THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY MAJOR, MILLARD, BAKER, BEYER, BOBACK, BOYD, CREIGHTON, CUTLER, EVERETT, FLECK, GEORGE, GINGRICH, GOODMAN, GRELL, GROVE, HALUSKA, HARRIS, HENNESSEY, HESS, MARSHALL, MARSICO, MILLER, MUNDY, PHILLIPS, PICKETT, QUINN, SCAVELLO, SIPTROTH, K. SMITH, SOLOBAY, STERN, SWANGER, TRUE, WANSACZ AND YOUNGBLOOD, MARCH 18, 2009

REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY, MARCH 18, 2009  

AN ACT

Amending the act of July 25, 1961 (P.L.825, No.359), entitled

"An act defining and prohibiting waste in the production of

oil and gas; defining the powers and duties of the Oil and

Gas Conservation Commission and the Oil and Gas Division of

the Department of Mines and Mineral Industries with respect

to the prevention of waste in the production of oil and gas

from certain geological horizons; the protection of

correlative rights; the spacing of well drilling operations;

the unitization of lands and horizons for the purpose of

regulating well spacing; providing for the enforcement of

this act; and the issuance of rules, regulations and orders

prescribing the rights, obligations and duties of owners and

operators of interests in lands and leasehold interests

therein with respect to the drilling of oil and gas wells

thereon; providing for hearings and the procedures to be

followed therein; imposing duties upon the courts; providing

methods for the enforcement of the provisions of this act,

limiting all the provisions hereof to certain geological

horizons; imposing penalties and making an appropriation,"

further providing for definitions and for applicability,

exclusions and construction.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Section 2(7) of the act of July 25, 1961

(P.L.825, No.359), known as the Oil and Gas Conservation Law, is

amended and the section is amended by adding clauses to read:

Section 2.  Definitions.--As used in this act--

* * *

(5.1)  "Lease" means a contract between a landowner and an

operator, in which the landowner grants the operator a right to

explore, drill and produce oil, gas and other minerals for a

specified primary term and as long thereafter as oil, gas or

other minerals are being produced in paying quantities in

exchange for monetary compensation to the landowner.

* * *

(7)  "Operator" shall mean any owner of the right to develop,

operate, and produce oil and gas from the pool. In the event

that there is no oil and gas lease in existence, the owner of

the oil and gas rights shall be considered as "operator" to the

extent of seven-eighths of the oil and gas in that portion of

the pool underlying the tract owned by such owner, and a royalty

owner as to a one-eighth interest in such oil and gas. The

dollar amount of the one-eighth interest shall represent one-

eighth of the current market value of the oil and gas, and

constituents thereof, at the point the operator markets the

product calculated without deduction directly or indirectly for

the cost of producing, gathering, storing, separating, treating,

dehydration compressing, processing, transporting or marketing

the product. In the event that the oil is owned separately from

the gas, the owner of the substance being produced or sought to

be produced from the pool shall be considered as "operator" as

to such pool. Nothing in this clause shall be construed as

prohibiting a landowner from negotiating a royalty under a lease

that is greater than a one-eighth interest.

* * *

(11.1)  "Royalty owner" means the following:

(i)  Any landowner who is the owner of oil or gas in place,

or oil or gas rights, subject to a lease covering such oil or

gas in place or oil or gas rights.

(ii)  Any owner of an interest in an oil or gas lease which

entitles him to a share in the production of the oil or gas

under such lease or the proceeds therefrom without obligating

him to pay any costs under such lease, including any costs of

production under the lease.

(iii)  The owner of any interest in the oil or gas in place,

or oil or gas rights, who has not executed an oil and gas lease,

to the extent that such owner is not designated an "operator"

under subclause (ii).

* * *

Section 2.  Section 3 of the act is amended to read:

Section 3.  Applicability; Exclusions; Construction.--(a)

Except as provided in subsection (b) of this section, this act

shall apply to all lands in the Commonwealth, including any

lands owned or administered by the Commonwealth, or any

political subdivision thereof, except the excluded horizons. The

commission shall have jurisdiction over all persons and property

necessary to enforce effectively the provisions of this act.

(a.1)  Any oil or gas well that penetrates the Marcellus

Shale horizon shall be subject to the requirements of this act

that pertain to the unitization of lands for well spacing and

the protection of correlative rights. Such wells shall be

regulated in the same manner as a well which penetrates the

Onondaga horizon.

(b)  This act shall not apply to or affect--

(1)  [Any] Except as otherwise provided under subsection

(a.1) of this section, any well or wells which do not penetrate

the Onondaga horizon, or in those areas in which the Onondaga

horizon is nearer to the surface than thirty-eight hundred feet,

any well or wells which do not exceed a depth of thirty-eight

hundred feet beneath the surface. For the purposes of this act,

the question whether a pool is covered by the act shall be

determined by the depth of the producing interval in the

discovery well in such pool, and if such producing interval is

covered by the act, then all wells drilled to such pool shall be

covered by this act, even though some of the wells in the pool,

if considered alone, would not be covered by the act.

(2)  Any well or wells of whatever depth commenced prior to

the effective date of this act, except such wells previously

completed in strata above the [Onondaga] Marcellus Shale 

horizon, but subsequent to the effective date of this act

drilled deeper than the [Onondaga] Marcellus Shale horizon, or

three thousand eight hundred feet, whichever is deeper, provided

that such wells may be considered in spacing and pooling orders

entered by the commission.

(3)  Any well or wells drilled to inject gas into or withdraw

gas from gas storage reservoir.

(b.1)  Before drilling any well which is to penetrate the

Marcellus Shale or deeper horizons or a depth of thirty-eight

hundred feet, whichever is deeper, the well operator shall on

the plat prepared on the same form required by the division

under the act of December 19, 1984 (P.L.1140, No.223), known as

the "Oil and Gas Act," demonstrate and assure that any

anticipated horizontal drilling shall not be conducted under or

through any lands where an oil and gas lease does not exist

between a landowner and an operator.

(c)  This act shall not be construed to grant to the

commission authority or power to--

(1)  Limit production or output, or prorate production of any

oil or gas well, except as provided in clause (6) of section 7;

or

(2)  Fix prices of oil or gas.

Section 3.  This act shall take effect immediately.