New law favors gas companies

New law favors gas companies by John Finnerty, August 4, 2013, CNHI Harrisburg Bureau
HARRISBURG — Legal experts working for property owners fighting gas companies say that language in a new law that makes it easier for gas companies to pool properties without the consent of the landowners is not the only problem. Act 66, signed into law by Gov. Tom Corbett, also suggests that when there are disputes over how to allocate the proceeds of gas production between property owners, the gas company can make the decision.

The rub?

These conflicts are sometimes caused by confidentiality agreements that the gas company insists are included, said Paul Yagelski, a Pittsburgh attorney who specializes in working with landowners negotiating with gas companies.

The language that allows gas companies to pool leases without explicit consent of the properties has been widely recognized by critics. Last week, a gas company in Allegheny County used the change in law to sue 70 property owners who had been seeking to renegotiate their leases before allowing the driller to begin fracking. 

That is only half of the section of Senate Bill 259 that is causing heartburn for landowner groups. The second component of the new law may have broader implications. The way it works is this: Drilling companies often will group numerous properties into units of 600 to 1,000 acres to be served by one fracking well. All of the properties involved in that unit will then split the proceeds, based on how much of the property each owner has. “This is how royalties are allocated in virtually all modern Marcellus gas leases,” said Dale Tice, an attorney in Williamsport who works with the National Association of Royalty Owners, a landowners group. “This provision appears to be drafted to be deliberately vague and invites abuse. NARO-PA certainly has this on the radar,” Tice said. A small number of lawmakers objected to the language, saying they feared it trampled the rights of landowners. … They must act fast, she noted, because even though the law hasn’t officially taken effect yet, gas companies already are citing it. The language from Senate Bill 259 was included in the Allegheny County lawsuit, she said. “I don’t think there’s any part of Senate Bill 259 that we are thrilled about,” Root said. Counter-lawsuits from property owners across the state are possible, Root said. [Emphasis added]

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