Billions in gas drilling royalties transform lives

[I hate the title, because the royalty is payable on gross production, not “drilling”. – Ed.]

“Nationwide, the [National Association of Royalty Owners] estimates, natural gas royalties totaled $21 billion in 2010, the most recent year for which it has done a full analysis. Texas paid out the most in gas royalties that year, about $6.7 billion, followed by Wyoming at $2 billion and Alaska at $1.9 billion.

“Exact estimates of natural gas royalty payments aren’t possible because contracts and wholesale prices of gas vary, and specific tax information is private. But some states release estimates of the total revenue collected for all royalties, and feedback on thousands of contracts has led the royalty owners association to conclude that the average royalty is 18.75 percent of gas production.

“ ‘Our fastest-growing state chapter is our Pennsylvania chapter, and we just formed a North Dakota chapter. We’ve seen a lot of new people, and new questions,’ said Jerry Simmons, the director of the association, which was founded in 1980 and is based in Oklahoma.

“Simmons said he hasn’t heard of anyone getting less than 12.5 percent, and that’s also the minimum rate set by law in Pennsylvania. Simmons knows of one contract in another state where the owner received 25 percent of production, but that’s unusual. [Bet that’s Louisiana. – Ed.]

“By comparison, a 10 to 25 percent range is similar to what a top recording artist might get in royalties from CD sales, while a novelist normally gets a 12.5 percent to 15 percent royalty on hardcover book sales.”

Note: The Federal government owns no land in Texas, so that $6.7 billion is largely payable to private landowners, although a large swath of West Texas is designated “University Lands” – all royalties benefit the University of Texas system. Most of Wyoming is comprised of Federal lands. All of the minerals in Alaska are held by the state, under the state constitution.

Take that, Matt Damon!