Oil and Gas at Your Door? (2005 Edition) - Earthworks

IMPACTS ASSOCIATED WITH OIL AND GAS
Impacts Associated with Oil and Gas Operations
Some impacts from oil and gas development may be positive for surface owners. The enjoyment
of benefits depends upon a couple of factors:
1. Do you own the mineral rights?
2. Is some of the infrastructure associated with oil or gas development useful to you?
The primary benefit of oil and gas development to mineral owners is financial. If you own the
mineral rights you will receive royalties on any oil or gas that are removed from your property.
The extent of your financial gain, however, depends upon the productivity of the well, and what
sort of royalty provisions you are able to negotiate in your leasing agreement. Secondary benefits
may be derived from any compensation received for surface damages, as well as perceived
benefits from improvements such as roads and fences.
In the 1980s, a study on the benefits and costs of oil and gas development to ranchers in New
Mexico was conducted. 213 Below is a summary of the benefits and costs mentioned by the ranchers.
The authors of the study discussed the fact that almost all of the cash benefits (an average of
$28,000 over the life of the well) occurred early in the exploration and development process,
and that most were one-time payments. Meanwhile, the costs to ranchers averaged $5,750,
per year, for the life of the oil or gas operation. The report concluded that for ranchers not
receiving annual royalty payments: it is evident the rancher is a net income loser if the life of
the oil field exceeds six years.
If landowners do not own the minerals beneath their land, there is often no guarantee that
they will be fairly compensated for property damage from oil and gas development. (See sections
II and III for more information on compensation.) Many surface owners who have experienced
oil and gas development wonder why their quality of life and livelihoods suffer, while
the oil and gas industry reaps huge financial profits at their expense. This question was also
addressed by Randy Udall, Director of Community Office for Resource Efficiency, when delivering
the keynote address at a 2002 Coalbed Methane Conference in Montana:
A typical coalbed well will yield $1 million in gross revenues, so there’s enough money
to protect the environment, farmers, ranchers, and water quality. . . Why should their
stockholders be the only ones that benefit from gas development on private property?
With $1 million in revenue per well, gas producers could/should share some of it with
the landowner. 214 I-41