Gas-drilling influence deep in Harrisburg

The most visible sign of the gas-drilling industry’s profound influence over state policy is the Legislature’s refusal to impose a fair extraction tax on the industry even as the state government faces a $2.2 billion deficit.

But a piece of the revenue bill passed July 27 by the Senate demonstrates that the industry’s influence in Harrisburg runs even deeper than the deep wells across the Marcellus Shale.

The provision, which was added to the unrelated revenue bill the day before it passed, without debate, would benefit the industry at the expense of thousands of Pennsylvanians.

As reported by Laura Legere of the Pittsburgh Post-Gazette, the bill was written with an assist from EQT Corp., which is poised to become the nation’s largest natural gas producer.

Long before the development of the Marcellus Shale deep-well fields, Western Pennsylvania had thousands of shallow conventional wells. Leases for drilling those wells had been considered to be expired once the gas stopped flowing.

But vast amounts of Marcellus gas lurk far below those shallow conventional wells. The new provision holds that unless one of the old leases has a provision specifically defining the termination of an unproductive lease, the lease is considered active and the end of production only temporary, regardless of how long ago the gas stopped flowing from the shallow well.

In some cases, companies that acquire old leases attempt to drill into the Marcellus Shale under the terms of the old lease, vastly diminishing royalty payments. The new provision holds that the old lease is deemed to be controlling if a leaseholder accepts a single royalty payment or fails to object within three months of ground being broken for a new well.

There have been conflicting court rulings, over decades, on the termination of old leases.

Proponents of the new provision say it is meant to settle the conflict. Naturally, instead of requiring drillers to negotiate new leases where old wells have run dry, the Senate settled it in behalf of the industry at the expense of Pennsylvania residents who are lessors.

The same Legislature has stood by as the industry has diminished the value of leases by assessing lessors for post-production costs.

When the House takes up the revenue bill it should strike the lease provision. The question of new drilling based on old leases should be handled as separate legislation.