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NC Seeks To Prevent Fracking Companies Underpaying Landowners

North Carolina officials are preparing to open the state up to fracking, a process for drilling for natural gas. The state is expected to vote on rules to govern companies who want to drill later this year—rules to protect the environment, but also for landowners. The latter will be especially important, after a recent investigative report shows companies in other states have bilked landowners for the gas under their land.

The investigative news non-profit ProPublicareported on Thursday that one oil and gas company raised nearly $5 billion by slashing its payments to landowners with rights to the gas—in some cases from $5,000 a month to $500 a month. The company, Chesapeake, subtracted high fees from payments to Pennsylvania landowners for transporting the gas through pipelines.

In North Carolina, the Mining and Energy commission is developing rules for lawmakers to affirm this spring. Vice chairman Ray Covington says the commission has looked at this issue.

“There’s a lot of tricks in the trade that we need to make sure that we always stay on top of,” Covington says.

The state attorney general’s office says a state law passed in 2012 forbids companies to charge fees for production or transportation of the gas. So, companies could not use this particular trick here.

“We would assert that, based on NC law, NC landowners should not be assessed any costs for oil and gas production or for any post-production activities, including transportation costs,” a Department of Justice spokeswoman wrote in an e-mail.

There are plenty of other tricks though, including companies selling gas cheaply to subsidiaries who flip it for higher prices. Covington says lawmakers will need to pass more protections.

“There’s a whole list of protections for landowners rights, which include surface agreements, indemnification, options approaches, auditing of oil and gas operators on behalf of landowners—all those recommendations have gone forward,” he says.

Thus far, North Carolina’s most high-profile so-called “landowner protection” is also its most controversial. A recommendation for “forced pooling” would make landowners sell the gas under their land if enough of their neighbors agreed.