West Virginia, which collected less than $55 million in severance taxes from natural gas operations last year, could see that number jump to nearly $120 million by 2016, thanks in large part to the state’s growing Marcellus Shale industry, according to Deputy Revenue Secretary Mark Muchow.

Revenue from the state’s natural gas severance tax peaked at about $81 million in 2008, but it declined in 2009 and 2010 as gas prices fell, Muchow said during a recent presentation to the West Virginia legislature’s Joint Select Committee on Marcellus Shale.

The number of Marcellus Shale wells in the state has increased (from 242 in 2008 to 622 in 2009), and the play’s share of natural gas property taxes levied in the state is also on the upswing, increasing from less than 2% of the total in 2010 to 8% this year, Muchow said.

Recent reserves estimates show about 25 Tcf to be underlying the Marcellus in West Virginia (see Shale Daily, Jan. 24). According to Department of Environmental Protection (DEP) figures, the number of horizontal well permits skyrocketed from 50 in 2007 to a high of 500 in 2009, with more than 400 permits sought in the state last year.

But the state’s legislature during its recently concluded regular session and an extended budget session failed to approve increased funding for additional DEP oil and gas inspectors, despite requests from DEP and Gov. Earl Ray Tomblin (see Shale Daily, March 21). DEP had proposed increasing horizontal drilling permit fees to $10,000 from the current $650 paid by all drillers to fund the additional inspectors (see Shale Daily, Feb. 11).

Lawmakers need to come to an agreement on a statewide regulatory framework for Marcellus drilling if West Virginia’s Marcellus output is to reach its full potential, Muchow recently told the MetroNews Talkline radio program, which is broadcast throughout the state.

“It’s always nice to know what the rules are. And as those rules are being developed and put in place, that’ll help ensure that the industry continues to grow,” Muchow said.

A recent study by West Virginia University’s Bureau of Business and Economic Research (BBER) found that gas drilling in West Virginia’s Marcellus Shale has enriched the state through new jobs and more revenue and is on track to create up to 20,000 jobs by 2015 (see Shale Daily, Jan. 26). While Pennsylvania is considered the hotbed of activity, “in fact, West Virginia Marcellus Shale permits issued through 2008 exceeded those of other Marcellus Shale states,” the BBER researchers said.