No official response on royalty questions


The Susquehanna County Commissioners were asked at the June 12 if they had received any feedback about the resolution they passed in May regarding landowners who were being underpaid in royalties from natural gas development.

Hall said that while there was no “official” feedback, local representatives Sen. Lisa Baker, and Reps. Sandra Major and Tina Pickett were on board to having the royalty issue clarified by the legislature.
At the May 8 meeting the commissioners adopted the resolution because local landowners are receiving less than a twelve and one-half percent royalty from their natural gas as the gas industry utilizes the “net back” method which causes landowners to incur post-production costs.

In a March 2010 decision, the Pennsylvania Supreme Court held (Kilmer v. Elexco Land Services) that the “net-back” method of royalty calculation was allowable under the GMRA, but noted that until the state legislature specified the point of valuation for royalties, the statute had to be interpreted as written.

Commissioner Michael Giangrieco said that he felt Harrisburg should be more “proactive rather than reactive.”

He said the Pa. Supreme Court Kilmer case decision has been on the books for three years. They could have addressed this immediately. They chose to ignore it,” Giangrieco said.

In the case opinion handed down in March 2010, the Pa. Supreme Court noted that the General Assembly was best suited “to weigh the public policies underlying the determination of the proper point of royalty valuation in the deregulated gas industry.”

According to the state’s Guaranteed Minimum Royalty Act which governs landowners and gas companies, requires landowners received at least a one-eighth royalty.

The term “royalty, however, has still not been defined by the state legislature.

Bradford County passed a similar resolution.

In response to a question posed by Vera Scroggins regarding underpayment of royalties, Giangrieco said some civil lawsuits are now in the works.