Gas royalties are not as royal, attorney for lease-holders says
A year and a half ago, Joe Morascyzk acknowledged, the price of natural gas in Marcellus Shale was a reasonable $3 per thousand cubic feet. An industry slump followed, later accompanied by what he calls the mild “winter of no winter” of 2019-20.
“Then COVID-19 kicks in and puts Marcellus Shale on pause like a lot of other things,” Morascyzk said. Last month, the skidding price dropped below $1.40 Mcf. And with supply continuing to outstrip demand and producers drilling less, things aren’t getting better.
Ask landowners holding mineral rights leases, which aren’t as lucrative during this pandemic.
Morascyzk, a Cranberry Township-based attorney with Canonsburg roots, represents a number of these landowners, and he discussed their plight Tuesday morning during a virtual webinar organized by the Center for Energy Policy and Management at Washington & Jefferson College.
The presentation was the second in a three-part series titled, “Effects of COVID-19 and the Economic Downturn on Western Pennsylvania Shale Gas Development,” which is offered free through CEPM’s Shale Gas Knowledge Hub.
“Lower natural gas prices mean less royalty revenue. That means less income for landowners,” said Morascyzk, a founding partner of Morascyzk & Polochak law firm and a W&J alumnus. He said the gross sales price has plummeted nearly 65% over the past year or so.
He said because of lower gas prices, many drilling companies are drilling fewer wells. He added that prices affect the number of leases and that some may not be renewed or extended.
“Low prices mean low urgency,” said the attorney. “Drillers don’t have the incentive to drill.”
A few production companies are no longer drilling in the region. Chevron Corp., which had operated in Greene, Fayette and Westmoreland counties, announced late last year that it was selling its assets in the Appalachian Basin.
As a result of these factors, he added, “more royalty owners have chosen to sell their oil and gas rights.” Some are holding on, hoping for a rebound.
“If you’re getting a monthly royalty check,” Morascyzk said, “it’s a lot lower than a year or year and a half ago … even a few months ago.”
Natural gas is a fossil fuel, and while he endorsed the use of solar and wind energy – renewable and eco-friendly sources – Morascyzk called natural gas “vital. It’s the cleanest of fossil fuels. A lot of people in the world need electricity. My opinion is natural gas will be there to displace coal.”
Part III of the series is scheduled for July 14, featuring Jesse Bushman, revenue analyst for the state Independent Fiscal Office. He will address trends in natural gas production across the state and its effects on Act 13 Impact Fee revenues and local government revenues.