Pennsylvania Land Owners Upset About Gas Drilling Royalties

From WENY TV----> A must watch video for landowners ---> http://youtu.be/s4fbpORf8Zc

From WENY-TV describing their video "Gas Drilling Royalties"

BRADFORD COUNTY, PA (WENY) -- Bradford County land owners with drilling leases are speaking out about their royalties disappearing. They're teaming up with Bradford County Commissioners, and calling on Pennsylvania lawmakers to take another look at the Guaranteed Minimum Royalty Act.
In 1979, Pennsylvania adopted the Guaranteed Minimum Royalty Act, making sure people leasing their land to gas companies got at least 12.5 percent of royalties. But now, landowners are being hit with post-production costs as high as 90 percent. Those production costs make landowners profits way lower than they thought, and now, neighbors and commissioners alike have had it with some gas companies.
They're arguing that people leasing their land to gas companies are not getting their fair share of royalties.
"This really is an arrogant move and the trouble is that you know, the vast majority of operators in the U.S. are good operators, who care about the ppl they serve, but you get arrogant ones that just don't," said Bradford County Commissioner Doug McLinko.
Jackie Kingsley of East Smithfield is just one of many neighbors frustrated with a company she lets lease from her.
"It gets frustrating and after a while you just have to say, enough is enough and look the other way, I guess," she said.
But some landowners don't want to look the other way. A lot of them are still scared to speak out, but hope state lawmakers make a change.
"We have very humble and good people most people will not speak out, we've had a lot of people that called and send us their checks and are just dumbfounded with what's happening," said McLinko.
One woman shared some of her tax forms with WENY HD News. Chesapeake Energy and Statoil have been using her land since before she moved in in 2007. Back in July, she was getting about 65% of her royalties, but in January, she got no royalty at all. After reaching out to Chesapeake, she got a combined 25 percent of the royalties due her in February and January. And it's been going down ever since. In March she says Chesapeake kept almost 82% of the royalty.
"So really what we need is to have this looked at and revisited. Is there something that can be done to clarify and reinterpret what was meant by the intent of the 12.5% minimum royalty Guaranteed Minimum Royalty Act," said County Commssioner Daryl Miller.
Comissioner McLinko says natural gas drilling benefits neighboring New York, and he is going to Albany this week to talk to lawmakers about it.

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Replies to This Discussion

Permalink Reply by Larry Livengood on July 13, 2013 at 12:46pm

The royalty check this month for the Burdick unit paid $34.44 an acre, but they charged a gathering fee for transmission of the gas from the well to the main line of $5.69 an acre.  They pay the royalty first so you get the state minimum, then deduct.    

Permalink Reply by craig on July 13, 2013 at 1:17pm

I don't see how they can deduct anything as you were not paid the minimum, ie you didn't actually receive the minimum and that is what folks are upset about.  

More smoke and mirrors from my perspective.

Permalink Reply by Larry Livengood on July 13, 2013 at 2:07pm

The $34.44 was the 12.5%, then they deduct.  So, they have paid the minimum, but then they deduct transmission fees.  When I contacted Chesapeake, they were surprised that I wanted them to put up all the money to drill and develop without sharing in the costs.  They thought I was really being petty about the entire deal.  Unfortunately, their lawyers are better than our lawyers and they have court ruling that says at the well head includes all infrastructure from the well to the main line.  I'm just thankful they haven't had to put in a compressor station or we'd be paying for that. 

Permalink Reply by craig on July 13, 2013 at 2:41pm

Typical gas company BS. I just hope that CHK comes knocking wanting something from me, cause it ain't gonna happen. 

Permalink Reply by Larry Livengood on July 13, 2013 at 2:50pm

By the way, The gathering system is operated by Appalachian Midstream Services, which is a subsidiary of Access Midstream Partners.  Trying to keep up with them is like playing three card monte with a card shark.    The only thing they will ever get from me is resistance.

Permalink Reply by Todd on July 15, 2013 at 4:13am

Wow Larry... I figured you were getting decent royalties.  This is bad news to say the least.  How much/little gas was produced to get you such little per acre royalties?  How many acres are included in the Burdick unit?  I thought they produced a good amount of gas for at least the first couple months.

I can't understand how you got such little royalties being that you own a good percentage of that unit!  Did they decide to choke the well all the way back???

PA Supreme Court has problems... why in the world would they want to screw landowners that already have unfair leases? 

Permalink Reply by Todd on July 15, 2013 at 4:33am

Per the DEP website, the Burdick well produced 479,965 mcf of gas in 95 days in 2012.  Lets divide that by 3 to get per month average = 159,988 mcf average per month.  Let's say gas was at $3.50/mcf times 159,988 mcf = $559,958 gross for the unit per month, multiplied by 0.125 = $69,995 average per month gross royalties for the entire unit.  I just saw that the unit is 925 acres so that's $75.67 per acre gross.  That unit size is huge and is diluting royalties.  How long is the Burdick lateral?

Is Chesapeake claiming a lower value on the gas?  The way you are being treated is like you are living in a rogue state!

Permalink Reply by craig on July 15, 2013 at 5:03am

Todd, I believe you will find that the volumes sold varies widely by month. Only royalty owners in the unit can give us timely information on volumes sold per month.  That's why I asked Larry to post the volumes for the last few months.... wish he would because I've seen some Thompson Unit stubs and some months very little gas was sold. 

Permalink Reply by Larry Livengood on July 15, 2013 at 7:12am

Burdick volumes:                Price     $/acre

October   188,906.12          $2.55     $65.10

November 145,279.95         $2.98     $58.50

December 130,214.44         $3.48    $61.24

January 95,854.31              $2.61    $33.81

February 106,585.15          $2.58     $37.16

March 110,933.77              $2.94    $44.07  Up to here gathering fee by reduced price

April 62,941.56                  $4.08     $34.70  $5.69/ acre Gathering fee as a deduction

Permalink Reply by craig on July 15, 2013 at 8:42am

Thank you Larry ! Hope this wasn't prying too much, but it is the only way the rest of us really know what is going on in recent months.`

Now i need to get hold of my friend  that is in the thompson unit and compare monthly productions. I bet that all 3 wells are going to rotate one month of extra choking to allow the others to sell more for two months. Starting in Jan. this seems to be the case. I wonder if they have contracts to sell lots more gas per month signed for the future when more of our area wells become connected. Or are they going to throttle all of them back? 

Permalink Reply by Larry Livengood on July 15, 2013 at 8:51am

Glad to get some info out there.  They live on the fact that people don't talk and share information.  It looks like it's not going to get better for us with the recent pooling and other things being considered.  

If you get some Thompson info... share please.

Permalink Reply by craig on July 15, 2013 at 11:25am

If I can pry the info from them I'll gladly post.

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