On June 27, 2013, Pennsylvania Senate Environmental
Resources and Energy Committee held a hearing about royalty transparency and
the calculation of post-production costs in Pennsylvania oil and gas leases. Further,
the question of what costs incurred by operators are categorized as
post-production was discussed at the hearing.
The committee hearing centered on testimony from county
commissioners from Bradford County, the Pennsylvania Farm Bureau and National Association
of Royalty Owners, as well as industry and legal representatives involved in
the Marcellus play. The discussion focused on the accessibility of information
on cost-deductions to landowners and how the state should regulate the
calculation of cost deductions by producers.
While current legislation requires an 1/8th royalty
on all gas extracted be paid to landowners by gas companies leasing the land (Guaranteed
Minimum Royalty Act), and the State Supreme Court has held that post-production
costs can be factored into the calculation of the royalty (Kilmer
v. Elexco), gas companies are not currently required to show how the
periodic royalty paid to a landowner is calculated. Proposed
legislation would update the required information on pay stubs to
landowners (SB
259 and HB
1414).
For more information on the discussion, visit Sen. Yaw’s website for the committee hearing recording, transcripts, and a news release detailing the discussion.
For more information on the discussion, visit Sen. Yaw’s website for the committee hearing recording, transcripts, and a news release detailing the discussion.
Written by: Garrett Lent, Research Assistant
Agricultural Law Resource and Reference Center
June 2013
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