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Gas Mortgage Notification in Pennsylvania’s Blake Bill

by Kenneth E. DuBose on August 17, 2011

Gas mortgages or loans against the value of mineral leases have been a hot topic in Pennsylvania. We first detailed the issues in a post titled Chesapeake Mortgages Marcellus Shale Mineral Rights. Even though many banks have come back to say that an oil & gas company using leases as collateral should not affect homeowners, the issue has sparked debate. The latest action involves Senator John Blake in the Pennsylvania legislature. He has proposed a bill that will require property owners to be notified if a company uses a mineral lease as collateral for loans. Honestly, gas mortgages or using mineral leases as collateral is very common in other states, so we don’t expect legislation will be needed.

A pending bill by Sen. John Blake would require natural gas companies to notify property owners if they mortgage the mineral rights of their leased property to secure credit.

To address this situation, the senator’s legislation would require that a mineral-lease agreement include a provision notifying the property owner that a lease may be subject of a mortgage by the company. It would require a company to notify the landowner within 30 days of the recording of any mortgage on a lease property. Any fears that mortgaging of mineral rights will affect a landowners’s ability to secure financing on their own property are not based in reality, said John Shoemaker, a Montoursville attorney who specializes in gas lease issues. “It sounds like a bill that would address a non-issue,” he said. “There’s just no way that any of the gas companies can really affect the landowner by mortgaging the company’s lease-hold rights.”

Read the full news release at thedailyreview.com

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