Monday, July 01, 2013

Natural-gas producers charging fees that cut into Pennsylvania landowners' royalty payments

In a good example of local reporting on the relationship between gas companies and rural landowners, The Herald of Sharon, Pa. has a story about how gas company fees in the Marcellus Shale region are cutting into royalty payments for landowners who allow drilling on their property, and landowners are being seriously shortchanged while gas companies make huge profits, reports John Finnerty, state-capital correspondent for Community Newspaper Holdings Inc.

Republican Sen. Gene Yaw, chairman of the Senate Environmental Resources and Energy committee, said “In some cases, these costs have caused royalty payments to be as low as 1.47 percent, well below the 12.5 percent guaranteed minimum,” Finnerty reports. Yaw told him problems with confusing or ambiguous royalty stubs and excessive post-production cost deductions have significantly impacted many leaseholders.

The Pennsylvania Farm Bureau looked into allegations, finding that one well produced $41,861 worth of gas, but Chesapeake Appalachia deducted $28,249 before making a royalty payment of $13,611, Finnerty reports. "In another case, the gas company post-production deductions consumed 88 percent of the royalty payment. The well had produced $14,481 worth of gas. The company deducted $12,790, leaving the landowner with a royalty payment of $1,690."

The Pennsylvania chapter of the National Royalty Owners Association "is lobbying for changes in regulations to arm property owners with leverage to ensure they are being treated fairly," Finnerty reports. David Sikes, president of the national association, told a Senate committee, “The problem is that most royalty owners cannot afford to file a lawsuit on an oil company that has lawyers on their staff." (Read more)

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