Last updated: July 10. 2013 12:10AM - 2876 Views
By Jon O'Connell

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HARRISBURG — Gov. Tom Corbett penned his name to a law Tuesday that vows to change the way gas drillers do business in Pennsylvania.

The Oil and Gas Lease Act calls for more descriptive royalty updates to leaseholders, which has been discussed by lawmakers for two years, according to state Sen. Lisa Baker, R-Lehman Township.

But the bill was amended in the House to include some language that allows drillers to pool geographically connected leases for development. A statement from the House said this act is not forced pooling because it applies only to active leases.

The statement also said joint development is already common practice with horizontal drilling but never defined by law.

Baker, who co-sponsored the bill, said she opposes forced pooling. She said the bill’s original intent was to hold companies accountable for production fees they might deduct from lessors’ royalty checks.

The act requires companies to include check stubs with royalty payments that, among other things, detail:

• Total fuel removed from a lessor’s property and price per unit received by the gas company.

• Total production taxes and other deductions taken that are permitted under the lease, except profit tax.

• Net total sales from the property.

• The lessor’s share of the total sales before deductions.

The act amends a 1979 law that states resource developers must pay at least a one-eighth royalty to landowners for any fuels extracted. Anything in excess of that one-eighth is figured between company and landowner. This part of the law remains intact.

Oil and gas drilling has been in Pennsylvania for more than 100 years, said state Sen. John Yudichak, D-Plymouth Township, who voted for the bill.

Baker and Yudichak agreed the word “pooling” does not apply to the act in the traditional sense. When old leases were signed — most of them were in western counties — horizontal drilling was not an option.

The act’s pooling language does not apply to landowners who are off the natural gas grid: those who have not signed leases. Under the new law, drillers still may not enter their property without a lease.

Royalty check issue

Yudichak said the act was first drafted because leaseholders were complaining they did not understand certain production fees withheld from royalty checks.

“The bill was about greater accountability for royalty payments. That’s my primary concern,” Yudichak said.

The act’s opponents say the amended language will strip landowners of an ability to renegotiate for a higher rate when an existing frack or borehole is redeveloped through their property, as the amended text allows companies to set an appropriate rate for the connected developments that use a single well pad.

Yudichak said he understands some royalty associations might disagree with the act, but it’s not the government’s business to meddle in contract agreements like that.

“The state’s role is oversight and regulation. We have to be very careful in how we insert ourselves into the private negotiations between companies and the landowners,” Yudichak said.

The act is expected to have an environmental impact for good because it means fewer well pads — and all the construction and equipment that goes with them — are needed as companies can utilize the wells they have as long as the landowners in their development paths have signed leases.

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