A bill designed to limit how much oil and natural gas producers can charge people whose land they lease for drilling passed the Environmental Resources and Energy Committee of the Pennsylvania House of Representatives today, 15-10.
Under Pennsylvania law, those who lease their property for oil and gas drilling are guaranteed a minimum 12.5 percent royalty. House Bill 1684 of 2013 alleges that producers have been charging those landowners for costs after the gas has been withdrawn from the ground, such as transportation or compressing, which bring the royalties to less than 12.5 percent.
"We should have stopped it before," Lycoming County Republican Garth Everett said.
He introduced the legislation with 23 co-sponsors Sept. 16. It was tabled March 11 to consider amendments, including whether to have producers make retroactive payments.
Should a landowner negotiate a royalty above 12.5 percent and sign a contract allowing a producer to deduct post-production costs, the bill would make it so the net payment could fall below the contractual royalty rate, but not below 12.5 percent.
The original law setting the 12.5 percent floor dates to 1979.
Beaver County Republican Rep. Jim Christiana said during the hearing, broadcast live online, he thought the bill unconstitutionally altered existing contracts. Rep. Timothy Krieger, a Republican from Westmoreland County, said he feared creating liability for the state in altering lease contracts and "hurting the people we're trying to help."
Both voted against sending the bill to the full House.
Rep. Steven Santarsierso, a Bucks County Democrat, voted in favor. He said Act 13 already disallowed deducting severance-tax fees from royalties.
"No one's talking about gouging the companies," he said.
Mr. Everett said by allowing even one company to make such deductions and push net royalties below 12.5 percent, it was an invitation and even a mandate to other companies to do the same.
"All we're doing is reinforcing the floor that's existed since 1979," he said.
First Published March 17, 2014 9:02 AM