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TMCNet:  Drill Bills Address Limits On Post-production Costs [News - Item, The (PA)]

[May 11, 2014]

Drill Bills Address Limits On Post-production Costs [News - Item, The (PA)]

(News - Item, The (PA) Via Acquire Media NewsEdge) HARRISBURG -Regional differences continue to shape the debate over House legislation to limit what Marcellus drillers can deduct from royalty payments to landowners.

House lawmakers briefly considered a bill last week ardently sought by a group of Northeast lawmakers to put restrictions on what companies can deduct in post-production costs tied to Marcellus drilling.

The bill stems from a wave of complaints about landowners in the Marcellus region in Bradford, Susquehanna and Lycoming counties about the business practices of Chesapeake Energy LLC. Landowners have complained that these deductions have dramatically reduced royalty payments in some cases.


The bill sponsored by Rep. Garth Everett, R-84, Muncy; would buttress a 1979 state law that guarantees leaseholders receive at least 12.5 percent of the value of gas extracted by basing royalties on the value of gas at the market instead of at the well head.

The House debate focused on an amendment offered by Rep. Brian Ellis, R-11, Lyndora; to establish some remedies for landowners to pursue regarding royalty complaints. The debate went on for roughly a half-hour before House Speaker Sam Smith, R-66, Punxsutawney; called a halt and said the bill would go over temporarily. The House left town the next day for a three-week recess with no further action on the bill.

Ellis' amendment would also remove references to post-production costs from the bill.

During the debate, Rep. Mike Carroll, D-118, Avoca; pointed to the proposed removal of language referring to post-production costs.

"Where's the guarantee that post production costs don't drive royalties below 12.5 percent," he asked.

Carroll said the amendment if approved would offer no protection to landowners.

The deletion is troubling to Rep. Matt Baker, R-68, Wellsboro.

"I'm hoping we can get a vote on the bill itself and not have the amendment," he said. "It (amendment) weakens the underlying bill." House Majority Leader Mike Turzai, R-28, Pittsburgh, spoke in favor of the Ellis amendment.

He said the amendment would allow landowners to inspect company records and ask a magisterial district judge to review the deductions and make a ruling.

"These are remedies that landowners do not have today," he added.

Turzai spokesman Stephen Miskin said the amendment was called up to get the debate started. The practice in the House of starting debate on a bill or amendment and then stopping it before a vote can take place has been on the upswing in recent years.

District office leases Reps. Mario Scavello, R-176, Mount Pocono, and Mike Tobash, R- 125, Pottsville, have negotiated leases for district offices where landlords pay for some costs that are not included in other district office leases.

A copy of Scavello's lease with the Greater Pocono Chamber of Commerce for a Stroudsburg office states the landlord is responsible for paying for utilities and cleaning and trash removal, for example.

A copy of Tobash's lease with Mill Creek Leasing Inc. for a Pottsville office states the landlord is responsible for paying for real estate taxes, insurance, electric and heating costs and water and sewer.

A story last week examined what lawmakers spend on district office leases.

(Robert Swift is Harrisburg Bureau Chief for Times-Shamrock Newspapers. Email rswift@timesshamrock.com.) (c) 2014 ProQuest Information and Learning Company; All Rights Reserved.

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