Study examines ownership, control of land with Marcellus Shale gas

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Wednesday, July 18, 2012

UNIVERSITY PARK, Pa. — Ownership of the land in Pennsylvania counties with the most Marcellus Shale natural-gas drilling activity is concentrated among relatively few residents and people living outside the counties, according to a study by researchers in Penn State’s College of Agricultural Sciences.

The majority of residents in these counties together own little of the total land area and, therefore, have relatively little “voice” in the critical leasing decisions that affect whether and how Marcellus Shale drilling will occur in the counties, noted the lead investigator Timothy Kelsey, professor of agricultural economics.

Together, half of the resident landowners in these counties control only about 1 percent of the land area, and renters have no “voice” at all, the study suggests. Rather it is the top 10 percent of resident landowners, plus outside landowners (both public and private), who are able to make the major leasing decisions that affect communities.

“In some counties, such as Sullivan, Tioga and Lycoming, nonresidents have more voice about what occurs than do county residents, because more than half of the land is owned by those outside the county,” Kelsey said.

“Our analysis indicates that a majority of lease and royalty income from Marcellus Shale development will go to a relatively small share of the resident population in these counties, with much of the remainder going to others outside the counties.”

The study, “Marcellus Shale: Land Ownership, Local Voice, and the Distribution of Lease and Royalty Dollars,” was done by Penn State’s Center For Economic and Community Development, which is housed in the College of the Agricultural Sciences.

Co-authored by Alex Metcalf, a post-doctoral scholar in forest resources, and Rodrigo Salcedo, a doctoral candidate in agricultural, environmental, and regional economics, the research was entirely funded by the University.

Penn State researchers felt it was important to look at the ownership of the land within 11 Pennsylvania counties with Marcellus natural-gas development activity because land ownership determines who has a voice in decisions about the activity and for the distribution of lease and royalty dollars, Kelsey explained.

“Much of the public debate about Marcellus Shale development revolves around differing views of fairness and equity,” he said. “These discussions often focus on the environmental, health, and other risks, the proper role for local government regulation and oversight of industry activities, and the ability of individual owners to use their resources as they believe is appropriate.”

The study was not intended to evaluate or make judgments about Act 13 of 2012 — the state law that allows counties to decide whether to allow Marcellus drilling and to impose an impact fee on wells — or the current distribution of control and income, Kelsey stressed.

“Rather, we believe that understanding land-ownership patterns helps to clarify the economic implications of Marcellus Shale development and the context for the concerns some are expressing about the need for more local government control over that development.” he said.

To examine likely mineral-rights ownership, researchers collected publicly available geographic information system, or GIS, landownership data from 11 county planning offices. Counties included in the study are Bradford, Butler, Clearfield, Fayette, Greene, Lycoming, Sullivan, Tioga, Washington, Westmoreland and Wyoming.

The 11 counties include nine of the top 10 Marcellus counties in Pennsylvania; the sole missing top-10 county was Susquehanna, for which GIS information was unavailable. Together, the 11 counties account for 79 percent of all Pennsylvania Marcellus wells through 2011.

Because surface land owners in Pennsylvania do not necessarily own the mineral rights under their land, and because up to a fifth of the land in the counties in question is publicly owned (state forest and state game lands), researchers supplemented the GIS data with U.S. Census data, mailing address records and physical inspections of property records.

The county resident land ownership included a mix of individuals, families, local businesses, farmers, hunting camps, land trusts and others.

Kelsey said the research is important because it documents that many of the residents in the counties with much drilling activity don’t have a voice in Marcellus development, despite having to deal with considerable disruption and change in their communities.

“They are encountering rising rents and housing prices, housing shortages, significant increases in traffic and road congestion, changing demands for local government services, increased conflict, concerns about environmental consequences, student turnover in public schools, and changes in the landscape,” he 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.”