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RST: New gas-drilling law: who benefits? Also, lawmaker pension update

Written by Scott LaMar, Smart Talk Host/Executive Producer | Jul 13, 2013 1:15 PM

Radio Smart talk for Monday, July 15:

gas drill rig at rear of house 300 x 170.jpg

StateImpact Pennsylvania reporter Marie Cusick will appear on Monday's Radio Smart Talk to explain a controversial natural gas drilling bill signed by Gov. Tom Corbett last week.

Under the legislation, drillers would have to disclose more information to landowners who lease their properties for drilling to ensure transparency in the amount of royalties paid to them.  Some gas companies were deducting the cost of getting natural gas to market from royalties.

According to critics, the bill would allow deep underground horizontal drilling across several properties known as pooling.  They say lease owners who negotiated shallow vertical wells before Marcellus Shale drilling greatly expanded could lose out on royalties or would be unable to renegotiate.

Gov. Corbett had said he opposed "forced" pooling, which involves drilling horizontal wells under land that hasn't been leased.  The governor says the new law does not constitute forced pooling.

Also, the activist group Rock the Capital points out that a 1995 law that provided for cost-of-living pay increases and an increase in pensions for legislators in 2001 is costing taxpayers millions.  The group's Eric Epstein will appear on Radio Smart Talk to explain.

Eric Epstein 7-15.jpg

Eric Epstein

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Comments: 5

  • Kim Van Fleet img 2013-07-15 08:54

    Contrary to general opinion there are landowners who own the mineral rights under the surface of their properties who for ethical or financial reasons do not want the natural gas to be extracted from their property. Owning those mineral rights should give them total control as to if or when those resources should ever be extracted. The new legislation supporting forced pooling of natural gas is clearly government endorsed theft of this resource without regard for those landowners

  • Jim Gawn img 2013-07-15 19:41

    I listened carefully to the discussion of drilling rights, and came away knowing less than I did before. What on earth is the point at issue? If landowner A has sold the oil and gas rights, and the driller opts to extract via horizontal drilling from another property (B), surely that is to A's advantage. Owner A gets extraction royalties without any surface damage to the property.

    And if A has not signed over the oil and gas rights, surely this law is not saying the drill can take it anyway. That's what I got from Ms. Cusick's explanation. The other contributor was less clear. He seemed to be saying, by using the term "forced pooling," that indeed the act does give drillers the right to seize the resources unfairly - but provided no comprehensible evidence for that assertion. So, once again: what is his beef?

    • Marie Cusick img 2013-07-16 12:18

      Hi Jim,
      To clarify, the landowners who are upset about this bill do not oppose pooling. As you point out, the arrangement can be advantageous to all involved.
      The objection from the landowner's group is that if a lease (typically an older one, signed before the recent gas boom) is silent on the topic of pooling and horizontal drilling, the landowner no longer has the opportunity to negotiate with a driller to get that language into their contract-- and perhaps get more money or better terms.
      So overall, their concern about the law is that it hinders their negotiating power.
      The sponsors of the bill and the Corbett administration disagree and say this will not re-write anyone's lease.
      Mr. Burnett and the Corbett administration also disagree on what "forced pooling" means. To Corbett, "forced pooling" is when you don't have a lease and you're pulled into a production unit anyway.
      To Mr. Burnett, this law qualifies as "forced pooling" because landowners (with leases) are being pulled into production when there is no specific language in their contract allowing it.

    • sfbrion img 2013-07-17 11:47

      Hi Jim,

      From my perspective as a landowner the issue is that the provision at issue grants new lease rights to Oil & Gas Companies without compensation. The impact is a redistribution of economics from landowners to oil & gas companies. Most older leases provide an actual royalty paid to owners of 10% or less after the deduction of expenses. Across the US the average least royalty rate exceeds 19%. In PA, new or renegotiated leases typically pay royalties of between 15% to 20%, so by giving companies the right to pool, the law allows them to drill Marcellus wells under the old lease and pay only 10% royalty rather than the 20% which was possible to achieve through negiotiation prior to the new law. This represents a huge financial impact to the oil & gas companies.

      This whole affair is maddening because PA lawmakers have stated publicly that they can not raise or further define the state minimum royalty for existing leases through legislation because it would be setting new lease terms which is ostensibly not good public policy. But this legislation specifically does set new terms for many existing leases. So as it stands in PA, our elected officials can do nothing to protect citizens with a straight forward guaranteed minimum royalty, but they feel no compunction about legislation that changes lease terms to the direct financial benefit of Chevron, Exxon-Mobile and Royal Dutch Shell (several of the largest corporations on the planet) at the expense of everyday Pennsylvania citizens.

  • Robert Colgan img 2013-07-15 20:21

    I called in, the phone connection was faulty. Sorry I couldn't be heard.
    What I said was that an Environmental Impact Study was NEVER done in PA to tell us what the possible risks, hazards, dangers, compromises, alterations to habitat, lifestyle, behavior, etc------and not just now, but projected into the future.
    The mandate of the DEP is to protect the land, water, air for ALL Pennsylvanians and ALL descendants.

    SECTION 27 PA CONSTITUTION
    "The people have a right to clean air, pure water, and to the preservation of the natural, scenic, historic and esthetic values of the environment.
    Pennsylvania's public natural resources are the common property of all the people, including generations yet to come. As trustee of these resources, the Commonwealth shall conserve and maintain them for the benefit of all the people."

    Unless we know that there will not be longterm environmental damage we should NOT be drilling these pressurized fluid injection gas wells.
    The HEALTH of the residents of PA and surrounding States is more valuable that the damn gas------if we're going to make our children's children sick, and it's preventable now-----we need to stop the drilling and evaluate what the damages may be.

    People like Bob Burnett consider the drilling a fait accompli-----and are concerned only about the profits being handled in a fairer way...but IS the drilling, WAS the drilling ever really vetted???

    NO, it wasn't.

    Once again, PA is being (potentially)harmed by the fast buck crowd exploiting natural resources as quickly as they can....the difference this time is that the harm may be irremediable. Chronic. In perpetuity.
    If the aquifers are compromised, we may be poisoning future generations: medical consequences for millions of people.
    We don't know for certain. . .EIS has not been done.

    The fasttracking that the Corbett administration has been doing is profitable for the drillers------but potentially extremely expensive for the citizens of PA.

    Unrelatedly, Scott, please get Eric back asap. His is a valuable voice of accountability for a PA gov't that has virtually no effective oversight at all.

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