(03/29/2017)
In Pennsylvania, landowners/rights owners argue that the state should pass a law to ensure royalty payments are at least 12.5%, which would instantly modify existing leases.

Drillers argue that the legislature can't just pass a law that tosses out provisions in thousands of signed leases. You can't just wave the magic wand and change all of those existing contracts.

It's unconstitutional.

If you sign a contract today but have no assurance that contract is forever binding, why sign a contract?

It puts the entire system of contract law in doubt. PA's drillers make a compelling case, in our opinion. Better to resolve royalty payment issues in court rather than nullify a huge number of existing leases/contracts.

In West Virginia, we have the same parties on the opposite sides of the argument.

In WV, drillers want the legislature to pass a law that nullifies existing, signed contracts, with landowners/rights owners saying to do so is unconstitutional.

If you want to drill on adjoining properties with old leases, sign new leases and pay more money.

There is nothing stopping WV drillers from renegotiating leases and paying more to drill on adjoining land-which seems to us to be reasonable, given the leases in place were signed years ago for peanuts, before the shale revolution began.

So what if a driller owns the leases for the surrounding properties and the only thing preventing that driller from drilling a horizontal well are old leases?

They were leases/contracts signed with a specific provision.

You want that provision changed? Renegotiate it! Pay more! Or don't.

But to pass a law that nullifies existing leases AS WRITTEN seems to us to be fundamentally wrong.

- Marcellus Drilling News


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