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Inspection of Records and Freedom From Retaliation

By Paul R. Yagleski, Esq.

Senate Bill No. 138 and Senate Bill No. 139 address inspection of records and a lessor’s freedom from retaliation

You’ve received your royalty statements and you believe that your oil and gas company’s figures are wrong.  Can you check the figures on your royalty statements?  Can you check the oil and gas company’s records to verify the accuracy of their royalty statements?  What happens if the figures are wrong, but you are afraid to tell the oil and gas company.  You are afraid of retaliation. What can you do?

If you do not have an audit or inspection clause in your oil and gas lease or if you are afraid of retaliation if a lessee breaks your lease and your report it, the Pennsylvania Senate has recently passed two bills, Senate Bill No. 138 and Senate Bill No. 139, which address inspection of records and a lessor’s freedom from retaliation.

Senate Bill No. 138

Senate Bill No. 138 amends Pennsylvania’s Oil and Gas Lease Act to allow a lessor to inspect the records of a lessee.

Under the Senate Bill, a lessor must make a written request for inspection of records for any property for which the lessor has been paid royalties within the three-year period immediately preceding the date of the request.  The lessee is to designate a date for inspection as mutually agreed upon or within ninety days of receipt of the request.  Lessee is also to designate a time for inspection which is reasonable to permit completion of the inspection and provide supporting documentation of payment information required under the Act.

Senate Bill No. 139

Senate Bill 139, the Natural Gas Lease Anti-Retaliation Act, is an act providing for the protection of the lessor of natural gas rights who reports a violation or suspected violation of a contractual agreement.

Section 3, entitled “Protection of Lessors,” provides that a lessee may not retaliate by ceasing development or production or take other reprisals against the lessor because the lessor takes a good faith action.

A lessor who alleges retaliation may bring a civil action for damages or injunctive relief, or both, within one year after the occurrence of the alleged violation.  A court that finds in favor of the lessor may order the lessee to pay reasonable damages to the lessor and may impose a civil fine of up to $1,000 per day for each day the provisions of Section 3 have been violated.

Both Senate Bill 138 and Senate Bill 139 have been referred to the Environmental Resource and Energy Committee of the General Assembly’s House of Representatives.

If you haven’t entered into an oil and gas lease yet, you should require an audit clause, so that you can check the oil and gas company’s figures for accuracy.  If you already have a lease but no audit clause, think of contacting your House Representative to express support for Senate Bill 138 and to also express support for the Anti-Retaliation Act, Senate Bill 139.

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