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Billions in gas drilling royalties transform lives

Published on NewsOK Modified: January 27, 2013 at 10:41 pm •  Published: January 27, 2013
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"You don't have that problem anymore. It's a lot more fun to farm," Georgetti said, since he has been able to buy newer equipment that's bigger, faster and more fuel-efficient. The drilling hasn't caused any problems for the farm, he said.

Range spokesman Matt Pitzarella said the Fort Worth, Texas-based company has paid "well over" $1 billion to Pennsylvania landowners, with most of that coming since 2008.

One economist noted that the windfall payments from the natural gas boom are wonderful for individuals, but that they represent just a tiny portion of total economic activity.

For example, the $1 billion for Pennsylvania landowners sounds like a lot, but "it's just not going to have a big impact on the overall vitality of the overall economy," said Robert Inman, a professor of economics and public policy at the University of Pennsylvania's Wharton business school. "I think the issue is, what difference does it make for the individual families?"

Pennsylvania's total gross domestic product in 2011 was about $500 billion, according to the U.S. Department of Commerce.

Inman noted that total gas industry hiring and investment can have a far bigger effect on a state or region, and companies have invested tens of billions of dollars just in Pennsylvania on pipelines, infrastructure, and drilling in recent years.

For example, in North Dakota the shale oil and minerals boom contributed 2.8 percent of GDP growth to the entire state economy in 2011, according to Commerce Department data.

Another variable in how much royalty owners actually receive is the wholesale price of gas. That has dropped significantly over the past two years even as production has boomed in Pennsylvania and many other states. Average wholesale prices went from about $4.50 per unit of gas in 2010 to about $3 in 2012. For many leaseholders, that meant a decline in royalties.

The boom in natural gas royalties has even led to niche spinoff companies that look for lease heirs who don't even know they're owed money.

Michael Zwick is president of Assets International, a Michigan company that searches for missing heirs.

"It was an underserved niche," Zwick said of oil and gas leases. When a company can't find an heir to lease royalties, the money often goes to state unclaimed property funds.

Zwick said he has found a few dozen people whose gas lease money was being held in escrow, including one who was owed about $250,000 in drilling royalties. But the average amount, he said, is far lower.