Marcellus Shale

Date of Publication: November 2013

Synopsis: Drilling in the Marcellus Shale formation located beneath Pennsylvania has provided the state an economic boost amid the recession and sluggish recovery.  The benefits have come through increased state income tax receipts—royalty income reported on tax returns jumped 61 percent from 2006 (pre-drilling) to 2010 (most recent data available) with an increase of 119 percent in counties with Marcellus Shale drilling activity. Statewide, employment growth in the mining and logging sector is up 75 percent from August 2006 through the same month in 2013.

 In the Pittsburgh MSA, the average increase to royalty taxable income was 107 percent led by Washington County’s 289 percent jump and Butler County’s increase of 209 percent.  The smallest increase in the Pittsburgh metro belongs to Allegheny County at 41 percent.  The number of mining and logging jobs in the Pittsburgh MSA has risen more than 125 percent from August 2006 through August 2013.

 Data Snapshot:  Marcellus Shale Wells Drilled in the Pittsburgh MSA[1]

Less than half of the wells have been drilled in Washington County (48 percent) with Westmoreland (15 percent) and Fayette (13 percent) a distant second and third. Rounding out the MSA are Butler (12 percent), Armstrong (10 percent), Allegheny and Beaver (less than two percent each).

 Forecast: Drilling activity in the Marcellus Shale formation has been an economic boon to Pennsylvania and the Pittsburgh area.  This has been shown in royalty payments to land and mineral rights owners as well as in the amount of jobs in the industry directly as well as other ancillary industries such as leisure and hospitality and manufacturing.  However as more wells are drilled and gas is extracted at such a high rate (more than 2.065 billion mcf statewide) the price will fall as supply is increased which may lead to a slowing of drilling new wells.

[1] Data source:  PA Department of Environmental Protection, Office of Oil and Gas Management