BY ROBERT SWIFT
Times-Shamrock Writer

A group of Northeast Pennsylvania lawmakers launched a new effort Tuesday to prevent some gas drillers from whittling away at royalty payments to landowners through deductions.

They called for passage at a press conference of a revived House bill to restrict what companies can deduct in post-production costs. The measure sponsored by Rep. Garth Everett, R-84, Muncy, would achieve this by buttressing a 1979 state law that guarantees leaseholders receive at least 12.5 percent of the value of gas extracted.

Reps. Sandra Major, R-111, Bridgewater Twp.; Karen Boback, R-117, Harveys Lake; Tina Pickett, R-110, Towanda; and Matt Baker, R-68, Wellsboro, support the bill.

Landowners in the Marcellus region in Bradford, Susquehanna and Lycoming counties have complained in recent years about the business practices of Chesapeake Energy LLC in using deductions to reduce royalty payments.

Bill supporters said that private landowners as well as local and state governments lose money when drillers deduct post-production costs for compressing and transporting gas from the well to market.

“This shortchanging of property owners in Pennsylvania adds up to the loss of millions of dollars each year,” said Ms. Boback. “Beyond property owners, it affects school districts, townships and other municipalities.”

Landowners pay the state personal income tax on royalty payments that can last until the gas is depleted, said Jackie Root, an officer with the National Association of Royalty Owners Pennsylvania Chapter.

The legislation is in response to a 2010 state Supreme Court ruling that determined the current law doesn’t address the matter of deducting post-production costs.

“The 1979 law guaranteeing a minimum royalty payment has led to varying interpretations, with some landowners getting far less than specified in their leases and others receiving royalty payments with figures in the red,” said Ms. Pickett. “The state court has ruled that the Legislature should be the branch of government clarifying existing state law in an effort to achieve royalty fairness and equity, and our legislation seeks to do just that.”

The measure is headed for the House Environmental Resources and Energy Committee. Panel Chairman John Maher, R-40, Upper St. Clair, voiced his support for the bill, saying it’s needed to stop ridiculous surcharges.

A similar royalty bill reached the House floor last session only to get bogged down in inconclusive debate over an amendment offered by a western Pennsylvania lawmaker to give landowners some remedies to pursue royalty complaints.