DALLAS — Once-lucrative royalty checks for mineral rights owners across Texas are shriveling as oil and natural gas prices tumble.
U.S. crude prices ended the week falling after Goldman Sachs said a global price of oil could push prices as low as $20 a barrel. Now land owners who leased their property to drillers during the oil and gas boom with the promise of steady income are feeling the pinch, the Dallas Morning News reported Saturday.
In Argyle, where Betty Farmer’s family has made a living off its rural North Texas land for seven decades through farming and ranching, the gas extracted from their property now sells for a third of what it did a decade ago.
“Everything follows the price of the gas they produce,” said Farmer, 80. “We’re OK. We get by. But we had two ranch hands we had to let go. It’s just us doing the work now.”
Mineral rights owners are a diverse pool: Some are vast holdings owned by corporations and old-money families, while others are suburban homeowners who, by sheer luck, bought in a neighborhood that was later discovered to sit on a tiny fragment of a gas deposit.
The perception that all mineral rights owners are rich is misleading, said Jerry Simmons, executive director of the National Association of Royalty Owners. He puts the list of everyone receiving an oil and gas royalty in Texas at 4 million names long.
“If you take my average member, she is 67 years old, widowed and makes less than $500 a month” off royalties, Simmons said.
Since 2010, natural gas prices have averaged about half what they did the five years prior, as new hydraulic fracturing and horizontal drilling technology opened up deposits long thought too expensive to drill. That flooded the market with shale gas and later shale oil.
But whereas the five-year average for oil prices was running at $93 a barrel a year ago, it’s now selling at less than $50.
The Federal Reserve Bank of Kansas City found that of the more than $11 billion in royalties generated from the Eagle Ford Shale last year, about $3 billion went to landowners who actually live in the South Texas area. Economists say that came out to roughly $12,000 per resident in what is a traditionally poor region where many residents subsist on leasing hunting land and farming.
Jack Fleet, whose family has mineral rights across Texas and Oklahoma, now advises other royalty owners in their dealings with oil and gas companies. He cautions those who come through his Houston office to not become too dependent on royalty checks because, inevitably, they will shrink.
“I don’t really live my lifestyle on all the income that comes in. I save for tough times because if you’ve been in the business long enough, you know it’s a roller coaster,” Fleet said.