Wednesday, January 23, 2013

Don't Forget the "Lucky Few"

As the War of LNG rages on between well-funded, vaguely named industry lobbying groups over whether the U.S. should allow natural gas exports, big companies are choosing sides and the PR campaigns are picking up steam.  Comparing the benefits of export of natural gas versus prohibiting its export to keep natural gas prices low to benefit manufacturers is very complicated, and it is nearly impossible to quantify future outcomes (unless of course you have a vested interest in one side of the debate or the other).

But while corporate titans battle over whose businesses will be more profitable, let's not forget about those whom I will call the "Lucky Few."  These are the millions of Americans that own mineral rights in the U.S.  Private mineral ownership is a concept that's almost entirely unique to the United States and it has been a major reason that the U.S. has developed an energy industry that leads the world in innovation and soon might lead it in production.

But nowhere in the conversation about exporting natural gas and the impact one way or another to its commodity price have I heard any discussion of the impacts to mineral owners.  If LNG export leads to higher natural gas prices, even if only marginally higher, royalties increase and more money ends up in the pockets of average people.

Roughly somewhere between 10% and 25% of all oil and gas production from private lands goes into the pockets of average Americans.  Royalties from production on state and federal lands are paid to governments and therefore benefit everyone.  Mineral ownership and the payment of royalties (and bonuses) help "share the wealth" of fossil fuel production with the common man.  The money paid to private owners is taxed and recirculates throughout the economy as spending and investment.  

I know, boo-hoo for the people who have royalty rights (that's why I call them the "Lucky Few").  But royalties are real revenues that go directly to people and shouldn't be ignored when the government is poised to make a decision that effectively will cap commodity prices and will directly reduce royalty payments in the long run.

Suppressing natural gas prices has a direct economic impact on millions of Americans.  Let's hear more about that in the War of LNG.

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