Today there is much interest, pro and con, swirling around the prospects for the development of New York’s Marcellus Shale gas reserves. These reserves, which some estimate at well over one trillion cubic feet in New York alone, may provide a significant revenue source for a state that is burdened with a multi-billion dollar budget gap for the coming budget year, and perhaps several years to follow.

One potential source of much-needed revenue from Marcellus Shale gas could be a severance tax associated with the extraction of gas in New York. Another would be sales tax related to purchases of certain equipment and other material in New York. Third, income tax from persons working on developing the Marcellus reserve could provide increased revenue to the State.

Perhaps the most controversial source of State revenue would be lease payments and/or royalties from Marcellus Shale gas development on State forest land. As reported in the Ithaca Journal, the recently-finalized Strategic Plan for State Forest Management will allow the State to lease Marcellus gas rights beneath certain State-owned land. This is sure to generate further controversy.

Given the State’s budget woes, it appears to be a matter of time before New York allows, likely under stringent controls, the development of the Marcellus formation gas, and a resulting flow of funds into the State’s treasury. Whether a not this will include revenue from mineral rights beneath State forest land will likely take some time to sort out given the inevitable challenges.