Capturing Rents from Natural Resource Abundance: Private Royalties from U.S. Onshore Oil & Gas Production

Jason P. Brown, Timothy Fitzgerald and Jeremy Weber

No 205657, 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California from Agricultural and Applied Economics Association

Abstract: Innovation-spurred growth in oil and gas production from shale formations led the U.S. to become the global leader in producing oil and natural gas. Because most shale is on private lands, drilling companies must access the resource through private lease contracts that provide a share of the value of production – a royalty – to mineral owners. We investigate the competitiveness of leasing markets by estimating how much mineral owners capture geologically-driven advantages in well productivity through a higher royalty rate. We estimate that the six major shale plays generated $39 billion in private royalties in 2014, however, extraction firms capture most of the benefit from resource abundance, with a doubling of the ultimate recovery of the average well in a county leading to a 2 percentage point increase in the average royalty rate (an 11 percent increase). The low pass-through is consistent with firms exercising market power in private leasing markets.

Keywords: Community/Rural/Urban Development; Environmental Economics and Policy; Resource /Energy Economics and Policy (search for similar items in EconPapers)
Pages: 44
Date: 2015
New Economics Papers: this item is included in nep-ene, nep-env and nep-ino
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Capturing rents from natural resource abundance: Private royalties from U.S. onshore oil & gas production (2016)
Working Paper: Capturing rents from natural resource abundance: private royalties from U.S. onshore oil and gas production (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea15:205657

DOI: 10.22004/ag.econ.205657

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