Helping landowners understand oil, gas royalties


“We’ve had an increase in questions and concerns from members about their royalty payments. This is a very complex issue and unfortunately there is no quick fix or easy answer,” said Dale Arnold, OFBF’s director of energy policy. 

Determining natural gas and oil royalties takes in factors that include contract language, New York Mercantile Exchange (NYMEX) commodity prices, transport, refining and point-of-delivery costs. These variations mean landowners can’t simply compare their royalties to those of neighbors. 

Very few people outside the energy industry can help landowners understand how their royalties are calculated, Arnold said. Ohio Farm Bureau’s educational seminars are helping explain how oil and gas are marketed, some of the techniques used to meter and measure production and how prices are indexed to NYMEX. Old and new leases throughout Ohio feature different types of royalty systems that provide a foundation on how mineral rights owners benefit. 

Landowners should ask energy developers to provide information on how to read their royalty stubs and an explanation of how those royalties were determined. OFBF policy calls for the establishment of a system that requires producers to provide leasor friendly royalty payment reports. 

The Ohio General Assembly is exploring legislation that would make the royalty check stub process more transparent. Class action lawsuits have been filed in Pennsylvania, which is a couple of years ahead of Ohio in oil and gas production.

To find out when an OFBF oil and gas royalty briefing will be held in your area or to request one, contact your county Farm Bureau.