Section 34.1 of the Pennsylvania Oil and Gas Lease Act was enacted July 9, 2013, and has received heavy scrutiny since its enactment based on the misperception that it permits unfettered, “forced pooling” by oil and gas developers. In truth, Section 34.1 merely permits lessees the opportunity to jointly develop multiple contiguous leaseholds through horizontal drilling, unless such activity is expressly prohibited under the affected lease agreements. Section 34.1 was recently thrust back into the spotlight, and the public outcry against it rekindled, when the Allegheny County Court of Common Pleas upheld a lessee’s right to horizontally develop multiple tracts under Section 34.1.
Despite the media attention garnered by its enactment and the recent decision, most of the reports and coverage related to Section 34.1 have overlooked the second part of the statute. Specifically, the second sentence of Section 34.1 provides as follows: “In determining the royalty where multiple contiguous leases are developed, in the absence of an agreement by all affected royalty owners, the production shall be allocated to each lease in such proportion as the operator reasonably determines to be attributable to each lease.”
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