Act 66 of 2013 and Takings....

Previously, on June 13, I reported on House Bill 1414.  http://brbechtel.blogspot.com/2013/06/house-bill-1414.html   This bill defined the guaranteed minimum royalty and added a provision allowing the horizontal drilling and hydrofracturing of contiguous properties that were held under lease, unless the lease provided they could not be pooled. 

This bill has since become law, Act 66 of 2013, when the bill was passed by the House and sent to the Senate on June 29, 2013 and the amended bill was passed by the Senate on June 30, 2013.  Incidentally, these were a Saturday and Sunday, respectively.  Governor Tom Corbett signed the Act on July 9, 2013.

Article 1, Section 17 of the Pennsylvania Constitution provides that "No ex post facto law, nor any law impairing the obligation of contracts, or making irrevocable any grant of special privileges or immunities, shall be passed."  In fact, Act 66 has just such an effect.   One Section (2.1) of Act 66 provides that "Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontally drilling unless expressly prohibited by a lease."  Thus, if a producer has the right to oil and gas across multiple leases, the producer may horizontally drill under all the leases unless the lease specifically provides the producer may not.  The Producer may gain other rights to produce by implication such as pipelines, compressors, dehydration stations and water use. 

The problem is that there is no reference that this is prospective, and this was not the law in the past.  So old 1930 leases can now, under color of Commonwealth law, be horizontally drilled across boundaries, even if the owners intended to keep those rights.  Worse yet, applying the Belden and Blake principles, the landowner would be responsible for challenging the actions of the Producers.  Of course, the Producing companies have the power, not a single landowner.  So there is little chance that Mom and Pop will be able to stop or collect their due on an old lease.  If this section were limited to prospective leases, landowners would have the ability to contract as they see fit.  If this section were not passed at all, such provisions would be up to the intent of the parties.

Article 1, Section 1 provides for certain "inherent and indefeasible rights, among which are those of enjoying life and liberty, of acquiring, possessing and protecting property..."  The Fifth Amendment to the United States Constitution provides that no one shall be deprived of life, liberty or property without due process of law.

In this instance, there is a law which has an unrelated provision attached on a Saturday, approved and passed on a Sunday and signed in short order over a holiday week.  That law, in fact, affects the possession and protection of property and impairs the rights of citizens in the contracts they have already executed.  Such a law is not only likely unconstitutional, but could give rise to a cause of action under the Eminent Domain Code 26 Pa.C.S.A. Section 101, et. seq.   This violates the section of the Code taking people's property for private use.  26 Pa.C.S.A. Section 204.  Lest we think there is some benefit other than a private benefit, the words of the Governor should make it clear.  The Tribune Review reported:

"In a letter to lawmakers, Corbett said he believes the new law enhances the efficiency of drilling for oil and gas while limiting environmental damage and protecting the rights of landowners and leaseholders."

Read more: http://triblive.com/state/pennsylvania/4340341-74/gas-drilling-corbett#ixzz2ZK4l51l6.

 

To be fair, gas producers cannot even be sure what the law means.  It contains no provision sexplaining to what extent contiguous properties may be "pooled".  For instance, can all of Western Pennsylvania be "pooled"?  Must one of the leases allow pooling before ALL of them can be pooled?  Must they all have been taken by the same company, or may one company buy up (or be assigned) the leases in order to meet the provisions of being owned contiguously?  This would seemingly be allowed.  What if all the leases were originally to one owner, but were now farmed out to others?  This would seemingly be disallowed. 

 

It should be clear to readers that attorneys will have a field day with this law and that landowers will be big losers.  I urge anyone with interest to contact their legislators and push a repeal before we all become embroiled in a mess from which there is no return.  Recognizing there may be differences of opinion, I at least urge you to contact your legislator and be part of the decision making process.  Let's not fix this on a Saturday and Sunday at the end of a fiscal year, but in open public forums debating the process.