Good Morning! I have searched everywhere for the answer to this question so am putting it out there to see if anyone else has an idea. With the shale gas industry being fairly well matured and a LOT of natural gas being pumped out of the ground, many landowner's who have leased their property to gas drilling companies are receiving royalty payments. By definition, we are, essentially, consigning our natural gas to the gas company to sell in exchange for a percentage of the sale. So, we own the gas. We hire a gas company to come in and get it out of the ground and to market (which we, of course, couldn't do without them), and we pay them a LARGE percentage of the sale of our gas for their service. My question is, what is the landowner's occupation title? We are called "Landowners" but we are landowners whether or not we sell our natural gas for market, with or without the gas companies, and that is NOT an "occupation". Landowners receiving royalties... when filing your income taxes, for example, the royalties paid are classified as 1099 INCOME. What would the occupation title be for this income received? Another example; if you are applying for a loan or other income based application, what is your occupation from which this income has come? "Landowner" doesn't apply. I honestly think there should be a general term for a person receiving royalty income from the sale of their leased gas as a monthly income. Maybe there IS one out there and I just haven't found it. Any suggestions or does anyone know? Sure would appreciate some input. Thanks!
Can I ask what area you are in? We are leased by Gulfport and are not getting anything near what the Henry his is offering. It appears that we have a lot of pipe lines in place and is service. We are in Washington township.
The IRS has already given you a title....TAX PAYER!
Thanks to everyone for your replies. Have to agree with most of what has been opined. We are most DEFINITELY tax payers of the greatest magnitude, it seems, however when filling out an application for a loan or credit acct they are unlikely to accept that occupation designation as source for our income. :o)
We are, of course, Lessors, on contract to a gas company to extract our gas (which we own) and market for us at the cost of a quite large percentage of those sales.
Can't really be officially retired until the age of 59.5 and "unemployed" doesn't give a very positive inference when applying for credit, regardless of what income you cite.
Albert Russel, we are located in Washington County, PA and as I mentioned, get less than half of Henry Hub market prices due to OUR market for sales being confined to the tri-state area where gas is already over supplied (OH-PA-WV) so prices are much lower until pipelines can be completed to market our gas to the rest of the country - particularly the SW. If you calculate expected royalties on the EIA's Henry Hub averages you will be greatly disappointed because we just can't get those sale prices here with our limited market area. I keep close watch and my monthly statements showing sale prices are always pretty much in line with the PA DEP's state average so can't complain other than the slow progress (and approval) of expanding the infrastructure and getting the pipelines run to market our plentiful supply of gas to other areas where the demand is higher (as well as the prices). I'm not HAPPY about it - but understand it.
As far as the IRS, I think that they are an unconstitutional, out of control 3 letter agency with no oversight in league with the devil, assisting the current govt party platform to rip off and steal every penny they can from anyone who has made anything to either waste or give to those who would rather sit and do nothing more than walk to their mailbox to see how much free money has been loaded to their EBT cards and how much they've "saved" on their free benefits paid for by people who actually pay taxes.
As for the gas companies; some are doing everything they can to get as much from the landowners as possible while others are being as fair as they can while still making a profit allowing them to continue to operate with the soaring fees, taxes, and regulations this corrupt govt continues to pile on to the industry. We are with Rice and have no complaints about the company's treatment of us and our communities. I have compared their operating practices with other companies and found that they are not the norm. It DOES take being well educated and informed when initially signing on with a company and your lease terms, however, to reduce the chances of losing more than you thought you would.
As far as current pipelines in place - we have many however they are gathering lines from well sites to compressor stations and transmission lines of LOCAL gas buyers/suppliers such as Dominion. We do NOT have any pipelines that connect us to other markets out of our tri-state area, at this time, though there have been some approvals for a few that I am anxiously awaiting as our market will increase and with that, so will our sales prices and royalties. Make no mistake - your producer wants those higher markets as much as you do because it is also THEY'RE portion of the sales that will go up.
My main reason for my question was to see if anyone had found a designated occupation title for those who are NOT officially retired and have royalty income as their main income source to cite on official documents and applications - most particularly for loans and credit. I used the IRS tax form as an example because, when deducting expenses, for example, they ask from what occupation are the expenses being deducted (though other than depreciation, there really aren't any business expense deductions on royalties, I suppose). Another example is a credit application or mortgage application. We can always prove income with monthly statements and yearly 1099's, just like pay statements and W2 forms, but I wanted to know if there was an actual LABEL for a person whose income is derived from natural gas royalties, that wouldn't raise eyebrows, be negative, or difficult to explain.
That was well put, it sounds like you have done your homework. Thank you so much for that helpful information.
One thing I would add to this is that you should be careful of how you list your occupation for Federal and State income tax. A title that suggests you are in the business of leasing/developing mineral rights may very well flag the IRS that you should be paying Self-Employment Tax on the income. I don't know if this issue has ever come up, but I would not want to be the test case. SE tax is 15.3%. So unless this is your objective, I'd be careful.
Thank you for the heads up. I am less concerned about a designation for income taxes as the 1099's would clearly note where the income is derived and that we are royalty owners. The tax is certainly high enough without adding more! Rents & Royalties do have their own tax code section so properly completed tax returns would be self-explanatory. Using the royalties as our main source of income from the farm rather than regular employment or farm income was where my curiosity and lack of info came into play, if using the royalty income as an income source if in search of credit or income verification. I'm actually surprised that the Fed hasn't already created one for the tax code or Labor & Industry Occupational code designation.
Oil & gas Lessor, Lessor, Royalty Owner - mean all the same thing
Sounds like reasonably good tags. Thank you!
i was nearby ellenboro,wva the other day delivering some freight and a person where i delivered it told me that there is a compressor facilitie close-by that pumps over a billion feet a day at about 1200 psi as i recall. i dont think that gas is priced locally when its sold.
The compressor stations are where multiple well pads pump their gas to for distribution to other stations and lines. The shale gas comes out of the ground into the gathering line at 3000 psi. It is under extremely high pressure and why a lessee cannot run a line from the well to their home for gas use, as in shallow wells, which pump at a much lower pressure. The local buyers link in to the compressor stations with their pipelines, etc. Not sure of all of the access, etc, but do know that shale gas is pumped at a very high pressure and it doesn't necessarily mean it's going a long distance.