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Landowners in the Pennsylvania Marcellus Shale region have seen royalty payments decline to almost nothing, including a few instances where statements have been issued for negative amounts, Rubinkam writes. That goes against "a 1979 state law that mandates a landowner royalty of at least 12.5 percent of the value of the gas." Drillers contend that "royalty is properly calculated based on the market price, less post-production deductions for transportation and processing, a method permitted in most states."
In 2010, the Pennsylvania Supreme Court "sided with the gas companies—but also noted that state lawmakers are 'best suited' to deciding how the royalties should be paid," Rubinkam writes. State lawmakers have scheduled a procedural vote on a state House bill to keep deductions from reducing royalties below the one-eighth minimum, an industry standard for decades. "The gas industry has been lobbying against it, asserting it would unconstitutionally interfere with tens of thousands of existing private contracts. Any contractual disputes should be decided in the courts, not through legislation, the drillers argue," Rubinkam reports.