The Herald, Sharon, Pa.

Business

July 31, 2013

Brooks opposes new lease law

HARRISBURG — A bill signed into law by Gov. Tom Corbett will make it easier for gas companies to merge drilling leases from old conventional drilling deals, to allow for fracking under the same properties.

The issue hits the hardest in southwestern Pennsylvania where people have old gas and oil wells, said Dale Tice, a Williamsport attorney who specializes in gas drilling law. In many cases, those leases lack language indicating whether gas companies can add the property to a “pool” of properties that are combined.

The absence of that language “creates an opportunity for negotiation,” Tice said. Landowners can demand new bonus payments or better royalty payments or additional protections.

At least they could until Senate Bill 259 was signed into law. The legislation includes language specifying that gas companies can merge neighboring properties with existing gas and oil leases “unless expressly prohibited by lease.”

Under the law, gas companies are allowed to interpret silence as permission to go ahead and merge the leases together.

State Rep. Jaret Gibbons said there was open debate about the pooling language in the House Environmental Resources and Energy Committee, on which he serves. The bill was approved by the committee and then the House passed its version of the bill unanimously.

“It’s a different kind of drilling,” said state Rep, Michele Brooks, Jamestown, R-17th District. “Property owners should have the opportunity to renegotiate.”

For landowners, the difference can be substantial said Brian Pitzer.

“It’s not uncommon for a landman from the gas company to show up at a landowner’s door and say ‘We were here a couple weeks and here’s what we’re offering to your neighbors,’ and present a two-page lease,” Pitzer said.

That initial lease might include a bonus payment of $50 an acre, Pitzer said.

“That was your father’s Oldsmobile,” Pitzer said. Now, some landowners have gotten bonus payments of $1,000 an acre.

Pitzer is a member of the Northwest Pennsylvania Landowners Association, which formed to educate property owners who are negotiating with gas companies. The landowners group convened a special meeting last week to discuss the new law. One hundred and eighty-five people showed up, Pitzer said.

Pennsylvania law sets a floor of 12.5 percent for royalties, so there is nothing in the law that will allow gas companies to pay less than the minimum royalty, Gibbons said.

Tice said that at one point, he saw a deal where the landowner had negotiated a royalty of 21 percent. More recently, he has seen royalties of 17 percent to 18 percent.

Twelve Republicans – including Brooks, Rep. Brad Roae from Crawford County, and Rep. Fred Keller of Union County – voted against the bill. Nineteen Democrats voted against the bill.

“I am always mindful of property owners’ rights and this goes too far,” Brooks said. “I was disappointed that the governor signed it into law and I hope it’s rescinded.”

Understanding the implications is difficult because there are so many variations used in leases, which, in some cases can be decades old.

Brooks said that she hopes any landowner approached by a gas company takes the proposed lease to an attorney specializing in the drilling business or consults with one of the landowners groups that have sprung up in Pennsylvania in response to the gas boom.

Making it easier for gas companies to frack under those properties is arguably environmentally friendly because it will allow the companies to get the gas with less activity above the ground, said lawmakers who supported the bill.

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