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Wednesday, July 25, 2012

New Penn State study on Marcellus development: who has a say, who benefits? - UPDATED

Part of the public debate about Marcellus Shale development in Pennsylvania centers, rightly, on environmental and public health issues. But this big, complex issue involves much more.  Act 13 of 2012 sharply limits local control over natural gas development and has resulted in legal challenges and growing concern from disempowered local governments.  All of this occurs against a steady drumbeat of the industry and allied groups pounding away at the extraordinary – though sometimes exaggerated, or at least disputed - economic benefits of natural gas development.  

An important new study from researchers at the Penn State University College of the Agricultural Sciences’ Center For Economic and Community Development has provided needed perspective on some of these issues, looking at who has a voice in – and who benefits from – community-transforming Marcellus shale gas development in Pennsylvania.

Marcellus Shale: Land Ownership, Local Voice, and the Distribution of Lease and Royalty Dollars looked at land ownership in 11 Pennsylvania counties where most Marcellus gas drilling activity is occurring: Bradford, Butler, Clearfield, Fayette, Greene, Lycoming, Sullivan, Tioga, Washington, Westmoreland and Wyoming.  Land ownership determines who has a voice in decisions about drilling and pipeline development and how lease and royalty payments are distributed.

The researchers found that ownership of the land in these counties is concentrated among relatively few residents and people living outside the counties.  Half of the resident landowners in these counties control only about 1 percent of the land area.  So, the study found that the top 10 percent of resident landowners, plus outside landowners (both public and private), make the major leasing decisions that affect communities.  The majority of residents, according to the study, have relatively little "voice" - and renters have no "voice" at all - in the decisions that affect whether and how Marcellus Shale drilling will occur in those counties.

Similarly, the study finds that almost half of lease and royalty payments from Marcellus shale development will go to the top ten percent of the resident population in these counties, with much of the remainder – almost 40 percent - going to public or non-resident land owners. That leaves a little over 11 percent of lease and royalty income going to 90 percent of local landowners.

To be sure, local employment and business growth are major benefits of shale gas development.  But this study highlights some fundamental issues of local equity that need to be considered.  In a University press release, lead investigator Timothy Kelsey, professor of agricultural economics, said, “The decisions by nonresident owners and by the relatively small share of residents who own the majority of land thus can have profound implications for the quality of life for everyone else in the community."

July 26 UPDATE: Pennsylvania's Commonwealth Court has struck down the local zoning preemptions of Act 13.  An annotated version of the court's opinion is here.

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