Attorney General Kathleen Kane has broadened her review of natural gas royalty payment practices beyond those of Chesapeake Energy Corporation by issuing several administrative subpoenas throughout the state’s shale industry.
According to reports, subpoenas have been issued for information regarding royalty calculations and payments in what appears to be an industry-wide survey to review and compare practices.
Leaseholders have complained of unfair practices for years, prompting Lycoming County legislators Sen. Gene Yaw and Rep. Garth Everett to draft and champion legislation to correct the problem. Despite gaining some traction, the bills were not passed prior to the legislature’s summer recess as drillers argued that the legislators were trying to tamper with private leases.
Landowners who lease property for drilling are guaranteed by law a minimum one-eighth or 12.5 percent of the production value. The law also allows companies to tax the payments for post-production costs. But complaints have been that Chesapeake and other drillers are deducting “excessive” post-production costs from royalty payments, which in turn may cause the payments to drop below the state minimum guaranteed royalty.
Drillers believe that companies are responsible for the cost of bringing gas to the surface, but they share the financial responsibility of preparing and delivering the gas to market with the leaseholder, as per the terms of most lease agreements.
Last summer Chesapeake settled a federal class-action lawsuit filed in Scranton brought by leaseholders to cover the cost of post-production deductions.