MARCELLUS BOOM MAKING A FEW VERY WEALTHY - Royalty Seller Beware, Impact Small On Overall Economy

(01/30/2013)

By Bob Weaver Media reports say private landowners are reaping billions of dollars in royalties each year from the boom in Marcellus Shale gas drilling, transforming lives and livelihoods, but the windfall provides only a modest boost to the broader economy. Certainly a number of West Virginia royalty owners have done well with the Marcellus Boom. In Pennsylvania, royalty payments could top $1.2 billion for 2012, according to an Associated Press. Figures are not available for West Virginia. A royalty owners association says the average royalty is 18.5 percent of gas production, although lease outfits continue to negotiate smaller deals with unsuspecting royalty owners. It becomes a case of royalty seller beware. Sometimes royalty owners get more that 18.5 percent. The royalty is often adjusted based on the per-acre signing bonus a landowner receives. While many people are lured by higher upfront bonuses, a higher royalty rate can generate more total income over the life of a well, which can stretch for 25 years. The $1 billion for Pennsylvania landowners sounds like a lot, but economy watchers say it's not going to have a big impact on the overall vitality of the overall economy of an area. Historically, places in the USA from which the greatest natural resources have been extracted, remain the poorest. Certainly that's true in southern West Virginia's billion dollar coalfields.

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