Does Resource Ownership Matter? Oil and Gas Royalties and the Income Effect of Extraction

Jason Brown, Timothy Fitzgerald and Jeremy Weber

Journal of the Association of Environmental and Resource Economists, 2019, vol. 6, issue 6, 1039 - 1064

Abstract: We study how subsurface ownership shapes the income effects of oil and gas extraction. For the average US county with growth in extraction from 2000 to 2014, we find that royalty income and its multiplier effect accounted for 70% of the total income gain, with each royalty dollar generating an additional 49 cents of local income. A county where residents own the subsurface captured 28 cents more of each dollar in production than one with absentee ownership. Nationally, oil and gas production increased US personal income in 2014 by $67 billion (0.5%) more than if all royalties accrued abroad. Areas with the same resource abundance can therefore experience contrasting economic outcomes because of differences in ownership.

Date: 2019
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