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.
About Sharon Wilson
Sharon Wilson is considered a leading citizen expert on the impacts of shale oil and gas extraction. She is the go-to person whether it’s top EPA officials from D.C., national and international news networks, or residents facing the shock of eminent domain and the devastating environmental effects of natural gas development in their backyards.
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Yep. I’d love for the mineral owners here to live in my house for a week. I’d love for them to see firsthand what they’ve done to my family. But surprise! They’re nowhere near.
They destroyed us for profit. I do hope their royalties are shrinking. I hope the gas company screws them royally.
Read your royalty check. it has all the numbers you will need to prove whatever it is you are needing to prove. If you need to confirm your net to the wells gross, public sources have those numbers as well.
Accountants, or someone that used to play one, produce financial statements for ALL oil & gas companies every year. There is no such thing as non-disclosure of income from the federal government IF you are operating within the economic system of that government.
The only reason the government doesn’t know how much oil & gas is produced daily in this country is they don’t have the people or the resources to go through the myriad of reports they require to be filed in different groupings with several gov. departments and reconcile the numbers. Public sources try to do it & depending on which government report or combination of reports you decide to use, the grouping requirements are so different, they can result in different absolute volumes.
I know everyone understands by now that the horizontal completions can start out real strong but, decline in volume rapidly. I would not suggest spending your 1st check as Jed Clampett might.
If your surface has been severed from your subsurface, it would be either a family member or previous land owner after that profit motive thing. That would not have been caused by the oil company?
I can not argue that the petroleum extraction process is an industrial process & is not a good place to live next to while the initial stages of the completion are being conducted. I can only offer that it will improve and as alternate energy sources figure out how to become an economic alternative, the “game” will change once again.
Nick, I used to work for a company that marketed production. I know about this stuff and the producers (not the company I worked for) purposely make it nearly impossible for royalty owners to track.
What everyone understands is what complete and utter bullshit all those spreadsheets with zeros and commas the industry passed around and the promise of production that would last 30 years were. And the picture of one tank sitting in a pasture failed to disclose the true horror of endless infrastructure, noise, odors, dust, traffic, lights and property value loss that will far exceed the royalty payments. What a great deal fracking is for us!
The surface can be severed for many reasons like greedy developers.
The renewable energy disinformation campaign is debunked here http://blog.rmi.org/blog_2013_07_31_debunking_renewables_disinformation_campaign
Tim Ruggiero says
Well, there you have it, folks, Nick the expert on everything fracking has spoken. The guy from NARO oviously has no idea what he’s talking about. And, all you people who are getting fracked over by the Nicks of the world, well shut your freakin pie hole and take your cancer like a true patriot!
I’m chuckling bitterly at the “…not a good place to live to live next to while the initial stages of the completion are being conducted.”
Yes! Everything is fine, once the initial stages are completed.
Except when they aren’t.
Which is pretty much daily.
Right. When I read his post last night, we were trying to enjoy a nice evening on the patio, around 8:30 pm …. but couldn’t hear each other speak, as there was a loud semi at the tanks right behind our back yard. One of the many semis that are there 24/7, all year, every year, that sound like jets. I looked up, and could see the driver walking around the tanks, in perfect view of us. The noise, lack of privacy, and fumes drove us inside, as they always do, although it’s not that much better than outside.
“….take your cancer like a true patriot!”
My god, that’s the best line ever, says it all, and should be on billboards. Right next to the “There’s nothing like the smell of a new rig!” ….. which is the most cold-blooded, cruel thing I’ve ever seen on a sign.
Really. I wish I could afford to lease a few billboards, and use that line. The best I can do on my budget is make my own out of cardboard, and put them on poles. They’d last about 7 minutes here, before some assclown would rip them down, bellowing, “God, guns, and gas wells!”
Nick, a couple of points here from the good ‘ole Barnett Shale, we have thousands of miles of pipelines everywhere, not all of it has been reported and mapped. In Texas, and I’m sure much like everywhere else, and probably like many other instances it is a good ole boy club. We have a local neighborhood in my community that has a couple of wells in it, side by side. These wells have two sets of mineral owners. Now, pretend you hear my Gomer Pyle voice, surprise, surprise, surprise, one of these wells is a dry hole, and the other one is a gold mine. The one that is the gold mine is partly leased by the land man who went door to door signing up his entire neighborhood. My guess is they needed that second well to help offset costs of the other one, pay for the pipeline, and pad the other folks’ pockets. There are conveniently two different energy companies. Land man well hits the good one, his neighbors get screwed, getting zilch, nada. Okay, point number 2. Living near these industrial sites while the ones who are getting rich is wrong. Their greed has cost me my health. My medical bills have surpassed the $1,000,000 mark, last year. Yes that was 1 million. I collapsed in my garage while Argyle Central was doing one of their wonderful releases outside city limits in 2011 (side note, one gagged person who sued Williams also had the exact same type heart attack, we both have clean arteries). I have lost my ability to work, and to support myself, I went two years and was only able to drive my car about 10 times. Want to live here? If you have a previous medical condition, try Collin county. If you are close to a well, watch out for headaches, fatigue, irrational behavior, memory loss, loss of concentration, confusion, weakness, and rashes . How is your marriage. Marriage is a challenge without If you are really close, you should pack an emergency kit with all your important documents, just like if you live always prepared for emergency. It is a day to day thing. Personally, I now watch every single well site(keeping a camera close by since I have caught them illegally dumping, and frac trucks barreling through school zones, dumping into our creeks that feed our lakes. I’m sure most drivers are probably good people, just trying to feed their families, much like the hands on the rigs. I don’t hate them for doing their job on top of our homes, churches. nursing homes. I just don’t like the arrogant ones who mistreat the property and the people. So you see, the some we don’t like disrespect our neighborhood and communities. I hope they have Aflac!
Eva Hall says
Very disturbing. I’m starting to dislike these companies for what they are doing to landowners and even to the environmentm for which we live in. The companies seem to only care about themselves without really studying its consequences to the environment. It is all about the profit for them. Things like principles and character don’t exist in their world.
Hello Eva Hall,
I too dislike these companies for polluting the environment where we live in. They do not like people to live in fresh air.
Carolyn M says
I am wondering big time about the accuracy of royalty payments. Being a 1/200th owner of new rig in Barnett Shale and seeing that I’ve been paid about $20 in Royalties over 18 months doesn’t add up. When I do the math (200 x $20) and that’s equal to 20% of the total extract?? Can’t be! Why would they even bother extracting. So, somehow the royalties aren’t really give to the owners? And when I read the complaints from people who live in or near this activity I pause to reconsider this whole thing. Maybe I won’t give the oil company the time of day next time around. Problem is they tell you that if a majority of mineral right owners want the oil extracted it can’t be stopped by just a few of us. They just go ahead and frack and hold the royalty until we decide to sign.
Yes, they totally rip royalty owners off and have been for decades. This article might be of some help http://www.expressnews.com/business/eagle-ford-energy/article/The-clock-is-ticking-for-mineral-owners-to-ask-6133188.php