Farmers discuss natural gas royalties with state, local leaders
Mike Jones/Observer-Reporter
Bill Beinlich, co-owner of Triple B Farms in Forward Township, shares a laugh with members of the Washington County Farm Bureau while leading them on a tractor tour through his fields Wednesday morning.
Mike Jones/Observer-Reporter
A utility vehicle travels through Triple B Farms during the Washington County Farm Bureau’s annual legislative meeting Wednesday at the farm in Forward Township.
Mike Jones/Observer-Reporter
A tractor and wagon carrying members of the Washington County Farm Bureau travels through the apple orchard at Triple B Farms in Forward Township during the group’s annual legislative meeting Wednesday.
Mike Jones/Observer-Reporter
A utility vehicle travels through Triple B Farms during the Washington County Farm Bureau’s annual legislative meeting Wednesday at the farm in Forward Township.
Farmers from several area counties gathered Wednesday morning to discuss various issues facing them, including shrinking royalties from the natural gas industry on land leases.
While the state’s minimum required royalty payment for proceeds from natural gas production is 12.5%, the numerous farmers who met at Triple B Farms near Monongahela raised concerns about the “depletion rate” that sometimes drastically lowers the revenue they receive from the industry.
“It’s not like we’re asking for more,” said Jim Lindley, who owns a 200-acre farm in North Bethlehem Township. “We’re just asking for what we should be receiving.”
“We’re not getting 12.5% because we’re getting nickeled and dimed with their deductions,” added George Scull, a farmer from Greene County who attended the meeting. “They don’t want to make it simple.”
The issue – one of several topics brought up at the Washington County Farm Bureau’s annual legislative meeting that attracted about a dozen farmers – centered around the “post-production cost” that deducts from the royalty payments and lowers leaseholder revenue. The contracts signed by the farmers call for them to receive at least 12.5% in royalties, but there are a variety of costs after drilling that the gas industry says cuts into the profits and were written into the contracts.
State Rep. Tim O’Neal attended the agenda meeting and said he understands the concerns from farmers about the royalty payment deductions and that lawmakers are looking into the issue. He pointed to a situation he learned of in Tioga County in which a farmer receives no money for royalties because of the deductions.
“I’ve told them this is the biggest issue they have to resolve,” O’Neal said of the industry.
He said the “post-production deductions” that account for those costs come from the industry’s process to move natural gas from a landowner’s property to market. While he would like to see changes, his biggest concern is opening up larger issues with renegotiating contracts and how that may impact both sides.
“It’s not an easy thing to do,” O’Neal said. “But I think there is a solution.”
But it might not be as easy as that. Jim Welty, vice president of government affairs for the Marcellus Shale Coalition, said in a written statement that the industry stands by its contracts it negotiated with all of its landowners.
“Post-production costs are associated with moving natural gas from wellhead to market and are negotiated, agreed upon terms in contracts between the landowner and operator,” Welty said. “We have helped advance and continue to support royalty check transparency measures, but contract-related disputes will always be most effectively addressed by the courts.”
Bill Black, who owns a 127-acre farm in Hopewell Township, said that he lucked out when he signed his lease in 2008 at the height of the natural gas boom and was able to secure 16.25% royalties along with $2,000 per-acre signing bonus. While he got that original percentage early on, he said his current royalty payments are much lower now because of the “depletion” rate that includes a variety of factors.
“I know we’re blessed,” Black said. “We’re not getting wealthy. We’re not living high.”
Black said he’s been pushing for changes since 2014, but any legislative updates have been stuck in committees in Harrisburg without a full vote. He and others are frustrated by the lack of progress on the issue.
“I feel sorry for the people who signed up for the minimum (because) the deductions really took them down,” Black said.
Don Carter, a farmer from Washington County and one of the leaders on the farm bureau, said he feels that some farmers are receiving about half the royalties they should be getting from the gas industry for their land leases. Carter said that while farmers have benefited tremendously from the natural gas industry, he thinks more needs to be done by the state to benefit the landowners.
“The gas industry has been a tremendous asset,” Carter said. “If the landowners hadn’t granted the gas industry the use of their land, then they wouldn’t be where they are today. This has to be a working relationship.”
State Rep. Bud Cook also attended the meeting and said he would like to hear more about the issues.
“There has to be a deal here,” Cook said. “Let’s see where we’re at, get people to the table and get a deal.”
“We need less talk and more action,” Scull said to Cook.
The WCFB’s annual legislative meeting was held at Triple B’s because the farm is part of the Washington County group since Allegheny County doesn’t have its own farm organization. The meeting was punctuated by a tractor ride around Triple B as the nearly two-dozen participants talked about their various farms.
The Greene County Farm Bureau will hold a similar legislative meeting at 11 a.m. Friday at Campbell Land and Cattle Farm near Sycamore.