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Report: Shale Gas Possible Windfall for Maryland

Although only two of its counties overlay the Marcellus Shale, Maryland could earn on average about $441 million in severance taxes over a 30-year period if drilling were permitted there, according to a report released Thursday by the Maryland Petroleum Council (MPC).

The report also said Garrett and Allegany counties, located in Maryland's western Panhandle, could eventually host several hundred natural gas wells and employ thousands of people.

"Policymakers should note that though Maryland has an opportunity to participate in the Marcellus Shale play, its allure to the natural gas industry is somewhat limited," cautioned Sage Policy Group Inc., the Baltimore-based consulting firm that prepared the report for the MPC. "Maryland is home to only about 1% of the Marcellus Shale play and could therefore be easily overlooked...Given current low natural gas prices, Maryland is even more likely to miss the opportunity if it creates an exceedingly regulated and expensive environment."

Sage researchers presumed that each well drilled in western Maryland would produce approximately 2.5 Bcf over its lifetime. Through 2025, the researchers estimate that 199 wells could be drilled (employing 1,129 people) under a low-case development scenario. Those numbers jump to 365 wells (1,814 people) under a mid-case scenario and 667 wells (3,094) under a high-case scenario.

The researchers further estimate that 1.8 Bcf could be extracted by 2016 under a low-case development scenario, followed by 3.3 Bcf and 5.8 Bcf under mid- and high-case scenarios, respectively. The value of the gas would range from $9.4 to $22.4 million, royalties to landowners would range from $1.2 to $2.8 million, and severance taxes to the state and the two counties would range from $700,000 to $1.9 million by 2016.

The U.S. Geological Survey estimates as much as 2.383 Tcf of technically recoverable natural gas lay under Garrett and Allegany counties. Commissioners from both counties have urged Gov. Martin O'Malley to speed up the process for allowing development to move forward.

The Maryland General Assembly has been busy with Marcellus Shale legislation this year. In February, lawmakers introduced separate bills that would implement severance taxes on natural gas, and would ban hydraulic fracturing wastewater imports, storage, treatment, discharge or disposal generated in other states (see Shale Daily, Feb. 15; Feb. 2). This followed a report by Maryland's Marcellus Shale Advisory Commission in January, which recommended imposing a fee on natural gas leases and a severance tax (see Shale Daily, Jan. 12).

The General Assembly began its 90-day legislative session on Jan. 11 and is scheduled to adjourn on April 9.

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