Pennsylvania Considers Minimum Royalties

by Elizabeth Alford on April 12, 2017

Pennsylvania lawmakers try for a third time to pass legislation that would provide minimum royalties for unconventional oil and gas well production.

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Representative Garth Everett [R] has re-introduced a bill that will amend the Oil and Gas Lease Act from 1979. This is the third time that the legislator has attempted to provide a remedy for mineral and landowners to receive a minimum royalty on unconventional oil or gas wells.

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.

The bill defines the minimum royalty to be paid to hydrocarbon production from unconventional oil or gas wells.

“The minimum royalty paid to a lessor for unconventional oil or gas well production may not be less than one-eighth of the gross proceeds received by the lessee for the production. No deduction or allocation of costs, expenses or other adjustments may result in a royalty less than the one eighth as provided in this section.”

The bill also says that treble damages may be awarded if a lessee acted willfully in failing to pay the minimum royalty or where a lessee has been previously found to have failed to pay the minimum royalty.

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