Corbett Signs Controversial Bill Giving Drillers Power To Pool Leases

Jul 12, 13 Corbett Signs Controversial Bill Giving Drillers Power To Pool Leases

Governor Corbett signed a controversial bill (Senate Bill 259*) into law on July 9th, giving drillers the power to combine or “pool” leases for horizontal oil and gas drilling. The Governor is defending this legislation, but an oil and gas royalty owners group states that it undermines some landowners’ negotiating rights when dealing with Marcellus Shale drilling companies.

The legislation was originally promoted as an effort to bring more clarity to the deductions companies take out of royalty payments. Landowner complaints over those deductions lead to a recent Senate hearing on the issue. This bill only applies to existing leases. It allows companies to combine land parcels for horizontal drilling, unless it’s explicitly prohibited in the lease.

The law is designed to advance the industry’s ability to extract natural gas through underground, horizontally drilled bores that can extend out thousands of feet from the vertical well bore, sometimes crossing property lines. This law gives power to drilling companies, instead of forcing them to ask the permission of the landowner or whoever leased the mineral rights, or simply drilling a well on the property to get the gas.

This is the part of the bill in question…

“Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontal drilling unless expressly prohibited by a lease. In determining the royalty where multiple contiguous leases are developed, in the absence of an agreement by all affected royalty owners, the production shall be allocated to each lease in such proportion as the operator reasonably determines attributable to each lease.”

An organization representing Pennsylvania’s landowners was angered over the language, which allows the pooling of some leases. They complained the measure made it through the state legislature during budget negotiations and didn’t receive a complete examination of all the facts. The organization has argued that the bill could adversely impact people who signed contracts years ago and didn’t anticipate Marcellus shale gas drilling. The organization states that it leaves landowners at a disadvantage in their ability to renegotiate old leases.

We at PAOGR would like you to weigh in with your thoughts about the “after effects”  of this bill. Please contact us at https://paoilgasreport.com/contact-us/

* An Act amending the act of July 20, 1979 (P.L.183, No.60), entitled “An act regulating the terms and conditions of certain leases regarding natural gas and oil,” adding definitions; providing for payment information to interest owners for accumulation of proceeds from production, for apportionment and for conflicts; and making editorial changes.