Testimony and Exhibits
PA Senate Environmental Resources And Energy Committee

Regarding Royalty Stub Transparency and
Natural Gas Development Post-Production Costs

June 27, 2013

Harrisburg, Pennsylvania

Offered by
Joel Rotz, Senior Director State Government Affairs
and
Mike Evanish, Manager, MSC Business Services Division

Good morning, and thank you for the opportunity to testify today on behalf of the Pennsylvania Farm Bureau regarding royalty stub transparency issues and natural gas development post-production costs.  I am Joel Rotz, Senior Director of State Government Affairs, for the over 57,000 members of the Pennsylvania Farm Bureau. 

Joining me this morning is Mike Evanish, Manager of Pennsylvania Farm Bureau’s MSC Business Services Division, who will primarily address the issue of natural gas development post-production costs and the impact assessment of these costs are having on a number of our members in reducing royalties paid to them by gas well operators to a small fraction of the 12.5 % that is expected.

First, I would like to just briefly discuss the transparency issues on royalty payment stubs which Senator Yaw has introduced legislation to address in Senate Bill 259.  A companion bill, HB 1414, introduced by Representative Garth Everett, and recently passed by the House is now under the Senate Environmental Resources and Energy Committee’s consideration.

Pennsylvania Farm Bureau fully supports the provisions of these bills.  The information that would be required to be included on royalty stubs by enactment of this legislation is clearly not asking for any proprietary information from gas well operators and frankly is common sense detail that those receiving royalties should have in understanding and determining that the payment received is proper compensation as provided for in the lease agreement with the corresponding gas well company.  Identification of the specific well for which the payment is received, the specific sales period, gross value, identification and amount of deductions or adjustments, net value, owner interest, the owner’s gross value and net value, and address and phone number where additional information can be requested, would go far in reducing a landowner’s concern of fair and equitable treatment in the royalty payment received.

With the more recent development of landowner concerns regarding post-production costs that are in some cases reducing royalty payments to a small fraction of what was believed to be the landowner’s share of royalty payment, and the seeming inconsistency of how these costs are applied between companies, between landowners and even between wells on the same pad as Mr. Evanish is about demonstrate, it appears logical that addressing the issue of transparency in post-production costs should also be dealt with in the legislation.  Pennsylvania Farm Bureau recognizes there are legitimate proprietary concerns that gas well operators may need to protect, however, certainly more information needs to be accessible to affected landowners regarding post-production cost assessments if the industry is interested in maintaining the support and trustworthiness that it has historically enjoyed among the majority of Pennsylvania’s agricultural community.

Now, Mr Evanish will present some factual information on what is being experienced by some of our members impacted by the post-production cost deductions.  Evanish Testimony and Exhibits