TOWANDA - Over 100 people attended a rally in Towanda on Friday in support of House Bill 1648, which would help protect landowners from large deductions being taken out of their royalty checks for post-production costs.

The bill, if passed, would make sure that landowners receive at least the state's 12.5 percent guaranteed minimum royalty and would prevent deductions for post-production costs from reducing royalty payments below 12.5 percent.

State Rep. Tina Pickett, a prime sponsor of the bill, told those at the rally that she feels the bill has been experiencing "good momentum" in the Legislature.

She said she believes that the bill would pass the House, if brought up for a vote. "I have great hope that the Senate will pass it, too," she said.

A hearing on the bill, which had originally been scheduled for Feb. 4 before House Environmental Resources and Energy Committee, has been postponed to March, due to a winter storm. she said.

Pickett said she is "quite confident" that the bill will "come out of committee," so that it could be voted on by the full House.

The crowd at the rally, which was held in front of the Bradford County Courthouse, often applauded the speakers.

Without House Bill 1684 signed into law, "many of you ... are being taken advantage of by the gas companies and are being paid less than what you are entitled to for your gas," said Charley Hall, the district administrator for the author of the bill, Rep. Garth Everett (R-Lycoming County). "This injustice must end, and it must stop now!"

Bradford County Commissioner Mark Smith credited the citizens of Bradford County for spurring politicians to address the issue of post-production deductions.

Noting that state Sen. Gene Yaw this week asked Attorney General Kathleen Kane to investigate the large post-production deductions being taken out of royalty checks by Chesapeake Energy, Smith said: "Now he (Yaw) stands with us. That is progress."

In the past, Smith has criticized Yaw for not taking action on the issue of post-production deductions.

At the rally, Smith read a recent letter to the Bradford County commissioners from Bradford County Planning Commission member Glenn Aikens, who Smith said was "really upset" that he received a royalty check in June for only 10 cents.

Aikens wrote that when he signed his gas lease on his 350-acre farm in Litchfield Township, he was promised by landmen from Fortuna Energy that his royalty would never drop below 12 1/2 percent.

Since then, the lease has been sold twice, and is now owned by Chesapeake Energy, which Aikens said is providing him with a royalty of less than 1 1/2 percent.

"I am not the only one who is having problems," Aikens wrote. "Anyone who has dealings with Chesapeake is having the same problems.

Bradford County Commissioner Daryl Miller said: "In 1979, the state Legislature wrote the Guaranteed Minimum Royalty Act (which established the state's 12.5 percent minimum royalty) for a reason ... I can't believe the Legislature's intent was that people receive 5 percent, 2 percent, and in many cases, zero percent royalties."

Bradford County Commissioner Doug McLinko said that the problem of large deductions for post-production costs needs to be stopped now. "If we don't stop it here, it will spread across Pennsylvania," he said.

James Barrett, a farmer from Asylum Township, said that, based on the language in the 1979 Pennsylvania Guaranteed Minimum Royalty Act, gas companies didn't think they should be deducting post-production costs from royalty checks, because, for the first three years they were operating in Bradford County, they didn't take such deductions from royalty checks.

It was after the Pennsylvania Supreme Court handed down its Kilmer vs. Elexco decision in 2010 that such deductions started to be made from royalty checks, he said.

Barrett also said that he had other local landowners with a one-eighth royalty written into their leases were not told that there would be deductions taken out of their royalty checks for post-production expenses, such as the costs of compressing the gas and transporting the gas to market.

While there are many leases that have language that allows for post-production costs to be deducted from royalty payments, those leases always have a royalty payment written into them that is higher than one-eighth (12.5 percent), Barrett said.

Barrett also said that it appears that some gas companies are selling the gas they produce at a reduced price to wholly owned subsidiaries of themselves, which results in reduced royalty payments to the landowner. And he said the practice of companies selling gas to themselves at a reduced price should be investigated by the Pennsylvania Attorney General's Office.

Barbara Warburton, representing the Pennsylvania Farm Bureau, said that House Bill 1684 "is one of our priority issues.

"We are going to get this bill through," she said.

Jackie Root, the Pennsylvania representative of the National Association of Royalty Owners, said her organization appreciates state Sen. Yaw asking the attorney general to investigate post-production deductions by Chesapeake Energy. "This has been overdue," Root said.

The rally was organized by the Bradford County commissioners.

James Loewenstein can be reached at (570) 265-1633; or email: jloewenstein@thedailyreview.com.