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Bradford County to state lawmakers: People fed up over cuts in natural gas royalties

TOWANDA — State legislators have been put on notice Bradford County landowners that have natural gas leases are fed up with not getting the royalties they expected.

The warning was issued in a video titled “Pa Royalty Rip Off” made by Zeppelin Communications of Buffalo, N.Y., for the county commissioners. It can be viewed at www.PAroyaltyripoff.com.

It is part of a lobbying effort to convince state House members to pass a bill that could be up for a vote Wednesday that would prohibit the use of post-production costs to reduce royalty payments below the 12.5 percent required by Guaranteed Minimum Royalty Act.

“Being up here on the mountain we are sometimes forgetting a little about by the people we put in office in Harrisburg,” Wilmot Twp. Supervisor Mark Dietz says on the video.

“The people can’t take it anymore. They’re stealing from these people. People are getting very upset. There’s going to be trouble.”

It is tough to fight against the donations gas companies give to legislators, Dietz said.

He accuses the state legislators of not looking at the whole picture. “They don’t seem to care,” he said about lawmakers outside the Marcellus region.

“It would certainly help if the legislators would rectify the problem,” said James Barrett, a farmer. “They wrote the law. If they left a little gray area all they have to do is clean it up.”

Chesapeake Energy, based in Oklahoma City, is the target of the ire expressed on the video.

“Chesapeake decided not to send us any revenue for 18 months while they continued to draw gas from the ground,” Barrett said.

Joan Smith-Reese, executive director of Animal Care Sanctuary in the East Smithfield area that deals with more than 500 animals a day, stopped getting royalties from Chesapeake.

In February she received from company a bill from the company for or nearly $30,000. “We were irate,” she said. She did not pay it, she said.

There are no wells on the sanctuary property but gas is being removed through horizontal drilling. The lease with Chesapeake expired and she is getting royalties from a different company, she said.

Wayne Felter said he got a $629 bill from Chesapeake “for taking may gas. I didn’t get anything.”

Chesapeake removed $1.2 million worth of natural gas from a Wyoming County property in a nine-month period and then sent the owner a bill for $110,000, Dietz said.

“I definitely feel I misled people,” said Dale Grover on the video. He worked for Red Sky retained by Chesapeake to obtain leases.

He said he negotiated in good faith. “I thought it was good for the economy and everything in this area. And this happened,” he said.

The guarantee minimum royalty payment of 12.5 percent was a big selling point, he said.

“Not everybody is as bad as Chesapeake,” said Wilmot Twp. Supervisor Frank Messersmith. He cited several companies that adhere to the leases as written and treat the people fairly.

Issues surfaced after the state Supreme Court in 2010 allowed companies to consider when calculating royalties the cost of moving gas from the wellhead to the marketplace.

When is the gas marketable so post-production costs can be deducted is the issue. Some say it is at the wellhead and others claim it is when it enters a transmission main.     

Dietz questioned whether the court realized Chesapeake would go to the ends it has “to rob the checks.”

Several lawsuits, including one filed by former Attorney General Kathleen Kane, are pending against Chesapeake over royalties.

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