Posts Tagged ‘state law’

Property owners claim in lawsuit agent offered lower royalty than allowed by law.

MARC LEVY Associated Press Writer

HARRISBURG — Scores of people who own land above a potentially lucrative natural gas reservoir are seeking to void the drilling leases they signed and accused a land agent of guaranteeing a lower royalty than the amount allowed by state law.

The property owners filed a lawsuit in federal court in Williamsport last week against The Keeton Group LLC, of Lexington, Ky.

The lawsuit stems from a rush of activity by exploration companies to capitalize on the largely untapped Marcellus Shale gas reservoir while natural gas prices are high. Property owners from West Virginia to New York have complained of aggressive “landmen” pushing them to sign leases that allow an exploration company to drill down to the Marcellus Shale, a layer of thick black rock that holds a vast reservoir of gas.

The law cited by the plaintiffs guarantees a property owner at least one-eighth of the royalties from the recovery of oil and gas on their land. However, the suit said the leases violate state law because they give the exploration company the right to subtract taxes, assessments and adjustments on production from the 12.5 percent royalty.

The suit, filed Thursday, said the approximately 130 plaintiffs own more than 18,000 acres in Sullivan and Lycoming counties in northern Pennsylvania. The contracts were signed with Keeton between April 2005 and March 2006, the suit said.

A telephone message left Tuesday with The Keeton Group was not immediately returned. On an outdated version of its Web site, Keeton touts its record as an early arrival on the Marcellus Shale.

“Our group was among the first to acquire lease rights for the current Marcellus Shale drilling activities — not only in Pennsylvania but also in 7 other states under which this vast geological formation lies,” the Keeton site said.

The gas reservoir beneath the Marcellus Shale was long known to exist, but only recently has drilling technology improved enough to cost-effectively tap into it. According to state officials, drilling activity on the formation is taking place at about 275 well sites, and less than 20 sites are producing gas.

To date, exploration companies have spent about $2 billion on leasing land, performing seismic studies and other activities in pursuit of Marcellus Shale gas in Pennsylvania, according to Stephen Rhoads, the president of the Pennsylvania Oil and Gas Association.

Companies as large as ExxonMobil Corp. have shown interest in Pennsylvania, which is one of four states that sit atop 54,000 square miles that analysts say hold the best exploration prospects.

Copyright: Times Leader

DAN NEPHIN Associated Press Writer

PITTSBURGH — A lawyer for a suburban Pittsburgh municipality trying to keep gas wells out of a residential neighborhood told the Pennsylvania Supreme Court on Tuesday that towns must be allowed to regulate the location of drills.

The high court’s ruling on whether Oakmont, home to the famous golf course of the same name, can restrict the location of wells will have big implications across Pennsylvania, a state where landowners big and small are trying to cash in on the vast stores of valuable natural gas below.

“This is way beyond Oakmont. This applies to every municipality in the state,” said borough attorney Clifford Levine. If a lower court ruling is allowed to stand, municipalities could become virtually powerless to control the growing number of gas and oil wells that are being drilled throughout the state.

Propelled by high natural gas prices, companies are scouring for drilling opportunities throughout the region.

Geologists and exploration companies, for example, recently developed a way to extract gas from one large reservoir located some 6,000 to 8,000 feet underground. Though drilling into that large pool has only just begun, prospectors are buying up drilling rights, leading to tensions among neighbors and questions about who can drill where.

In Oakmont, Huntley & Huntley Inc. wants to drill a gas well in a residential subdivision on two adjoining lots that total 10 acres. The families that own the lots would be allotted one-quarter of the gas at no charge and the rest would be sold. The families would share in the profit.

Opponents, mostly neighbors, objected on grounds that the well violated local zoning laws and that the drilling would create noise and jeopardize public safety. The borough council agreed and rejected the company’s proposal.

In July 2007, a state appeals court overturned the decision, saying state law pre-empted municipalities from regulating well locations.

The court relied on its interpretation of a 1992 amendment to the Pennsylvania Oil and Gas Act, but that amendment was intended to address only operational issues, Levine argued.

Copyright: Times Leader