Infrastructure & Environment

Oil and Gas Leases Levying Impact Fees Despite Pennsylvania Law Forbidding Them

In the last months of 2012, Steve Townsend, an attorney with Downtown-based ShaleAdvice LLC, began seeing the words "impact fee" in Chesapeake Energy's oil and gas leases.
October 17, 2013

In the last months of 2012, Steve Townsend, an attorney with Downtown-based ShaleAdvice LLC, began seeing the words "impact fee" in Chesapeake Energy's oil and gas leases.

The Oklahoma-based company wanted landowners to agree that Pennsylvania impact fees would be deducted from their royalty payments in proportion to their interest. So if landowners agreed to a 15 percent royalty, they'd be responsible for 15 percent of the impact fee.

Such an arrangement is expressly forbidden under Act 13, the state's major oil and gas law that established the impact fee in February 2012, and Mr. Townsend removed the provision from his clients' leases before they signed.

But other landowners agreed to the language, according to a random sample of leases accessed at MarcellusUSA.com, a warehouse of scanned oil and gas leases in Pennsylvania and Ohio.

And it may not actually be illegal, in Mr. Townsend's reading of the law. "[If] I'm a landowner, I'm allowed to negotiate whatever I want in my lease," he said. "[Companies] bury it in the end of the piece. If the landowner agrees, it's legal."

Act 13 spells out its intent bluntly.

"A producer may not make the fee ... an obligation, indebtedness or liability of a landowner, leaseholder or other person in possession of real property, upon which the removal or extraction occurs," the law states.

The legislation goes on to say that if such a provision is included in a lease, that part of the document "shall be null and void." That's true for leases signed before and after Act 13 took effect, the law states.

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