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Preparing for a Rise in West Virginia Gas Drilling

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Monday, August 8, 2016   

CHARLESTON, W.Va. – If the natural gas market follows classic patterns, drilling in the Marcellus shale will rise once the price climbs from the basement.

What should West Virginia do to prepare?

Sean O'Leary, a senior policy analyst with the West Virginia Center on Budget and Policy, says the state should gear up for more drilling activity by bumping up the severance tax to save for the future.

Industry officials argue that would discourage drilling, but O'Leary maintains more tax dollars can be put into the state's future fund without hurting the industry.

"Right now we have the future fund on paper, but we're not putting any revenue in it,” he states. “They're continuing to drill even at low prices – a small increase in the severance tax is not going to have a major impact on the industry."

The Center also has suggested a tax on liquefied gasses sent out of state, such as ethane, butane and propane. The Center says that would encourage plants that use those gasses to set up here.

O'Leary stresses the state should have a central clearinghouse for information about the industry and put more effort into public education.

"Making sure landowners know about the gas industry – what their landowner rights are, what all knowledge should you have before they sign a lease,” he urges. “And making sure that we're openly communicating with both the industry and the citizens who are affected."

Labor unions argue that too many of the drilling jobs have gone to workers coming in from other states.

O'Leary says although the state did some preliminary research on the issue, it never followed up. He says it would be good to get solid numbers on the impact drilling has as the wages move through the state's economy.

"We're not really estimating those indirect jobs, and we're not really systematically tracking what jobs are going to in-state workers and how much of that income generated is staying in West Virginia," he states.

The West Virginia Center on Budget and Policy, along with peer organizations in Pennsylvania and Ohio, recently compared how the three states are handling gas drilling. A copy of that study can be found on the Center's website.






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