oil-well-farm
Steven Jenkins

Discovering you live over an oil or gas deposit, in theory, presents you with a nice retirement plan. Lease the drilling rights to an energy company and you could be looking at thousands of dollars a month in royalties for as long as the fuel lasts. In fact, one of the arguments for expanded domestic drilling holds that those royalties will boost rural economies by putting extra cash in the pockets of local landowners, and funnel extra revenue to the federal government, as around 30 percent of drilling in the U.S. takes place on federal land.

It sounds like a sweet deal, so of course there must be a catch. Those royalties, it turns out, rarely end up being as high as expected, thanks to oil companies’ manipulation of the opaque formulas dictating how much drilling income the landowner ultimately sees. That’s according to an investigation by ProPublica:

In many cases, lawyers and auditors who specialize in production accounting tell ProPublica energy companies are using complex accounting and business arrangements to skim profits off the sale of resources and increase the expenses charged to landowners.