US Private Oil and Natural Gas Royalties: Estimates and Policy Relevance

Widespread ownership of oil and natural gas resources by private individuals is unique to the United States. The owner's share is typically specified as a gross revenue royalty. We develop estimates of income from production of privately owned minerals. Focusing on onshore resources in the continental United States, we determine that the share of total oil and natural gas production attributable to privately owned minerals has been approximately 75 per cent in recent years. We find that average private royalty rates in recent years were 13.5 per cent for oil and 11.8 per cent for natural gas, and that private royalty income from oil and gas production was $21–22 billion in 2011 and 2012. We then briefly discuss four current policy issues upon which our estimates have bearing: exports of liquefied natural gas and crude oil, effects of refinery and pipeline constraints, state and federal tax policy, and regulation of technology.