the gain how do you know the gain is being  allocated to you and whether the allocation is correct?  

maryjane, are you familiar with the cost of an audit for royalties?

I have heard conflicting stories and would like to get to the bottom of that subject.


This would have helped... simple, short, but clear...  I dont know what happened to it though...

I know what happened to the bill referenced by Rick.  It has powerful language for lessors and the passage of SB259 makes it very clear that any law passed will not help lessors.  All of the royalty stub information that the SB259 requires is the same information already reported on the copy of the royalty statement from Bradford County in the NPR StateImpact article.  I am sure nothing will change on royalty stubs due to this law.

Obviously the last minute pooling amendment was the reason for the bill.  I suspect that uproar caused by this amendment could have been avoided if the bill had been a few hundred pages of unreadable lawyer speak instead of 4 or 5 readable pages.  I am sure our legislators will not make this mistake again and the next bill to "help" royalty owners will be hundreds of pages will some well hidden "gotchas"


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