In gas-drilling country, royalty honeymoon ends

Associated Press

WYALUSING, PA.

Jan Brown pores over his royalty statement and wonders where the money went.

A few months ago, the nation’s second-largest natural-gas producer siphoned $2,201 worth of gas from his 240-acre property – but paid him only $359 after taking deductions for transportation and processing.

Brown, 59, who relies on the royalties as his sole source of income, says the deductions are outrageous and claims his lease forbids them. He feels cheated.

In Pennsylvania and other leading gas-producing states, a battle has developed over royalties, with landowners bitterly disputing the sums that some drillers have been taking from royalty checks already severely diminished by a collapse in prices.

Chesapeake Energy Corp. alone is facing royalty lawsuits in Texas, Ohio, Louisiana, Oklahoma, Arkansas and Pennsylvania – including one filed by the Pennsylvania attorney general – and says it has received subpoenas from the U.S. Department of Justice, the U.S. Postal Service and states over its royalty practices.

The deductions’ impact is especially acute in Pennsylvania, where gas extracted from the Marcellus Shale, the nation’s largest natural-gas field, has been selling at a steeper discount than anywhere else in the country.

Some landowners have seen their royalty checks dwindle to nothing at all, despite a 1979 state law that mandates a landowner royalty of at least 12.5 percent of the value of the gas. In rare cases, landowners have even gotten statements with negative balances.