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Gas-rich Marcellus Shale formation could help ease taxpayers' burden

Reports of a coming energy boom in Pennsylvania might sometimes sound like hyperbole or blue-sky dreaming, but there is solid geologic evidence supporting the heated interest in deep drilling for natural gas in what is called the Marcellus Shale formation.

For the last year or so, there have been whispers of energy riches lying more than 5,000 feet below the surface in an area of Appalachia stretching from West Virginia to southeastern New York. Already some large private and public landowners across Pennsylvania have struck lucrative deals allowing companies to extract natural gas from deep under their land.

And since the Marcellus Shale formation runs through southwestern Pennsylvania, landowners in this region have, for the past year or so, been courted by regional and out-of-state gas exploration and production companies.

Potential revenue from the gas in the Marcellus formation popped into the regional news this week when officials with the Pittsburgh International Airport announced that they were seeking bids for gas exploration on the 9,000 acres controlled by the airport authority. A day after that announcement hit the newspapers, Allegheny County Chief Executive Dan Onorato stepped forward to slow down the airport authority's plan by saying that the 9,000 acres is county land leased to the airport, and that the county intended to have a say in any deal struck with drilling companies.

While Onorato and airport officials work out how to proceed with lease agreements and revenue sharing from any gas deals on the airport acreage, various public officials in Butler County should be looking at the potential for gas revenues from their own land holdings.

Officials with the county, townships, school districts and other entities owning significant amounts of land should educate themselves about how best to negotiate leases and what factors to consider when agreeing to a deal.

That education process can be done individually, or in a group setting like the meeting held Monday at S&TBank Arena in White Township, Indiana County.That meeting attracted 500 people, lasted three hours and included presentations by a Penn State expert on the Marcellus Shale formation, a consultant to landowners, and an attorney familiar with gas leasing deals.

The presence of natural gas in the Marcellus Shale formation has been known for decades, but it's only in the last 10 years or so that drilling technology has made extraction of the gas, trapped a mile or so below the surface of the earth, practical.

A similar shale formation in Texas, called the Barnett Shale field, has proven the capabilities of new deep-drilling and horizontal-drilling techniques needed for deep gas fields. The Barnett field, which has been called the largest new onshore natural gas field in the United States, has fueled a natural gas-fired energy boom in Texas. And something similar is expected to develop in Pennsylvania, West Virginia and parts of southern New York.

Production from the Barnett Shale field has grown to 1 trillion cubic feet a year, or nearly 5 percent of U.S. annual consumption.

The frenzy to develop the deep gas fields has seen property owners receive deals paying as little as $500 an acre and 12 percent of production — and up to thousands of dollars per acre and 25 percent of production.

The experts at the Indiana County meeting warned, however, that landowners risk losing a deal if they push for overly generous terms. In that case, the company can just walk away, leaving the landowner with nothing and having to start the process over.

While Onorato and the airport officials work out their approach and their revenue sharing deal, officials with the Altoona City Authority are moving ahead with plans to lease 8,400 acres for gas exploration. That deal is projected to yield a $16 million upfront payment and production royalty payments that could total $50 million over 20 years.

Meanwhile, state officials already have moved forward and awarded to five out-of-state bidders rights to drill for gas on 74,000 acres of publicly owned land in northern Pennsylvania. The expected revenue from that deal could approach $200 million and would benefit state parks and recreation.

Officials and private landowners across Butler County need to become educated about the Marcellus Shale formation and about the latest developments in negotiating lease deals. And rather than put together their own program, Butler County officials, if they have not already done so, should contact their counterparts in Indiana County about setting up a similar public information event here. The Indiana County program was organized by the county commissioners, with support from the local state representatives, the Indiana County Center for Economic Operations, Penn State Extension and the Indiana County Farm Bureau.

Development of the Marcellus Shale formation could provide an economic boost to much of Western Pennsylvania, and Butler County needs to get ready to reap the financial benefits. It is quite possible that gas lease revenue and annual royalty payments could help ease the burden on taxpayers, or otherwise supplement tight budgets.

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