A fraction of U.S. farmers, about 3.5 percent, receive payments for oil, gas, and wind energy production on their land, and those payments provide “substantial income,” said a USDA report. With the growth of wind and solar energy, a wider array of farmers could benefit from the payments, now centered in the Great Plains, said the Economic Research Service.
“Geographic shifts will likely occur, resulting in a move in energy production from exclusively oil and natural gas-producing regions,” said the report. “Wind development in some states without major oil and gas production, including Iowa, Minnesota, Illinois, Oregon, South Dakota, and Washington State, has already provided energy income to farmers.”
Energy payments averaged $30,482 per farm annually over a 10-year period ending in 2020, for combined payments of $2.67 billion nationwide. The average energy payment was $1,300 larger than the average government payment.
For the report, USDA economists Justin Winikoff and Karen Maguire used data from an annual USDA survey of farmers on income and expenses as well as information about the location of oil, gas, and wind power production. The USDA report asked farmers if they received money from energy royalties or leases, though it did not ask them to specify whether it was from oil, gas, or wind.
“Results show that 3.5 percent of farm operations received energy payments and the average payment was more than $30,000 (in 2020 dollars), contributing substantially to farm household income and exceeding government payments to these operations,” said the report.
The Plains states, including oil and gas producers Texas and Oklahoma, had the highest share of recipients, 7.4 percent of farms, and the largest average payment, $39,087. Payments were least common in the South and smallest in the Midwest.
The size of payments fluctuated from year to year, tracking petroleum prices, and varied in size from farm to farm. Wind power payments were smaller on average than oil and gas payments.
The ERS report was limited to oil, gas, and wind power. Solar power is also a consideration for producers. One in 10 farmers in a Purdue University survey said they had been actively involved in discussions over a solar lease in the past six months. “Payment rates offered varied widely, but it was notable that over half of respondents were offered a lease rate of $1,000 an acre or more,” said Purdue in March.
Early this month, Purdue said that 18 percent of farmers or their landlords have been approached about possible carbon capture utilization and storage on farmland, a larger portion than was involved in solar leasing discussions.
The USDA report, “The role of commercial energy payments in agricultural producer income,” was available here.