Pennsylvania Adds New Royalty Payment Reporting Requirements and Deadlines for Unconventional Oil and Gas

On November 3, 2022, Pennsylvania Governor Tom Wolf signed Act 153 of 2022, which revises the Oil and Gas Lease Act’s provisions on required disclosures accompanying payments made to royalty owners from unconventional oil and gas wells. Beginning on March 3, 2023, unconventional oil and gas operators must provide production and sales information on a well-by-well basis. New reporting requirements include categorized royalty deductions with an optional summary format. If an operator does not provide the required payment information within 60 days after receipt of a written request from the royalty owner by certified mail, the owner may bring a civil action to obtain the information and to recover attorney fees and court costs.

The Act also imposes new deadlines for royalty payments and penalties for late payments. Royalty payments must be made within 120 days of the first sale of oil and gas from a well, and thereafter within 60 days after the end of the month in which production is sold. Payments that are not made on time accrue an interest penalty at the legal rate, currently 6% per annum. Payments may be suspended only if the royalty owner lacks marketable title, if there is a bona fide dispute concerning the interest, or if the owner cannot be located.

Unconventional oil and gas operators should take prompt action to review the Act and ensure that their royalty statements comply with the Act’s reporting requirements and timelines by the Act’s March 3 effective date. A full copy of the Act can be found here.

If you have any questions regarding these statutory changes or how they could impact you, please contact one of the authors of this alert below.