PA Environment Digest Blog: Marcellus Drilling News: Do Oil & Gas Drillers Owe Taxpayers Royalties For Oil & Gas Under Roads, Streets, Bridges And Other Taxpayer-Owned Land?

On July 13, Marcellus Drilling News raised the issue of whether taxpayers are due royalties and bonus payments by unconventional [and conventional] oil and gas operators for oil and gas they develop under roads, streets, bridges and other land owned by taxpayers, if the mineral rights are included.

[The short answer is yes… but are state agencies and local governments collecting them? Probably not.]

“For years we’ve [Marcellus Drilling News] railed against what we consider the theft of royalties and bonus payments by the state of Pennsylvania from landowners with creeks and rivers running through their leased (for shale drilling) property.”

“No, the state of PA is not claiming ownership of mineral rights under roadways–- although we hesitate to mention it because it may give them the idea.”

Taxpayer Owned Streambeds

Marcellus Drilling News points out the Department of Conservation and Natural Resources-- acting on behalf of taxpayers-- collects streambed royalties and payments under certain rivers and streams owned by taxpayers through submerged land agreements, typically only when shale gas companies drill under some streams or for projects like constructing pipelines across them.

These agreements, however, do not cover every “navigable waterway” streambed owned by taxpayers that include oil and gas mineral rights.

On the streambed issue, Marcellus Drilling News points to an article by the law firm of Houston Harbaugh that concludes “Yes…Many landowners across Pennsylvania are discovering that portions of their oil and gas holdings might actually be owned by DCNR [on behalf of taxpayers].”

[The question is-- is DCNR collecting the royalties and payments taxpayers are due from every stream and river taxpayers own that is developed by unconventional and conventional oil and gas operators?]

Taxpayer Owned Highway/Street/Bridge Rights-Of-Way

Marcellus Drilling News refers to another article by Houston Harbaugh on the issue of who owns the mineral rights under state [and local] highways, roads, streets and bridges and other taxpayer-owned rights-of-way.

The article says ownership of the oil and gas mineral rights hinges on whether-- when the land was sold to the state or other local government-- it reserved the mineral rights to the original landowner or whether they were conveyed to taxpayers via the public agency involved.

[Often in more recent taxpayer-funded projects like the interstate highways, some state parks and the Allegheny National Forest, mineral rights were specifically reserved to the original owners and were not conveyed to taxpayers.]

As the Houston Harbaugh article points out, “Prior to the advent of horizontal drilling and hydraulic fracturing, the ability to access and extract hydrocarbons from small, narrow and isolated strips of land was limited.

“But, that dynamic has changed now that the horizontal drilling is common and widespread. Such strips do have value as surface access is of less importance today.”

Click Here to read the entire Marcellus Drilling News article.

Peters Township, Washington County Gets Paid

In 2017, Peters Township, Washington County signed a five year shale gas lease with EQT Company providing a bonus payment and ongoing royalties for natural gas produced under its roadways and open space required to be set aside by developers.

A total of about 152 acres was involved and an upfront payment of $722,000 ($4,750 per acre) along with 18 percent royalties. Read more here.

Peters Township had been an opponent of shale gas drilling until signing. They took a case to the PA Supreme Court affirming the rights of municipalities to regulate drilling as a land use then adopted an ordinance confining shale gas drilling to just a few industrial areas in the township. Read more here.

What Do Oil & Gas Operators Owe Taxpayers?

The Marcellus Drilling News raises an intriguing issue.

Oil and gas operators-- unconventional shale gas and conventional oil and gas operators-- should have been paying state and local taxpayers royalties for the minerals they develop under all state and local highways, streets and bridges as well as all navigable streambeds where taxpayers own the mineral rights.

Many times state agencies and local governments look to be compensated for minerals developed under more obvious areas they own for taxpayers like parks and for certain limited oil and gas activities like drilling under a streambed.

It would be a shame if these taxpayer-owned mineral resources were simply being taken by private operators without compensating taxpayers for the oil and gas they own as a trustee for Pennsylvania’s environment, including generations yet to come.

Don’t taxpayers deserve to have their state and local governments look at this issue in much more depth?

NewsClip:

-- Marcellus Drilling News: Thorny Issue of Who Owns O&G Rights Under PA Roads – Strip & Gore

NewsClips:

-- Public News Service: Report: Oil And Gas Air Pollution Effects On Health Of Pennsylvanians

-- TribLive: Protect PT Seeks Support For Proposed Ordinance Regulating Shale Gas Wells In Penn Twp., Westmoreland County; Meeting July 13

-- Community Environmental Legal Defense Fund: The Law Did Not Save Grant Township’s Water From PA General Energy Oil & Gas Wastewater Injection Well, The People Of Grant Did

-- StateImpactPA - Susan Phillips: New Sinkhole Forms [Again] Along Mariner East Natural Gas Liquids Pipeline In Chester County

-- Independent Fiscal Office Reports PA Natural Gas Production Peaked In 4th Quarter 2021 [PaEN]

-- US Energy Information Administration: 2022 Appalachian Natural Gas Production Flat With Productivity Declines In Key Counties In PA

-- Bloomberg: Sweet Spot For Building New US LNG Natural Gas Projects Is Fading

-- Bloomberg: European Natural Gas Prices Have Biggest Weekly Loss Of The Year