Pennsylvania’s Unheralded Benefit from Shale Gas Production

Summary of Study

Over the years, opponents of shale gas drilling have debated its economic benefits, yet recent evidence suggests it still provides considerable value to the commonwealth. Royalty payments and shale gas production continued to increase across Pennsylvania over the 2011-2018 period.  This is especially true for counties in the Pittsburgh area, as well as some in the state's northern tier that are among the busiest producers of natural gas from the shale formations (Marcellus and Utica).

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Allegheny Institute for Public Policy

Findings:

  • Landowners who own property over natural gas pools can earn lease payments from their land, along with royalty payments on the gas extracted from their property. Royalty payments are paid to the landowner based on the value of gas extracted from the wells on leased property.
  • Pennsylvania income tax revenue data have a category of “rent, royalties, patents, and copyrights." This would capture any taxable income associated with the royalties from natural gas activity.
  • The majority of counties in the study group continued to show increases to this category on state tax returns, demonstrating the enduring economic benefit of natural gas drilling.
  • The evidence suggests that drilling of natural gas in the shale formations has continued over the years to generate revenue for many landowners in Pittsburgh’s MSA and across the state, as well as tax revenues for the citizens of the Commonwealth.
  • Royalty payments also depend upon production levels. Natural gas production numbers show total statewide production from unconventional wells increased from 1.065 billion MCF (thousand cubic feet) in 2011 to 6.123 billion MCF in 2018—an increase of 5.057 billion MCF.

Read the full policy brief here