The Impact of Shale Gas Tax Revenue for Local Municipalities

Late last year, the City Council of Pittsburgh, Pennsylvania rejected drilling for natural gas inside the city limits. But another city of similar size, Arlington, Texas, allows it within city limits. In an article talking about the pros and cons of “urban drilling” we get this information about the Arlington experiment:

[Mel LeBlanc, Arlington councilman] lunching at the Petroleum Club of Fort Worth, has ample reason to support the concept of urban drilling: Tapping the Barnett Shale, the 5,000-square-mile reservoir of natural gas embedded in rock beneath North Texas, has been a boon to his city’s finances. In 2007, Arlington’s city stewards set up a nonprofit to handle the city’s share of gas royalties and lease payments. Ten percent of the lease money (and half of the royalty money) goes to the city’s operating fund.

The remainder—90 percent of the lease payments and half the royalties—goes to the Arlington Tomorrow Foundation, which issues grants that support arts, recreation and historic preservation. In just three years, the foundation has put $70 million in the bank. In 20 years’ time, the balance may approach $225 million.

“We’re not Fort Worth. We’re not Dallas,” which have flush, old-money foundations, Mr. LeBlanc said. In Arlington, three years ago, the biggest nonprofit endowment was just $12 million. “This gas money [is] a once-in-a-lifetime opportunity as a city to get the financial footing that we need, [to] become the city that we envision.”

As Michael Joy, attorney and professor of oil and gas at SUNY Buffalo pointed out in a recent pro-drilling rally in Binghamton, NY, local tax revenues from drilling in the Marcellus could fundamentally change the tax structure and radically reduce local property taxes in those counties where drilling happens.

*Pittsburgh Post-Gazette (Mar 7) – Natural gas fields have provided a fount of cash for Texas cities