Acting to protect royalty payments BY...

Acting to protect royalty payments BY JAMES LOEWENSTEIN Daily Review

Posted in the Oil & Gas Forum

John goodfellow

Placitas, NM

#1 Jun 11, 2013
For the complete article go to --->
TOWANDA - Smithfield Township Supervisor Jackie Kingsley says that a gas company is deducting anywhere from 0 to 50 percent of her family's gas royalty payments for post-production costs.

Another Bradford County resident says that Chesapeake Energy Corp., which is the primary lease holder on her property, has been deducting anywhere from 35 to 50 percent of her gas royalty payments for post-production costs.

Five different Bradford County residents had a 12 1/2 percent royalty rate written on their lease, but, due to deductions for post-production costs, their most recent royalty payments actually ranged from 1.47 percent to 3.11 percent, according to Bradford County Commissioner Doug McLinko.

The Bradford County commissioners on Tuesday passed a resolution aimed at helping to address what they are calling unreasonably large deductions from royalty checks for post-production costs.

The resolution asks the Legislature to address the Pennsylvania Supreme Court's March 2010 ruling in the Kilmer vs. Elexco Land Service Inc. case, which allowed deductions for post-production costs to reduce royalty payments below the state's 12 1/2 percent guaranteed minimum royalty rate.

Specifically, the resolution asks the state legislature to take action that would prevent deductions for post-production expenses from reducing royalty payments below 12 1/2 percent.

"Just about everyone knew that with every lease, we were guaranteed a minimum of a 12 1/2 percent royalty," said Eric Matthews, chairman of the Bradford County Republican Party. "Then the state Supreme Court made a decision that changed that interpretation. We want the Legislature to correct that."

McLinko said there are "hundreds and hundreds" of cases in Bradford County where unreasonably large deductions are being taken out of gas royalty checks.

"I'm very upset about this," McLinko said. "This (cases where unreasonably large deductions are being taken out of royalty payments) is out of control."

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