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Babst Calland: Pa. House Panel Approves Bill To Reform Guaranteed Minimum Royalty Act

By Elena L. Rorabaugh

As reported by legal news website Law360, a Pennsylvania bill was approved by the House Environmental Resources and Energy Committee that would amend the Guaranteed Minimum Royalty Act of 1979 (GMRA) and will move to the House floor. House Bill 1684 would amend the GMRA to clarify the definition of the minimum royalty payable under an oil and gas lease. The GMRA already sets the minimum threshold at one-eighth, but does not clearly define how royalties should be calculated. House Bill 1684 would prevent operators from reducing royalty payments by the costs of production if the reductions would result in a payment of less than a one-eighth royalty. Supporters of the bill say that landowners should be protected from the possibility of unfair deductions and calculations of their royalty payments by oil and gas operators. Opponents of the bill argue that the bill violates both the state and federal constitutions by changing the terms of leases already in existence and that the bill would result in excessive litigation, which would not ultimately benefit the landowners that the bill seeks to protect.

Copyright 2014 • Babst, Calland, Clements and Zomnir, P.C. • Two Gateway Center, Pittsburgh, PA 15222 • 412-394-5400 • Administrative Watch is privately distributed by Babst, Calland, Clements and Zomnir, P.C., for the general information of its clients, friends and readers. It is not designed to be, nor should it be considered or used as, the sole source of analyzing and resolving legal problems. If you have, or think you may have, a legal problem or issue relating to any of the matters discussed in the Administrative Watch, consult legal counsel.