Capturing rents from natural resource abundance: Private royalties from U.S. onshore oil & gas production

Jason Brown, Timothy Fitzgerald and Jeremy Weber

Resource and Energy Economics, 2016, vol. 46, issue C, 23-38

Abstract: We study how much private mineral owners capture geologically-driven advantages in well productivity through a higher royalty rate. Using proprietary data from nearly 1.8 million leases, we estimate that the six major shale plays generated $39 billion in private royalties in 2014. There is limited pass-through of resource abundance into royalty rates. A doubling of the ultimate recovery of the average well in a county increases the average royalty rate by 1–2 percentage points (a 6–11 percent increase). Thus, mineral owners benefit from resource abundance primarily through a quantity effect, not through negotiating better lease terms from extraction firms. The low pass-through likely reflects a combination of firms exercising market power in private leasing markets and uncertainty over the value of resource endowments.

Keywords: Royalty payments; Oil; Natural gas; Mineral rights (search for similar items in EconPapers)
JEL-codes: L71 Q32 Q35 R11 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (43)

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Related works:
Working Paper: Capturing Rents from Natural Resource Abundance: Private Royalties from U.S. Onshore Oil & Gas Production (2015)
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:eee:resene:v:46:y:2016:i:c:p:23-38

DOI: 10.1016/j.reseneeco.2016.07.003

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