Local governments, bolstered by more than $1 billion from the Barnett Shale over the past four years, are adjusting to diminished windfalls as the lowest natural gas prices in a decade have slowed drilling and reduced royalties.
Fort Worth recently lowered its estimate of income from gas lease bonuses and royalties by nearly $334 million over 25 years. Chief Financial Officer Lena Ellis said the projected revenue, previously pegged at $1.03 billion, has been slashed to $697.5 million, a 32 percent reduction. Other entities are expecting less money as well. Dallas/Fort Worth Airport, which collected nearly $191 million from gas bonuses and royalties over the past four years, is now projecting about $10 million a year in gas-related revenue going forward.
A Star-Telegram survey of a dozen public entities shows that they cumulatively received $602.6 million in revenue from lease bonuses and royalties from 2008 through 2011 for gas from public lands. Separately, local governments took in more than $400 million in property taxes from well sites, according to the Tarrant Appraisal District.
But an analysis shows that nearly 45 percent of the bonus and royalty income, a total of $269.6 million, came in fiscal 2008, when gas prices were high, lease bonuses were soaring and the Barnett Shale drilling boom was at its peak.
In each of the next three fiscal years, revenue was less than half the 2008 level, with fiscal 2011 totaling slightly less than $108 million, just 40 percent of the 2008 total.
"Obviously, lower gas prices bring reductions in drilling activity and lower revenues to all royalty owners, including public entities," Texas economist Ray Perryman said. "This effect results in some short-term setbacks, although all recipients are much better off than they were before the [Barnett Shale] development started in earnest about a decade ago.
"Over the long-term, higher gas prices and ongoing technology enhancements will lead to additional rounds of significant production," Perryman said.
Average U.S. wellhead prices for gas were $7 to $11 per 1,000 cubic feet for most of 2008 and briefly topped $13. But prices began falling late that year and generally have been declining since then. Gas prices recently have been $2.40 to $2.50 in futures trading in New York after sinking as low as $2.
As a result, drilling in the Barnett Shale has plunged over the past year. In mid-October, only 53 rigs were active, the lowest level in more than seven years. The rig count stood at 59 on Friday, according to RigData.
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