Pennsylvanians Deserve a Level Playing Field to Negotiate Shale Gas Leases

Last week I introduced two bills designed to protect Pennsylvania landowners who want to sign leases to allow natural gas drilling on their property. I specifically wrote these bills to address a growing trend of the oil and gas industry lobbying for laws in Harrisburg that help the companies at the clear expense of leaseholders’ finances and Constitutional rights.

House Bill 1650 would prohibit the deduction of ‘post-production’ costs from leaseholder royalty checks of new or renewed leases. Post-production costs are defined as all losses of produced volumes and all costs actually incurred from and after the wellhead to the point of sale, which are deducted from monthly leaseholder royalty checks.

This is a real problem which needs addressed in clear language to protect the financial interests of those who signed a lease in good faith. If a company can deduct unlimited and undefined post-production costs, what incentive is there for that company to try and contain costs? The lessor is stuck in that lease and has virtually no option except for litigation, which creates an unreasonable financial burden and will crowd our courts.

I have personally heard from my constituents about excessive deductions for post-production costs, and the problem is happening across Pennsylvania.

It is entirely reasonable to require producers to pay their own post-production costs. To do otherwise is roughly the equivalent of asking a farmer who sells wheat to allow Wonder Bread to directly deduct the price of baking the bread, slicing it, putting it into bags and delivering it to the supermarket. It’s an unreasonable and unacceptable practice that needs to end.

House Bill 1700 would ban the practice of forced pooling in Pennsylvania. Forced pooling, also known as “private eminent domain” for drillers, allows gas drilling companies to drill under property even if the property owner does not want to lease his or her land, pooling the property together with adjacent owners who have agreed to lease their land for drilling.

The recent passage of Act 66 enables a form of forced pooling in Pennsylvania by permitting a drilling company to force people with old leases signed for shallow wells years ago to allow their land to be pooled into larger drilling units without having full power to negotiate better deals in return. This disproportionately hurts southwestern Pennsylvania landowners because there are so many decades-old shallow well leases out there. I joined with the National Association of Royalty Owners in opposing Act 66, but it was sneakily pushed through near the June budget deadline.

We need to be helping Pennsylvanians, not hurting them, and forced pooling hurts Pennsylvanians. Governor Corbett flat-out said he wouldn’t sign forced pooling legislation and then turned around and did exactly that when the gas industry lobbyists asked him to do so, taking away from the landowner all negotiating power and leverage for lease terms, which encompasses more than just money. The only winner from forced pooling is a drilling company that would no longer have to negotiate a lease. Pennsylvania landowners are the losers from forced pooling, which shouldn’t be allowed to happen.

My legislation would repeal the forced pooling/unitization provision in Act 66 and prohibit such actions of any kind in Pennsylvania, plain and simple. I believe the basic property rights and a level playing field for Pennsylvanians trying to negotiate a gas lease are more valuable than the bottom line of natural gas drilling companies; we can only hope that Governor Corbett and the rest of the legislature eventually agree.

Marcellus Shale Coalition spokesman Steve Forde spoke out against my proposals. He said, “Adding additional costs to the way industry and our partners operate only serves to undermine development in Pennsylvania and make the commonwealth’s landscape less competitive. In the end, this would be a loss for businesses, landowners and families alike.”

That explanation is absurd. Think about what he’s saying here. HB 1650 is clearly designed to make the drilling company pay costs they are currently passing on to the leaseholder and HB 1700 would get the leaseholder of a shallow well an upfront signing bonus the companies no longer have to pay. In both cases, the money stays in the pocket of the Pennsylvania citizen signing the lease, not the government or anyone else.

The drilling industry’s opposition is all about wanting to keep all of that money for themselves, which is why they’ve spent so much to lobby the state legislature to pass laws which help inflate their profits at the expense of local landowners. Range Resources reported a profit of $144 million in a three-month span earlier this year, so to claim these proposals would force them to move is insulting to anyone’s intelligence.

Considering that every other gas-producing state in America except Pennsylvania has a severance tax on drilling, where exactly do they plan to go where they can operate cheaper? Shame on the Marcellus Shale Coalition for resorting to using these kinds of hollow scare tactics on our farmers and landowners who just want to negotiate a fair lease to sustain themselves financially.

Hopefully people are starting to see that being a “pro-shale” lawmaker can mean lots of different things. I want to see my constituents treated fairly and get maximum financial value when they sign a lease. The industry, and the lawmakers who following the marching orders of the lobbyists, want to see the companies make the highest profit possible with little regard for how many honest Pennsylvanians they crush on the way to the bank. I’m not on the gas industry payroll and I never will be. I work for you, and that’s why I wrote HB 1650 and HB 1700- to help the people I represent.