PA Royalty Transparency Bill Moves Closer to Law

Pennsylvania currently does not require any standardized method for an operator to itemize deductions from royalties paid to a landowner.  This is about to change as Governor Corbett is expected to sign into law Senate Bill 259. On Sunday, June 30, 2013, the Pennsylvania General Assembly passed Senate Bill 259 which would require operators to provide a detailed itemization of all deductions taken from a landowner’s royalties on each and every royalty check stub, attachment to a royalty payment or other record of payment.  Senate Bill 529 also allows an operator to pool contiguous leases using horizontal drilling unless prohibited by a lease. Previously the bill passed in Pennsylvania’s Senate by a unanimous vote.  According to the bill’s sponsor, “Senate Bill 259 provides a simple, transparent way for subsurface owners who presently receive royalty payments from natural gas companies to verify that royalty payments received are being made properly[.]” The bill does not address all landowner concerns relating to royalty payments.  Such issues as to when royalty calculations are made and what deductions are proper remain.  Operators therefore are likely to see these issues take shape in Pennsylvania going forward via judicial challenges and perhaps even further legislative efforts. And, operators looking to New York when it opens should expect similar legislation when drilling finally commences in New York.