FOR THE COMPLETE ARTICLE GO TO ---> http://thedailyreview.com/news/yaw-county-commissioners-seeking-unc...

While the Bradford County commissioners recently passed a resolution calling on the Legislature to address the large deductions for post-production expenses that are being taken out of many local landowners' royalty checks, two state legislators say the remedy that the commissioners are asking for would not affect existing gas leases.

"It is important to understand that under the Pennsylvania Constitution and the United States Constitution, a legislature cannot change the terms of an existing contract (lease)," state Sen. Gene Yaw wrote in an email to The Review, in which he commented on the resolution. "If a legislature could change an existing contract, there would be no stability whatsoever in the business world."

The resolution, which was passed by Bradford County commissioners Doug McLinko and Daryl Miller on May 28, asks the Legislature to address the Pennsylvania Supreme Court's March 2010 ruling in the Kilmer vs. Elexco Land Service Inc. case, which allowed deductions for post-production costs to reduce royalty payments below the state's 12 1/2 percent guaranteed minimum royalty rate.

Specifically, the resolution asks the state Legislature to take action that would prevent deductions for post-production expenses from reducing royalty payments below 12 1/2 percent.

Because of the deductions, some Bradford County landowners are receiving royalties of 2 or 3 percent, instead of the 12 1/2 percent royalty rate that is printed on their lease, McLinko said.

While the Legislature could specify the parameters in leases in order to address the problem of large post-production deductions, this legislative "fix" would only apply to the leases that went into effect after the "fix" was made, Yaw said.

A Legislative "fix" could not apply to already-existing leases, he said.

"It is clear that the commissioners are seeking an unconstitutional legislative fix to contract issues," Yaw wrote in his email. "The focus of the resolution is the performance of contracts already in existence. The relief sought (by the Bradford County commissioners) is not possible under either state or federal law."