In a letter delivered to Pennsylvania Attorney General Kathleen Kane this week, Reps. Garth Everett (R-Lycoming), Sandra Major (R-Susquehanna), Matt Baker (R-Tioga) and Tina Pickett (R-Bradford) are calling for an investigation into Chesapeake Energy Company’s practice of deducting gas royalty payments for post-production costs.
“The letter to the attorney general is clear that an investigation into post-production royalty deductions is needed as many landowners in our region have seen, and are seeing large amounts of money being taken out of royalty checks, and in some cases, consuming the entire check,” said Rep. Everett. “This, and other practices, are in violation of leases signed in good faith by the owners. This is plain wrong and needs to be addressed.”
Rep. Everett said many owners signed leases that specifically precluded those deductions, not realizing that those costs would be subtracted royalties under other confusing lease terms. He said his House Bill 1684, co-sponsored by Reps. Major, Baker and Pickett is the remedy for the issue, but it is currently before the House Environmental Resources and Energy Committee, which is expected to conduct a public hearing. The legislation was referred there in September of last year.
“The deduction of these costs from royalty checks, we believe, is a direct violation of 1979 state law, and that is why we are asking the attorney general to investigate why this has been allowed to continue,” Rep. Pickett said. “While we work on legislation to further address this in the House, an investigation by the attorney general would send a clear message this practice must stop NOW and that it will not be tolerated in any way.”
According to a 1979 state law, a minimum royalty payment of one-eighth for oil, natural gas, or gas of any other designation was guaranteed, helping to ensure fairness and protect landowners from deceptive leases.
“I am hopeful Attorney General Kane will heed our call and conduct a thorough investigation into this matter,” added Rep. Major. “Landowners who signed contracts need to have their agreements upheld in the same good faith in which they were signed, which our legislation seeks to address.”
“I have heard from several landowners in my area who have legitimate concerns as to the deductions Chesapeake is taking out of their royalty payments,” said Rep. Baker. “The natural gas industry is continuing to grow and Chesapeake Energy is a big player in the market that needs to be held accountable for commitments it made to landowners. I look forward to a resolution to this matter.”
