Farmers making more money from oil and gas rights

U.S. Department of Agriculture chart; click on the image to enlarge it.

U.S. farmers are making more money than ever from oil and gas rights on their lands, especially in petroleum-rich states like Oklahoma, Pennsylvania and Texas, Claudia Hitaj reports for Amber Waves, a publication of the U.S. Department of Agriculture.

Almost 67 percent of oil and gas extraction is from farmland; in 2014, that meant $3.8 billion in payments for farm operators who owned $19.1 billion in oil and gas rights, up 69 percent from 2005. "Total payments accounted for 11 percent of net cash farm income in oil and gas counties across all states, and about 30 percent in Oklahoma, Pennsylvania, and Texas," Hitaj reports. "Respectively, these states received about $1.2 billion, $0.6 billion, and $0.5 billion in oil and gas payments."

Many farmers do not own the oil and gas development rights on their land; separate ownership of such rights is common, especially in areas with a history of drilling. In 2014, about 5 percent of farm operators nationwide and 11 percent in oil-rich areas reported owning oil and gas rights with positive value. In Oklahoma and Pennsylvania that number rose to 14 percent, Hitaj reports. Most payments are in royalties, typically one-eighth of the value of production, but landowners usually also get a one-time, up-front payment for leasing their rights.