Lease & Royalty Payments

In August 2013 an extensive investigative article about a then-director for the Pennsylvania Game Commission, William A. Capouillez, appeared in the Philadelphia Inquirer (see PA Director of Game Commission Double-Dipping with Gas Leases?). The article spotlighted a potential conflict of interest between Capouillez’s day job and his moonlighting side job as an agent for property owners who lease their land for oil and gas development. The issue? He was signing private deals with the same companies that often work with his state agency. It became a serious legal issue for at least one driller–Range Resources. The independent 8-member board that runs the Game Commission was about to promote Capouillez to the top job of executive director when then-Gov. Tom Corbett put the brakes on it (see PA Gov Corbett Blocks Promotion of Moonlighter at Game Commission). In September the chairman of the PA House Committee on State Government, Daryl Metcalfe, asked the State Ethics Commission to investigate his activities (see PA Game Comm. Head Not Afraid of Gas Leasing Ethics Investigation). Capouillez’s response was “bring it on.” He said he had not taken on new clients for his moonlighting job in three years and had done nothing wrong. The State Ethics Commission did investigate and now, three years later, the Commission levied a $75,000 fine, which Capouillez has agreed to pay, although he remains defiant and says the fine is a tiny fraction of the original fine sought–indication of his vindication…
Read More “Former PA Game Commissioner Fined $75K for Lease Moonlighting”

Channeling our inner Joan Rivers: Can we talk? It hurts when a good friend publicly criticizes you. It feels like you’ve been stabbed in the back. Perhaps a case of public criticism is one of the reasons for the developing rancor (we call it a civil war) between landowners and the Marcellus industry in Pennsylvania. Landowners are upset that their royalty checks are, in some cases, pennies–as in less than one dollar. Drillers claim that super low prices they receive for the gas are to blame–that nobody is making money right now. Landowners say that drillers (e.g. Chesapeake Energy) are deducting post-production costs that they shouldn’t be allowed to deduct, resulting in worthless royalty checks. For a number of years landowners in Pennsylvania have supported legislation to force drillers to pay a minimum 12.5% royalty, which is stipulated under a 1979 law. Drillers say post-production costs are written into many contracts and if it’s there, landowners must live by the contract. It’s turning into a mess. We’ve covered it extensively (see our articles on HB 1391). When we write about it, it’s from the perspective of a broken heart that we have a civil war brewing. When mainstream media writes about it, it’s typically with some degree of glee and happiness that “the other side” has infighting going on. An article appearing in today’s Pittsburgh Post-Gazette does a good job of summarizing what we’ve previously posted on the issue. However, the Post-Gazette article adds one new bit of information we didn’t know about: earlier this summer there was a Twitter fight/dust-up between PA-NARO (National Association of Royalty Owners) and the MSC (Marcellus Shale Coalition)…
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For the past few days MDN has chronicled what we’ve named a royalties civil war happening between Pennsylvania landowners and the Marcellus drilling industry in the state–two groups usually on the same side. The war revolves around royalty checks–and how meager they are (see Righteous Royalty Anger: PA Town Votes to Block Gas Production and Civil War: Bradford PA Escalates Fight with MSC re Royalty Bill). As we’ve previously explained, an oversimplification is landowners maintain that a 1979 PA law guarantees landowners a 12.5% royalty regardless of expenses involved in extracting the gas, and drillers say no, landowners must abide by the contracts they’ve signed and if those contracts allow post-production costs to be deducted before calculating a royalty, the rate may go lower than 12.5%–sometimes to zero and below. Chesapeake Energy is the primary offender, according to landowners. The issue is complex, but at its core is (according to landowners) about fairness. We’ve located two excellent bits of information, one an article, another an email, that explains both sides. The article is from the Houston Harbaugh law firm and does a great job explaining the landowners’ view of the issue, and their desire to pass House Bill (HB) 1391. The email was from the Marcellus Shale Coalition to members of the PA legislature, sent to them last June to explain why, in the opinion of the drilling industry, HB 1391 is unconstitutional and a bad choice. These two views clearly lay out the issues involved so everyone can understand why we are facing a civil war among the ranks…
Read More “Deep Dive: PA Royalties Civil War Between Landowners & Drillers”

It appears that legislation in the Pennsylvania House of Representatives, House Bill (HB) 1391 that would fix the issue of landowners getting shorted in royalty payments, is about to die. It’s not the first time a bill meant to ensure landowners get a minimum of 12.5% in royalties has died in the PA legislature. Bradford County Commissioners chairman Doug McLinko is blaming the Marcellus Shale Coalition and other drilling industry groups. And he’s not a happy camper. Last June MDN told you about a renewed effort by Pennsylvania State legislators to pass a minimum royalty bill that will guarantee PA’s landowners get at least 12.5% royalties (see New Bill HB 1391 Will Guarantee PA Landowners 12.5% Royalties). HB 1391 is was introduced by State Rep. Garth Everett, a Republican from Lycoming County, PA. Everett said in June the new bill was “narrowed” in focus from a previous bill (that had failed) and because the more narrowed focus, he hoped the Marcellus industry would not oppose it this time around. Everett was dead wrong. As we reported in June, the rift between landowners and drillers on the matter of minimum royalties continues (see Rift Continues Between Drillers & Landowners re Royalty Bill). Due to some hard work by Everett, the bill finally moved out of committee where it had been stalled, and on to the full House for a vote (see Progress: PA Minimum Royalty Bill Heads to Full House for Vote). But now the bill is stalled in the full House and it appears there will not be a vote by the end of the fall session, due to close in another two weeks…
Read More “PA Landowners, Drillers Fight over HB 1391 Minimum Royalty Bill”