Marcellus Shale and the Commonwealth of Pennsylvania

Review of Risks to Communities from Shale Energy Development

“…In the U.S., lease payments in prime development areas have reached several thousand dollars per acre for a 3–5 year period, which can represent a large windfall for landowners who own hundreds or thousands of acres. Royalty payments typically range between 10% and 20% of the value of the energy produced, which can result in very large sums of wealth accrued to the landowner during the early years of production, before the rate of oil and gas produced from the well drops precipitously …”

“…These approaches focus on wealth creation in community-level contexts, but have largely not addressed the specific and complex community development challenges associated with energy development. A main question is the degree to and ways in which royalties to landowners can serve to mitigate the long-term community-level problems identified in the resource curse and boomtown literature. − What happens, for example, when farmer-landowners receive mineral wealth? Are they more likely to invest in farm operations or consumer spending?…”

“…Shale energy development and its use of high-volume hydrofracturing techniques are emerging across wide swaths of the United States, encompassing both metropolitan and rural areas. Such development brings jobs, economic revenue in the form of increased spending and mineral royalties, and energy that is used by nearly all Americans. , Developing shale resources also entails massive industrial activity that requires the in-migration of specialized workforces, equipment, and materials, along with the possible risk of various kinds of environmental degradation. , Smaller towns and rural communities will play host to much of this development, and the small population of these places can make them most susceptible to many of the adverse impacts associated with shale gas development.…”

Sustainable Rural Development and Wealth Creation

“…A 1981 study by the Appalachian Regional Commission found that 80% of the mineral rights in the Appalachian region were owned by entities outside the county. In contrast, a more recent study by Kelsey, Shields, Ladlee, and Ward (2011) of two Pennsylvania counties with substantial gas drilling found that most landowners owned their mineral rights, and roughly two thirds of the land in each county was owned by people who resided in the county.…”

“…With regard to longer term impacts of natural gas development, properties where the mineral rights have not been severed and that have wells will reflect the expected value of future lease and royalty payments, which will increase the market value of the property and the wealth of landowners. Payment streams may also finance investment in existing industries: There is some evidence that farmers have used royalty payments to improve their operations (Kelsey et al, 2011). For properties without payments or the potential to have them, any deterioration of infrastructure, landscape aesthetics, or groundwater quality from drilling and production will likely lower property values, as has been documented in Alberta, Canada and Pennsylvania (Boxall, Chan, & McMillan, 2005; Muehlenbachs, Spiller, & Timmins, 2012).…”