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Thursday, March 27, 2014



This month papers, news blogs, and meetings regarding House Bill 1684 could fill a large stadium. The actions being taken by lawmakers, professional groups, leaseholders, and the O&G industry will be talked about and haggled over for a long time. 


Sometimes we hear/read about folks complaining they never received a royalty check. This House Bill is about those who received a royalty check but were dismayed it wasn’t bigger due to production costs being taken out before the check was cut. 

Now why would O&G companies do that?

Some leaseholders signed leases that mentioned only the royalty %, and believed that PA’s mandated 12.5% was either adequate or the mandated amount ( meaning one wasn’t allowed to receive more), and they were satisfied. It didn’t take long for others wanting to lease to realize companies existed that would offer higher percentages. These folks enjoyed the thought of striking a better deal than previous leased signers. After speaking with others and attending meetings, some landowners went a step further and had a clause inserted which stated company costs would not be deducted from royalty checks. Companies agreed! 

Aha! Who was the fox and who was the hen now?

Then it occurred to O&G companies … WAIT. 

 Did that clause indicate pre-production costs or post production costs? They determined neither had been stated so both costs could be deducted. Surprise for the landowners who now received less than they were accustomed to, and for others for whom the total was even less than 12.5%. 

If you’ve been following the news you know there’s a big uproar about all this. It’s a battle that didn’t start yesterday and won’t be over tomorrow. In spite of the INTENT of the 1979 law re: 12.5%, its language didn’t go far enough. Taking the matter to the state’s Supreme Court in 2010 (where the companies won), early unwary lease signers were so focused on land agents kind words and the dollar signs promised, they didn’t foresee this chaos over law interpretation coming.

Now many are hoping that HB 1684 will pass House and Senate and be signed into law … a better law than the one drawn up in 1979. It’s the INTENT of the public involved that the end result becomes “no more costs are deducted from royalty checks by the O&G companies” ... pre- or post production … and state that explicitly. 

The outcome in Harrisburg is up in the air but regardless … the end result for future lease documents and those that sign them can be an improvement … but it’s unlikely to change anything for landowners already leased. That ship has already sailed due to oversight. The words in a lease become a legal, lawful document the minute it’s signed. 

We all knew that didn’t we? What challenges are ahead?

**This article is meant to inform & forewarn, and convey sympathy to those for whom it’s too late.

Janice L. Hancharick
Raleigh, NC and Shinglehouse, PA


Anonymous said...

Bonnie Sue says; Thank YOU Janice. Very GOOD info for the comming surge of Landowners being approached...

Anonymous said...

suckers deserve it

you know they own the courts and the legislators. what did they expect?

dont shake hands with the devil and then cry when you get burned

Anonymous said...

You either get screwed by the companies, or you refuse and have your gas sucked out at not cost to them.

One would have to be a fool if they think that all the gas around you can be sucked out and yours remains intact.