One reason observers have cheered the country's recent natural gas boom is that people in economically depressed regions that were once dependent on coal would benefit from the extraction of a cleaner fossil fuel from right below their feet. Energy companies would create jobs, and landowners would get royalty payments.
Yet an investigation by Abrahm Lustgarten at the nonprofit news organization ProPublica suggests that the benefits to the locals might not be so rich. ProPublica's report involving landowners in northern Pennsylvania and Chesapeake Energy, which has invested heavily in unconventional natural gas production focused on an extreme case. Nevertheless, it mapped out how energy companies can use complex and arbitrary accounting schemes to minimize the amount of royalties they must remit.
A contract between a drilling company and a landowner delineates the amount the landowner will receive, including the royalties (usually a percentage of the gas' sale price) he or she will be owed, and the deductions the operator may make for gathering and marketing costs, which includes purifying and transporting the gas.