http://www.dallasnews.com/business/energy/20150911-as-oil-and-gas-p...

By James Osborne

ARGYLE — For seven decades, Betty Farmer’s family has made a living on their land outside Denton. They’ve run cattle on rolling grassland, farmed it for corn and hay, and — as of 2004 — watched the checks roll in for the natural gas drawn from beneath it.

But a substantial income — enough to buy new tractors, build a barn and help out their children’s families — has fallen to a fraction of what it was. Production has slipped, as it inevitably does. But more significantly, the flood of natural gas in the U.S. shale drilling boom means their gas now sells for a third of what it did a decade ago.

“Everything follows the price of the gas they produce,” said Farmer, 80. “We’re OK. We get by. But we had two ranch hands we had to let go. It’s just us doing the work now.”

With oil and natural gas prices at historic lows, it’s not just Fortune 500 companies and state budgets feeling the pinch. Around Texas and other oil-rich regions, there is a whole other economy of mineral rights owners who leased their land to drillers during the oil and gas booms with the promise of steady income for many years to come.

It’s a diverse pool, populated by everything from vast holdings owned by corporations and old-money families to a couple acres in East Texas split among 20-some heirs, to suburbs where by sheer luck an owner’s home sits on a tiny fragment of a gas deposit.

“There’s an outfit out of Austin that has gone to every county in Texas and will sell you a list of everyone receiving a royalty in the state. It’s over 4 million names long,” said Jerry Simmons, executive director of the National Association of Royalty Owners in Tulsa. “There’s a perception everyone who owns minerals is rich, but that’s usually not the case. If you take my average member, she is 67 years old, widowed and makes less than $500 a month [royalty] income.”

Those checks, which can represent up to 25 percent of the sale price of the oil and gas produced, are falling dramatically.

Since 2010, natural gas prices have averaged about half what they did the five years prior, as new hydraulic fracturing and horizontal drilling technology opened up deposits long thought too expensive to drill. That flooded the market with shale gas and later shale oil. Likewise, a barrel of West Texas Intermediate, the U.S. oil benchmark, is now selling for less than $50 a barrel — a year ago the five-year average was running at $93.

Every time a barrel of oil drops a dollar, that means about 19 cents less for the royalty owner. Multiply that by the more than 190,000 oil wells in Texas, each producing more than 4,700 barrels a year on average, and that adds up to almost $170 million less in annual royalty checks for each tick of the oil market.