Penn State: State, Local Tax Revenues Increase In Marcellus Shale Areas

The Marcellus Education Team at Penn State University’s Cooperative Extension recently issued a new study highlighting the positive and growing tax revenues being generated throughout the Commonwealth tied directly to the development of natural gas.

Kathryn Klaber, president and executive director of the Marcellus Shale Coalition, issued this statement regarding Penn State’s findings:

“The responsible development of clean-burning natural gas is creating tens of thousands of good-paying jobs, providing stable, American energy supplies for consumers and generating hundreds of millions of dollars in tax revenues at the same time. This data brings into perspective the enormous amount of taxes our industry’s work is generating for Pennsylvania’s economy, especially in rural communities. Without question, each and every Pennsylvanian is benefitting from Marcellus Shale development.

“Unfortunately the ongoing tax debate has been framed too narrowly. This study, however, importantly broadens the understanding of the tax revenues our industry is helping to produce for state and local governments."


Key excepts from Penn State University's new study: “State Tax Implications of Marcellus Shale: What the Pennsylvania Data Say in 2010”

-- State Sales Tax Revenues Increase in Marcellus Producing Counties: “The data indicate that counties with 150 or more Marcellus wells experienced an 11.36 percent increase in state sales tax collections between 2007 and 2010. Counties with fewer Marcellus wells reported declining state sales tax collections, but they still did better than counties with no Marcellus wells, which reported steeper declines. These data suggest that counties with Marcellus shale development fared better in retail sales during the years 2007–2010 than those counties without.

-- Realty Transfer Tax Collections in Marcellus Producing Counties Stronger than Non-Marcellus Counties: “Across the state, realty transfer tax collections were down between July 2007 and June 2010, reflecting overall weaknesses in the real estate market. However, counties with Marcellus shale development typically declined less than those without such development.”

-- “Counties With Marcellus Activity Showed Greater Increases in Tax Income”: “The state personal income tax is a levy on personal income, including wages and salaries, investment income, and leasing and royalty income. Counties with Marcellus activity showed greater increases in tax income than non-Marcellus counties even though there was little difference in the number of returns filed. Counties with ten or more wells reported an average 6.96 percent increase in taxable income, and counties with between one and nine wells reported a 3.08 percent increase. Those areas with no wells witnessed a 0.89 percent increase in taxable income.”

-- “In counties with ten or more Marcellus wells, returns reporting royalty income increased 44.1 percent and tax income increased 325.3 percent.”

-- “Counties with ten or more wells recorded an 10.8 percent increase in net profits [what business owners pay on their business earnings] between 2007 and 2008, and counties with fewer than ten wells saw a 7.1 percent increase in such income. Counties with no gas activity had increases of only 1.5 percent.”

-- “Positive Economic Activity for [Marcellus] Communities”: “State tax collections in counties with significant activity related to Marcellus shale on average had larger increases in sales and personal income tax collections and less precipitous declines in realty transfer tax collections than did other Pennsylvania counties. The data indicate that Marcellus shale development brings some positive economic activity for communities.

The report also contains a caution.

"The data indicate that Marcellus shale development brings some positive economic activity for communities. At the same time, however, this analysis only reflects the early stages of natural gas drilling and does not include the cost impacts of Marcellus development on public services or the environment.

"It also does not indicate the impact of Marcellus development on local government and school district tax collections since royalty and leasing income is exempt from the local earned income tax and local jurisdictions cannot levy sales taxes."

A copy of the study is available online.