Pennsylvania Legislature Considers Further Amendments to the Guaranteed Minimum Royalty Act

by Reed Smith
Contact

Pennsylvania’s oil and gas industry has grown tremendously in the past five years and continues to grow. Along with that market growth, Pennsylvania’s oil and gas laws, regulations, and guidance documents have changed. Currently, there is an emphasis in the Pennsylvania Legislature on post-production costs and royalties. While the Pennsylvania Supreme Court decision in Kilmer v. Elexco Land Servs., Inc. made clear that post-production costs could be deducted from a landowner’s royalty payment, landowners and landowner’s groups have recently claimed that their royalties are being reduced too dramatically by the deduction of post-production costs. As a result, we’ve seen the following recent and proposed developments from the Pennsylvania Legislature regarding post-production costs:

  • On July 9, 2013, Governor Corbett signed Senate Bill 259, which amended the Guaranteed Minimum Royalty Act by adding definitions for things like ‘check stub,’ ‘division order,’ and ‘interest owner,’ as well as clarifying the specific information that an oil and gas operator must include with royalty payments. The Act also included an amendment that allows oil and gas operators to pool contiguous leased properties, provided that each oil and gas lease does not contain an express prohibition against pooling.
  • According to their press release, Matt Baker (R-Bradford/Tioga), Tina Pickett (R-Bradford/Sullivan/Susquehanna), Sandra Major (R-Susquehanna/Wayne/Wyoming), and Garth Everett (R-Lycoming), are planning to propose legislation to directly respond to concerns of landowners who have oil and gas leases, and whose royalty payments have decreased because of the deduction of post-production costs.
  • On June 27, 2013, Senate Environmental Resources & Energy held a hearing on royalty stub transparency and post-production costs. Representatives from the following groups testified at the hearing: Pennsylvania Farm Bureau; Bradford County Commissioners Office; Griffen, Dawsey, DePaola and Jones, P.C.; National Association of Royalty Owners; and Marcellus Shale Coalition, which provided background on Pennsylvania’s Guaranteed Minimum Royalty Act and the Kilmer v. Elexco Land Servs. opinion.
  • Representative Pickett’s website indicates that the legislation might be ready to be introduced in the Legislature as a House bill in a month.
  • On June 28, 2013, Representative Everett put out a co-sponsorship memo for the proposed legislation. The memo also states that it is unfair for oil and gas operators to pay royalties of less than one-eighth because of the deduction of post-production costs. The co-sponsorship memo states that Representatives Everett, Baker, Pickett, and Major “will introduce legislation to clarify that the deduction of post-production costs from unconventional wells may not result in royalty payments less than the guaranteed minimum.”
  • Also on June 28, 2013, Representative Jesse White put out a co-sponsorship memo (of which he’s the only listed representative) seeking to prohibit the deduction of post-production costs from oil and gas royalty payments. He stated that in Bradford County, they’ve seen deductions ranging from 40 percent-90 percent. He also stated that the oil and gas industry is exploiting Pennsylvanians, especially farmers, of their royalty checks. The memo is available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Reed Smith | Attorney Advertising

Written by:

Reed Smith
Contact
more
less

Reed Smith on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.