So, you thought you were going to get rich off shale oil and gas royalties. I’ve said before, the only ones getting rich are the drillers and frackers and large land owners. And as I’ve also said before: Someday our children will ask how much we got when we sold out their clean air and safe water.
A new report, Unfair Share: How Oil and Gas Drillers Avoid Paying Royalties, by ProPublica’s Abrahm Lustgarten reveals that you’re not alone. I encourage you to read this article and fully absorb the epic screwing we are receiving.
I know something about how they screw royalty owners because I used to work in the oil and gas industry and I witnessed what the article describes here:
To keep royalties low, companies sometimes set up subsidiaries or limited partnerships to which they sell oil and gas at reduced prices, only to recoup the full value of the resources when their subsidiaries resell it. Royalty payments are usually based on the initial transaction.
It’s why I left.
They make it impossible for a regular person to track their payments and few people can afford the kind of forensic accounting that can track it.
Once the gas is produced, a host of opaque transactions influence how sales are accounted for and proceeds are allocated to everyone entitled to a slice. The chain of custody and division of shares is so complex that even the country’s best forensic accountants struggle to make sense of energy companies’ books.
I rarely agree with royalty owner associations because they seem to care nothing at all about environmental concerns or the people who have to live on the land where development is occurring unless the royalty owner and surface owner is the same. But the following statement by NARO got a hell yeah from me.
“If you have a system that is not transparent from wellhead to burner tip and you hide behind confidentiality, then you have something to hide,” Jerry Simmons, executive director of the National Association of Royalty Owners (NARO), the premier organization representing private landowners in the U.S., told ProPublica in a 2009 interview. Simmons said recently that his views had not changed, but declined to be interviewed again. “The idea that regulatory agencies don’t know the volume of gas being produced in this country is absurd.”
This industry has many secrets that are hidden behind confidentiality and non-disclosure agreements and these secrets are not in the best interest of public health and safety or the royalty owners’ financial interest.
But royalty payments are not the only way the general public is getting screwed by shale drilling and fracking. The Denton Drilling Blog recently asked some questions about fracking money.
Who’s Getting Rich from Fracking Denton? This post reveals that 67% of the mineral wealth is owned by the following 5 corporations and at least 85% of the mineral wealth is held by fat cat corporations and developers.
- Devon Energy $17,884,540
- Enervest Operating, LLC $17,283,720
- EagleRidge Energy $9,618,630
- Legend Natural Gas $9,236,740
- Vantage Ft. Worth Energy LLC $2,796,070
In the second installment of the attempt to answer the question, we learn that one must scroll down and down and down before you actually come to a human who owns mineral interests in Denton and lives there too. This post reminds me of my first visit to the Eagle Ford Shale. At one of the town hall meetings, a Cuero, Texas resident spoke about how angry she was with Devon for tricking her. She holds lots of mineral interests in Denton County and her first few checks were so lush that she dramatically altered her lifestyle upward. In a very short time her monthly checks dropped to only a fraction of the amount of the initial checks. She was no longer able to maintain her lavish new lifestyle and warned the Eagle Ford Shale mineral owners to not count on getting rich. I could only think about the terrible price the residents living near her mineral interests where paying with their health, property value and serenity.
The third installment looks at who profits from the Rayzor Ranch gas wells across the street from McKenna Park, which is also the scene of DoodyGate. The bottom line is that there are ZERO mineral owners who live within 3 miles of the Rayzor Ranch wells. This is a crystal clear illustration of who profits and who pays. Only .26% to .27% of the wealth of those wells is owned by Denton residents. Absentee owners, which are largely corporations, profit while the residents and future generations pay and pay and pay.
The forth installment attempts to answer these questions:
Who are the mineral owners who are making the decision to allow fracking in Denton and who are taking home the remaining 20-25% of the wealth? What percentage of owners actually lives in Denton?
It all adds up to absentee owners profiting at resident’s expense.