"Billions" Paid to Landowners in Natural-Gas Royalties

01/31/2013

A recent estimate by the National Association of Royalty Owners (NARO) approximates that some $21 billion in royalties were paid to landowners by oil and gas companies in 2010. In Pennsylvania alone, natural-gas royalty payments to landowners could exceed $1.2 billion for 2012 according to an estimate by the Associated Press in a recent article. The same article quotes one local farmer, in particular, who was living paycheck to paycheck prior to shale-gas development on his property.

Underlying the litigation and regulation surrounding fracking, is the fact that per the AP article, as a direct result of the deemed controversial fracking and horizontal drilling, billions of dollars are being paid to private landowners, farmers, and individuals. That says nothing of the benefits to the oil and gas producing states in terms of job creation and infrastructure investment, amounting to a 2.8 percent increase in GDP in North Dakota in 2011 and “tens of billions” invested in Pennsylvania in recent years.

As a result of this increased development, NARO, a landowner and royalty-owner organization that began in an effort to curb federal taxes on oil and gas production, has seen a marked rise in membership over the past five years. Given the annual increases in year-over-year production of natural gas and oil, a trend that is projected to continue long into the future, the annual royalties paid to landowners are expected to only increase. A result that would likely further grow the memberships of royalty-owners associations, several of which are generally in favor of further oil and gas development and, in the case of NARO, “the right to freely own and develop” resources.

At a time when the safety and consequences of fracking are constantly called into question, with firmly entrenched arguments on both sides of the debate, the billions paid to landowners and individuals represent one of the few uncontested effects of fracking and shale oil and gas development, an effect that is projected to have an upward trend for years to come.

As published in the American Bar Association Section of Litigation, Energy Litigation News & Developments on January 31, 2013.

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