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PRINTER'S NO. 580
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
557
Session of
2017
INTRODUCED BY EVERETT, BAKER, PICKETT, BOBACK, FRITZ, STAATS,
DRISCOLL, HANNA, STURLA, MILLARD, MURT, McNEILL, BARRAR,
CALTAGIRONE, M. QUINN, O'NEILL, VITALI, A. HARRIS, McCARTER,
FREEMAN, MULLERY, D. COSTA, WHEELAND, WATSON, METZGAR AND
HARPER, FEBRUARY 17, 2017
REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY,
FEBRUARY 17, 2017
AN ACT
Amending the act of July 20, 1979 (P.L.183, No.60), entitled "An
act regulating the terms and conditions of certain leases
regarding natural gas and oil," further providing for
definitions; and providing for minimum royalty for
unconventional oil or gas well production and for remedy for
failure to pay the minimum royalty on unconventional oil or
gas wells.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 1.2 of the act of July 20, 1979 (P.L.183,
No.60), known as the Oil and Gas Lease Act, is amended to read:
Section 1.2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Check stub." The financial record attached to a check.
"Division order." An agreement signed by an interest owner
directing the distribution of proceeds from the sale of oil,
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gas, casing head gas or other related hydrocarbons. The order
shall direct and authorize the payor to make payment for the
products taken in accordance with the division order.
"Interest owner." A person who is legally entitled to
payment from the proceeds derived from the sale of oil or gas
from an oil or gas well located in this Commonwealth.
"Lessee." An operator.
"Lessor." An interest owner.
"Mcf." A unit of measurement expressed by 1,000 cubic feet.
"Royalty." A lessor's ownership interest in the proceeds
generated by the sale of the lessor's production of oil or gas
or their constituents in an arms-length transaction the value of
which interest, unless expressly specified otherwise in the
parties oil or gas lease, is designated and fixed at the actual
point-of-sale, but from which interest is excluded the costs of
development, drilling and production.
"Royalty payment." A payment made by a lessee to a lessor in
accordance with a lease or other agreement that conveys the
right to remove or recover oil, natural gas or gas of any other
designation, including natural gas liquids.
"Unconventional formation." A geological shale formation
existing below the base of the Elk Sandstone or its geologic
equivalent stratigraphic interval where oil, gas, natural gas or
gas of other designations, including natural gas liquids,
generally cannot be produced at economic flow rates or in
economic volumes except by perforated vertical or horizontal
well bores stimulated by hydraulic fracture treatments or by
using multilateral well bores or other techniques to expose more
of the formation to the well bore.
"Unconventional oil or gas well." A bore hole drilled or
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being drilled for the purpose of or to be used for the
production of oil, natural gas or gas of other designations,
including natural gas liquids, from an unconventional formation.
Section 2. The act is amended by adding sections to read:
Section 1.4. Minimum royalty for unconventional oil or gas well
production.
(a) Amount.--
(1) 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.
(2) 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.
(b) Applicability.--The requirement to pay a minimum royalty
as provided in subsection (a) shall only apply to hydrocarbon
production from unconventional oil or gas wells generated and
produced after the effective date of this section.
Section 4. Remedy for failure to pay the minimum royalty on
unconventional oil or gas wells.
(a) Civil action and venue.--A lessor who is party to a
lease for an unconventional oil or gas well may file an action
for failure to pay the minimum royalty under this act in the
court of common pleas of the county where the unconventional oil
or gas well is located or the county in this Commonwealth in
which the lessor resides.
(b) Burden of proof.--
(1) Demonstration by a lessor who is party to a lease
for an unconventional oil or gas well that the lessee has
made a royalty payment which is less than the value of one-
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eighth royalty of all oil, natural gas or gas of any other
designation, including natural gas liquids, removed or
recovered from the subject real property or lands pooled with
the subject real property sold at an arms-length transaction
shall create a presumption that a violation of this act has
occurred.
(2) The presumption in paragraph (1) may be rebutted if
the lessee presents clear and convincing evidence that the
minimum royalty was paid.
(c) Effect of notice and failure to cure.--In an action in
which a court finds that the lessee who is party to a lease for
an unconventional oil or gas well has violated the terms of this
act by making a royalty payment which is less than the amount
required by this act, the lessor shall be entitled to the
remedies specified in subsections (d) and (e) if, before filing
suit, the lessor gave to the lessee 30 days' written notice by
certified mail of the deficiency and the lessee failed to cure
the deficiency.
(d) Additional remedies.--In addition to actual damages and
any other remedy deemed appropriate by the court, the court
shall award reasonable attorney fees and costs in bringing the
action, including expert witness fees, to the lessor.
(e) Treble damages.--In cases where the court finds that the
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, the court may award treble damages.
(f) Other remedies not precluded.--The remedies provided in
this section are not exclusive of, do not require exhaustion of
and shall be in addition to any other remedies provided by the
lease, by law or in equity.
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Section 3. This act shall take effect in 60 days.
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