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Rural wealth creation and emerging energy industries: lease and royalty payments to farm households and businesses

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Abstract

New technologies for accessing energy resources, changes in global energy markets, and government policies have encouraged growth in the natural gas and wind industries in the 2000s. The growth has offered new opportunities for wealth creation in many rural areas. At a local level, households who own land or mineral rights can benefit from energy development through lease and royalty payments. Using nationally-representative data on U.S. farms from 2011, we assess the consumption, investment, and wealth implications of the $2.3 billion in lease and royalty payments that energy companies paid to farm businesses. We estimate that the savings of current energy payments combined with the effect of payments on land values added $104,000 in wealth for the average recipient farm.

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  • Jason Brown & John Pender & Jeremy G. Weber, 2013. "Rural wealth creation and emerging energy industries: lease and royalty payments to farm households and businesses," Research Working Paper RWP 13-07, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:rwp13-07
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    Cited by:

    1. Hitaj, Claudia & Weber, Jeremy & Erickson, Ken, 2018. "Ownership of Oil and Gas Rights: Implications for U.S. Farm Income and Wealth," Economic Information Bulletin 276228, United States Department of Agriculture, Economic Research Service.
    2. Brown, Jason P. & Fitzgerald, Timothy & Weber, Jeremy G., 2016. "Capturing rents from natural resource abundance: Private royalties from U.S. onshore oil & gas production," Resource and Energy Economics, Elsevier, vol. 46(C), pages 23-38.
    3. Weber, Jeremy G. & Hitaj, Claudia, 2015. "What Can We Learn about Shale Gas Development from Land Values? Opportunities, Challenges, and Evidence from Texas and Pennsylvania," Agricultural and Resource Economics Review, Cambridge University Press, vol. 44(2), pages 40-58, August.
    4. Christian Brannstrom & Mary Tilton & Andrew Klein & Wendy Jepson, 2015. "Spatial Distribution of Estimated Wind-Power Royalties in West Texas," Land, MDPI, vol. 4(4), pages 1-18, December.
    5. Jason Brown & Timothy Fitzgerald & Jeremy G. Weber, 2016. "Asset Ownership, Windfalls, and Income: Evidence from Oil and Gas Royalties," Research Working Paper RWP 16-12, Federal Reserve Bank of Kansas City.
    6. Cortney Cowley, 2016. "The Dispersion of Farmland Values in the Tenth District," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 29-67.
    7. Haikola, Simon & Anshelm, Jonas, 2020. "Evolutionary governance in mining: Boom and bust in peripheral communities in Sweden," Land Use Policy, Elsevier, vol. 93(C).
    8. Hoy, Kyle A. & Xiarchos, Irene M. & Kelsey, Timothy W. & Brasier, Kathryn J. & Glenna, Leland L., 2018. "Marcellus Shale Gas Development and Farming," Agricultural and Resource Economics Review, Cambridge University Press, vol. 47(3), pages 634-664, December.
    9. Siu, Wai Yan & Akhundjanov, Sherzod B., 2020. "Fracking Boom and Agricultural Doom: Evidence from Kern County, California," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304255, Agricultural and Applied Economics Association.
    10. Kuethe, Todd & Ifft, Jennifer & Borchers, Alison, 2014. "Linking the Price of Agricultural Land to Use Values and Amenities," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 4, pages 1-2, October.
    11. Brown, Jason P. & Coupal, Roger & Hitaj, Claudia & Kelsey, Timothy W. & Krannich, Richard S. & Xiarchos, Irene M., 2017. "New Dynamics in Fossil Fuel and Renewable Energy for Rural America," USDA Miscellaneous 260676, United States Department of Agriculture.
    12. Hitaj, Claudia & Suttles, Shellye, 2016. "Trends in U.S. Agriculture's Consumption and Production of Energy: Renewable Power, Shale Energy, and Cellulosic Biomass," Economic Information Bulletin 262140, United States Department of Agriculture, Economic Research Service.
    13. Hitaj, Claudia & Weber, Jeremy G. & Hopkins, Jeffrey W. & Erickson, Kenneth W., 2018. "Ownership of Oil and Gas Rights and Farm Sector Income and Wealth," 2018 Annual Meeting, August 5-7, Washington, D.C. 274316, Agricultural and Applied Economics Association.
    14. Kirsten Hardy & Timothy W. Kelsey, 2015. "Local income related to Marcellus shale activity in Pennsylvania," Community Development, Taylor & Francis Journals, vol. 46(4), pages 329-340, October.
    15. Grout, Travis & Ifft, Jennifer & Malinovskaya, Anna, 2021. "Energy income and farm viability: Evidence from USDA farm survey data," Energy Policy, Elsevier, vol. 155(C).
    16. Harleman, Max & Weber, Jeremy G., 2017. "Natural resource ownership, financial gains, and governance: The case of unconventional gas development in the UK and the US," Energy Policy, Elsevier, vol. 111(C), pages 281-296.

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    Keywords

    Consumption (Economics) - United States; Households - Economic aspects; Farms - Valuation;
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