Some Good News for PA Budget on Marcellus Shale Leasing

While Pennsylvania tax revenue collections continue to fall below estimate, some good news came from state land leases for natural gas wells in the Marcellus Shale region. Bidders on six tracts of land would pay $128 million to the state should the lease deals go through. This is about double what was estimated in leases for the 2009-10 fiscal year. In addition, the state would receive 18% of the royalties on the natural gas.

The per-acre average bid of about $4,100 is less than the $5,000-plus that some groups of private landowners in northeastern Pennsylvania received last year.

But it is also higher than the approximately $2,400 per acre eventually reaped when the state first sold leases in 2008 to companies eager to exploit the Marcellus Shale. …

The state will take 18 percent of production royalties. Under the 2008 lease sale, the state will take 16 percent of production royalties. Only three of those wells are producing, while about 100 more are being drilled or in the process of being permitted, Novak said.

Indeed, the Commonwealth Foundation recommended expanded leasing (and royalties) as a better revenue source – one which would also foster job growth – than the proposed severance tax on natural gas.