The People of America's Oil and Natural Gas Indusry

Better than Winning the Lottery

Jane Van Ryan

Jane Van Ryan
Posted July 28, 2009

Pennsylvanians are sitting on a buried treasure. It's called the Marcellus Shale formation, and a new study quantifies its potential impact on the state's economy and jobs. According to the study, the state's economy will receive an infusion of $14.17 billion in 2010 due to Marcellus Shale natural gas development, creating more than 98,000 jobs and generating $800 million in state and local tax revenue.

The study also says the benefits of natural gas development are expected to grow during the next decade. By 2020, Marcellus Shale development could provide a $25 billion boost to the state's economy, creating almost 175,000 new jobs and providing $1.35 billion to state and local governments. The study, "An Emerging Giant: Prospects and Economic Impacts of Developing the Marcellus Shale Natural Gas Play," was produced by the Pennsylvania State University for the Marcellus Shale Committee and the Pennsylvania House Natural Gas Caucus.

But this positive economic forecast could change if Pennsylvania enacts a proposal that would place a severance tax on natural gas production. "Imposing severance or property taxes on the Marcellus gas industry just as it is getting established will lead to tax losses for the state and could seriously undermine the future growth of the industry, especially given the possibility that producers could shift operations to developing promising shale formations elsewhere," the study reports. "The simple fact is that if you tax something you get less."

Pennsylvania Gov. Rendell has proposed a 5 percent severance tax plus 4.7 cents for each thousand cubic feet of natural gas produced. The study says the tax could reduce drilling activity by more than 30 percent and cause a net loss in tax revenue to the state.

The Marcellus Shale formation, which stretches from West Virginia to Upstate New York, is believed to contain as much as 489 trillion cubic feet of recoverable natural gas. If Pennsylvania's portion of the Marcellus Shale is not subjected to new taxes, it could turn the state from a net importer of natural gas into a net exporter by 2014. Use the player below to listen to an EnergyTomorrow Radio episode about the Marcellus Shale formation.