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09/18/2021 06:51 PM
Pennsylvania State Senate
https://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=S&SPick=20210&cosponId=35528
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Senate of Pennsylvania
Session of 2021 - 2022 Regular Session

MEMORANDUM

Posted: April 29, 2021 12:25 PM
From: Senator Wayne D. Fontana and Sen. James R. Brewster
To: All Senate members
Subject: Royalty Payment Protection
 
In the near future, we will be introducing legislation that would add financial protections for landowners who have leased their land for natural gas drilling. 

 

Currently, Pennsylvania landowners who have leased their land for natural gas drilling must be paid a royalty of at least 12.5 percent, in accordance with the Guaranteed Minimum Royalty Act of 1979. However, gas companies are permitted to subtract postprodution costs (processing, transporting, etc.) from the royalty payments due to the lessors. 

 

In 2010, the Pennsylvania Supreme Court unanimously held that, because the term “royalty” is not defined in the law, the gas industry can define the term—including the subtraction of postproduction costs dropping the payment below the 12.5 percent (Kilmer v. Elexco Land Services Inc.). 

 

Our legislation will define the term “royalty” in the Oil and Gas Act and provide for minimum royalty payments. In addition, the landowner will be able to take legal action against a lessee for failing to pay the minimum royalty payment. The burden of proof would be on the gas companies to present clear and convincing evidence to the contrary. This bill will also provide the county court of common pleas, if it finds that the lessee acted willfully in failing to pay the minimum royalty payment, the ability to award treble damages to the lessor—triple the compensatory damages. 

 

Please join us in co-sponsoring this important legislation.