A new Penn State study of the economic impacts of the Marcellus Shale has found that Pennsylvania natural gas development in 2009 created roughly half the jobs and economic activity reported in earlier, industry-financed studies.
The more modest findings were reported Monday by researchers at the Pennsylvania College of Technology and Penn State Cooperative Extension.
The study, which examined not only how much money Marcellus Shale drillers spend on wages, leasing and royalty payments in Pennsylvania but also where and how those dollars are spent, found that "a significant portion" of the money left the community where the land was leased or was not spent in the year it was earned. Previous economic studies did not consider those factors and instead "assumed that all the dollars accrue to Pennsylvania households and are spent like normal income," the authors wrote.
Because of that, the number of jobs supported by the industry - about 23,000 in 2009 - is smaller than earlier estimates, Penn State researchers wrote. The total economic activity generated by the industry that year is also smaller: $3.1 billion.
A 2010 study by other Penn State researchers and funded by the Marcellus Shale Coalition estimated that the industry supported about 44,000 jobs and generated more than $7.17 billion in economic activity in 2009.
"Our results confirm that where leasing and royalty dollars are going significantly influences the estimated overall impacts," said Timothy Kelsey, Ph.D., a professor of agricultural economics at Penn State and a lead author of the study.
Although the authors noted that mineral rights ownership is often separate from surface ownership and is nearly impossible to study, they looked at property ownership in counties with Marcellus activity and found that only about half the land is owned by residents who also live in those counties. A quarter is owned by Pennsylvania residents who live elsewhere in the state, about 8 percent is owned by residents of other states and about 17 percent is publicly owned.
"This would imply that a large portion of the economic benefits immediately leaves the communities being impacted by drilling," Dr. Kelsey said.
The Penn State researchers detailed other notable findings, including:
- Landowners save or invest about 55 percent of leasing bonus payments and about 66 percent of royalty payments instead of spending them immediately, according to surveys.
- 28 percent of business in Bradford and Washington counties that responded to surveys said their sales had increased because of the gas development and only 3 percent reported a decline in sales.
- And only 18 percent of municipalities directly experiencing drilling activities in the most active Marcellus counties said their tax revenues had increased, while 26 percent of the local governments indicated that their costs had increased.
"This confirms that considering both revenues and costs is critical for having a complete understanding of the impacts of Marcellus Shale," the authors wrote. "These findings from local officials contrast with prior economic studies which predicted that there would be large local tax impacts, but which did not verify what is actually occurring."
David Kay, a senior extension associate with Cornell University's Community and Rural Development Institute who has studied past Marcellus economic impact studies, called the new report "the most careful study of the issue that's been done to date" using a common analytical tool called an input-output model.
The researchers did "a lot of empirical, on-the-ground survey work," he said. "They still had to make a lot of assumptions, but they had to make many fewer assumptions than were made in many of the other studies."
Kathryn Klaber, president of the Marcellus Shale Coalition, pointed to the study's shortcomings, calling it "far from complete and based on years-old data," but said it "illustrates the Marcellus Shale's growing economic strength."
Sharon Ward, director of the liberal-leaning Pennsylvania Budget and Policy Center, welcomed the report, which she said "offers a better assessment of the economic effects and contemplates the uncompensated costs to paint a fuller picture of the role of gas drilling to the state's economy."
She added that although the report does not address the issue of a statewide drilling tax - a tax the center supports - it "makes the case" for such a tax by alluding to "a lack of direct revenue to local governments, plus human, health, and environment impacts."
"The report makes clear that gas drilling brings additional wealth to leaseholders," she said, "but that it also brings additional headaches, and costs, to municipal officials struggling with gas-related impacts for which many receive no offsetting tax income."
Contact the writer: llegere@timesshamrock.com
Read more: http://thetimes-tribune.com/news/penn-state-study-shows-more-modest-economic-impact-from-shale-gas-1.1195154#ixzz1WWMQymnh
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Natural-gas data fuels ‘fracking’ battle
- 08/25/11 01:15 PM ET
New federal estimates of the natural-gas resources beneath Eastern states are quickly touching off fresh battles over the controversial hydraulic fracturing drilling method.
The U.S. Geological Survey this week greatly increased its estimate of recoverable natural gas in the Marcellus Shale formation that underlies major areas of Pennsylvania, New York and other states.
But while USGS boosted its mean estimate from 2 trillion cubic feet to 84 TCF — almost enough to meet four years of current U.S. demand — the figure is far lower than the federal Energy Information Administration’s (EIA) most recent projection.
The U.S. Geological Survey this week greatly increased its estimate of recoverable natural gas in the Marcellus Shale formation that underlies major areas of Pennsylvania, New York and other states.
But while USGS boosted its mean estimate from 2 trillion cubic feet to 84 TCF — almost enough to meet four years of current U.S. demand — the figure is far lower than the federal Energy Information Administration’s (EIA) most recent projection.
EIA, the Energy Department’s statistical arm, estimates 400 TCF in its most recent annual forecast in April, but the new data could lead to a lower projection. On Thursday, a spokesman said EIA’s next forecast would fold the USGS numbers into EIA’s modeling.
“Incorporating the new USGS resource assessment will lower the assumptions about the technically recoverable natural gas resources in the Marcellus that will be used in the next Annual Energy Outlook,” spokesman Jonathan Cogan said in an email.
“Incorporating the new USGS resource assessment will lower the assumptions about the technically recoverable natural gas resources in the Marcellus that will be used in the next Annual Energy Outlook,” spokesman Jonathan Cogan said in an email.
But, he said, it’s too soon to say what EIA’s next estimate for Marcellus Shale resources will be.
“USGS has just begun to share details of their assessment with EIA. As we learn more about those details we will have a better understanding of how best to integrate the information into the projections presented in the next edition of our Annual Energy Outlook 2012,” he said of the study that surveys U.S. energy trends decades into the future.
The statistical nitty-gritty has big political implications.
Gas from shale formations is commonly tapped with hydraulic fracturing — or “fracking” — a method that advocates tout as a way to unlock vast supplies, boosting energy security and the economy in the process.
But environmentalists fear the U.S. shale-gas boom could lead to widespread groundwater pollution by expanding use of fracking, which involves high-pressure injections of water, chemicals and sand into gas-bearing rock formations.
Fracking foes pounced Wednesday on the USGS figure because it’s vastly lower than the EIA projection.
“It is clear that there is not, nor will there ever be, enough gas in the region to justify fracking, especially given the risks it poses to public health and the environment. It also goes to show why the natural gas industry shouldn't be given license to police its own fracking activity, or to write its own rules,” said Wenonah Hauter, executive director of Food & Water Watch, in a statement.
Rep. Maurice Hinchey (D-N.Y.), a fracking opponent on Capitol Hill, said the USGS estimate should prompt a review of plans for shale-gas development in his state, noting “it is important that we understand all of the environmental and economic impacts that would result if drilling were to move forward in our state.”
“That's why it is essential that the public, the markets and policy makers have unbiased shale gas reserve estimates,” he said.
Natural-gas companies say they employ safeguards to protect groundwater and that contamination concerns are vastly overstated.
The Marcellus Shale Coalition, an industry group, this week welcomed the new USGS data that showed a big increase from its 2002 projections.
“These new figures are further affirmation that the Marcellus Shale will continue to safely produce prolific amounts of clean-burning American natural gas for generations to come. While advent of shale gas development in the United States was only several years ago, its impact is proving to be profound and lasting,” said Kathryn Klaber, the group’s president, in a statement earlier this week.
On Thursday, a spokesperson for the group sought to focus on the USGS’s huge increase in its projections, rather than their size compared to EIA’s estimate.
“Technological advancements continue to help responsibly unlock enormous amounts of clean-burning American energy. Yet with reports that a 4,100 percent increase in Marcellus reserves somehow, strangely, represent a decrease, we also know that it’s silly season,” the spokesperson said.
The new USGS data comes at a time when U.S. shale gas development — which is booming in Pennsylvania, Texas and other states — is drawing wider scrutiny along a number of fronts.
New York State Attorney General Eric Schneiderman recently sent subpoenas to several energy companies seeking information about how they are representing the long-term productivity and profitability of their gas wells, according to several published reports.
The Securities and Exchange Commission has also sent subpoenas to multiple companies relating to gas wells and reserves.
Shale-gas production has soared in recent years as advances in horizontal drilling and hydraulic fracturing have enabled economic production.
EIA estimates that gas from shale formations will account for 47 percent of U.S. gas production in 2035, up from 16 percent in 2009.
EIA’s Cogan says total resource estimates are just part of the story when it comes to natural-gas development.
“Variation in factors related to drilling costs and well productivity can have a larger effect on projected natural gas production and prices than variation in the assumed amount of technically recoverable resources,” Cogan said in an email.
“USGS has just begun to share details of their assessment with EIA. As we learn more about those details we will have a better understanding of how best to integrate the information into the projections presented in the next edition of our Annual Energy Outlook 2012,” he said of the study that surveys U.S. energy trends decades into the future.
The statistical nitty-gritty has big political implications.
Gas from shale formations is commonly tapped with hydraulic fracturing — or “fracking” — a method that advocates tout as a way to unlock vast supplies, boosting energy security and the economy in the process.
But environmentalists fear the U.S. shale-gas boom could lead to widespread groundwater pollution by expanding use of fracking, which involves high-pressure injections of water, chemicals and sand into gas-bearing rock formations.
Fracking foes pounced Wednesday on the USGS figure because it’s vastly lower than the EIA projection.
“It is clear that there is not, nor will there ever be, enough gas in the region to justify fracking, especially given the risks it poses to public health and the environment. It also goes to show why the natural gas industry shouldn't be given license to police its own fracking activity, or to write its own rules,” said Wenonah Hauter, executive director of Food & Water Watch, in a statement.
Rep. Maurice Hinchey (D-N.Y.), a fracking opponent on Capitol Hill, said the USGS estimate should prompt a review of plans for shale-gas development in his state, noting “it is important that we understand all of the environmental and economic impacts that would result if drilling were to move forward in our state.”
“That's why it is essential that the public, the markets and policy makers have unbiased shale gas reserve estimates,” he said.
Natural-gas companies say they employ safeguards to protect groundwater and that contamination concerns are vastly overstated.
The Marcellus Shale Coalition, an industry group, this week welcomed the new USGS data that showed a big increase from its 2002 projections.
“These new figures are further affirmation that the Marcellus Shale will continue to safely produce prolific amounts of clean-burning American natural gas for generations to come. While advent of shale gas development in the United States was only several years ago, its impact is proving to be profound and lasting,” said Kathryn Klaber, the group’s president, in a statement earlier this week.
On Thursday, a spokesperson for the group sought to focus on the USGS’s huge increase in its projections, rather than their size compared to EIA’s estimate.
“Technological advancements continue to help responsibly unlock enormous amounts of clean-burning American energy. Yet with reports that a 4,100 percent increase in Marcellus reserves somehow, strangely, represent a decrease, we also know that it’s silly season,” the spokesperson said.
The new USGS data comes at a time when U.S. shale gas development — which is booming in Pennsylvania, Texas and other states — is drawing wider scrutiny along a number of fronts.
New York State Attorney General Eric Schneiderman recently sent subpoenas to several energy companies seeking information about how they are representing the long-term productivity and profitability of their gas wells, according to several published reports.
The Securities and Exchange Commission has also sent subpoenas to multiple companies relating to gas wells and reserves.
Shale-gas production has soared in recent years as advances in horizontal drilling and hydraulic fracturing have enabled economic production.
EIA estimates that gas from shale formations will account for 47 percent of U.S. gas production in 2035, up from 16 percent in 2009.
EIA’s Cogan says total resource estimates are just part of the story when it comes to natural-gas development.
“Variation in factors related to drilling costs and well productivity can have a larger effect on projected natural gas production and prices than variation in the assumed amount of technically recoverable resources,” Cogan said in an email.
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