The Superior Court of Pennsylvania recently held that an assignment back to the lessee of a portion of the lessor's royalty interest, by way of separate letter agreement, violated the state's Guaranteed Minimum Royalty Act (GMRA) (see Southwestern Energy Prod. Co. v. Forest Resources, LLC). "[W]e conclude that a provision in a lease couched in the guise of an assignment back of a portion of a defined royalty that results in a lessor’s net royalty being less than one-eighth fails to guarantee the minimum royalty mandated by the GMRA. To allow such provisions in a lease, where a trick of drafting permits the left hand to remove what the right hand has given, would render the GMRA meaningless and run contrary to the plain language and intent of the legislation."
