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Pennsylvania Tries Again to Clarify Royalty Deductions

by Elizabeth Alford on August 11, 2017

Pennsylvania legislator introduces legislation aimed at increasing fairness and transparency for landowners who receive natural gas royalties.

Pennsylvania Considers Minimum Royalties

Rep. Jason Ortitay (R-Washington/Allegheny) introduced House Bill 1708 today that defines post-production costs and acceptable deductions allowed by oil and gas producers. The bill is the latest attempt by lawmakers to amend the Oil and Gas Lease Act of 1979 to provide better definitions and clarity for royalty payments.

“It is critical that the legislature take action to protect landowners and make sure companies live up to their end of the agreements. Lessors should have peace of mind knowing they never owe a company money for royalties, as this was something brought to my attention that we are going to clear up in this legislation once and for all. My office has received numerous calls regarding concerns with gas royalty payments. While my proposal – or any legislation – cannot change existing leases, if approved, it would put in place important protections to make sure landowners receive the royalties to which they are entitled.” - Rep. Jason Ortitay

Primarily, the bill defines what is considered to be an acceptable deduction. Other highlights include:

  • Landowners receive a written summary of deductions and can review records to confirm the authenticity of deductions
  • All sales take place as an arms-length transaction ensure appropriate business practices that do not jeopardize royalty owners
  • Prohibits the issuance of negative balance royalty checks

Representative Garth Everett [R] tried three times to amend the Oil and Gas Lease Act from 1979. Everett’s first attempt was during the 2013-2014 session, where HB 1648 would have guaranteed that Pennsylvania landowners would get minimum royalty payments of 12.5%–regardless of post-production expenses. When that attempt failed, Everett re-introduced a similar bill it during the 2015-2016 session, however, that one also failed. In February, Everett tried again, by introducing House Bill 557.

Read more at www.legis.state.pa.us

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