The Independent Fiscal Office (IFO) recently released a report which estimates that approximately $10 billion in natural gas royalties was paid to private landowners in Pennsylvania from 2010-2018.
“Natural gas royalties have been a catalyst for economic growth while providing a boost to multi-generation family farms and countless other hard-working families and small businesses across the Commonwealth,” Marcellus Shale Coalition President David Spigelmyer said. “We’re proud of our industry’s critical partnership with Pennsylvania land and royalty owners, who have received more than $10 billion in energy production-related payments, resulting in hundreds-of-millions of dollars in additional tax revenue. With the right policies that encourage the responsible development of clean-burning natural gas, not only will royalty owners continue to benefit, but so will our entire economy – especially manufacturers and our building trade unions – as well as our environment.”
The analysis estimates that natural gas royalty payments totaled $905 million in tax year 2010, peaked at $1.62 billion in tax year 2014 and fell to $1.06 billion in tax year 2017. IFO noted that the collapse of natural gas prices in 2015 and 2016 led to the decrease in estimated royalty payments, despite increased statewide production during those years.
For 2017, natural gas prices and estimated royalty payments recovered. The analysis projects a further increase in royalty payments for tax year 2018. Compared to 2017, the average spot price at major Pennsylvania hubs increased by more than one-third, and total output increased by 14 percent. If those gains are passed through to landowners, the report noted, royalty payments would increase by approximately 50 to 55 percent, assuming extraction firms deduct a similar amount of post-production costs in 2018 as in 2017.