Job Impacts of Marcellus Shale

A report released in November 2013 by the Multi-State Marcellus Shale Research Collaborative (MSMSRC) contends the gas-drilling industry exaggerated the employment impacts of shale drilling.
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A report released in November 2013 by the Multi-State Marcellus Shale Research Collaborative (MSMSRC) contends the gas-drilling industry exaggerated the employment impacts of shale drilling.

Exaggerating the Employment Impacts of Shale Drilling: How and Why reports shale-related jobs account for an increase of nearly 33,000 jobs over the six-state area covering the Marcellus and Utica Shale including Maryland, New York, Ohio, Pennsylvania, Virginia and West Virginia. Pennsylvania accounts for 22,735 of those jobs.

Yet according to a report issued by the Pennsylvania Department of Labor & Industry numbers (Marcellus Shale Fast Facts, December 2013 Edition), Marcellus Shale-related industries total employment at 241,926.

Part of that significant discrepancy may include how each counts ancillary jobs, such as trucking, and other employment-related data. Whether the real numbers rest with gas industry supporters or its opponents — or somewhere in between — debate centers around the use of those numbers as leverage to influence public policy.

“From our perspective, some of the claims by the gas industry and its allies or by researchers who are paid for by the gas industry are driven by a political agenda,” says Stephen Herzenberg, economist and executive director of the Keystone Research Center (KRC), Harrisburg. “The gas industry itself and the business community, the U.S. and Pennsylvania chambers, were pretty open about that they were launching a campaign to communicate the great job benefit to shale. They were doing that with the idea to discourage lawmakers from regulating and taxing the industry.”

Herzenberg contends even where there is a lot of drilling and some jobs, the impact on the overall health of the economy has been modest.

“The counties with the most drilling were cushioned a little bit from the recession and slow recovery, but — by and large — the impact on local and state economies has been small,” he says. “The idea that the shale industry is a great jobs machine has been used to keep for example the Pennsylvania tax on drillers much lower than basically any other state with significant drilling.”

KRC supports a push to create a severance tax similar to those used in other states to offset the infrastructure, environmental and other costs associated with the industry as well as costs for education and other needs in Pennsylvania.

“The other reason it makes complete sense to do what every other state does is that taxation doesn’t have a significant impact on the economic activity in the industry,” says Herzenberg.

The Marcellus Shale Coalition (MSC), a Pittsburgh-based industry group that promotes the positive impacts of natural gas production, disagrees.

“It’s no surprise that these groups, who are funded by deep-pocketed special interests opposed to responsible shale development, continue to make such misleading, intellectually dishonest and provably false claims,” says Travis Windle, MSC spokesman. “In reality, safe shale development — which is overwhelmingly supported by the American people, according to a recent Robert Morris University poll — has been and continues to be a powerful job-creating engine for our region and nation. These undeniable benefits are cascading across our economy, especially in our manufacturing sector and for all consumers, all while protecting our environment.”

The Pennsylvania Independent Oil and Gas Association also disagrees with MSMSRC’s numbers and findings.

“There are 85 new companies in the Williamsport area just as a result of the Marcellus Shale developed directly to do work for the industry,” says Louis D. D’Amico, PIOGA president and executive director. “That doesn’t talk about other jobs created for things like hotels and restaurants — those sorts of things. We have seen numbers from places like Bradford County, which has been a traditionally tough area for unemployment, where the unemployment numbers are way down.”

D’Amico believes MSMSRC under-reported job numbers and the industry’s overall impact in the state.

“Frankly, I think we have basically scratched the surface of what ultimately is going to be the most important part of this,” he says. “I don’t think the important part of this job creation will even be for the industry, won’t even be for the businesses that support the industry. It’s going to be the industries that utilize the low price and available gas for manufacturing. I think we are at the threshold of a huge return of industrial activity in Pennsylvania due to low gas prices.”

D’Amico remains concerned about the anti-gas industry supporters’ push for a severance tax on the industry.

“Anything with taxes is going to impact the landowner and individual companies in Pennsylvania,” he says. “Levy a four-percent or five-percent tax, that’s at least four or five percent more investment that’s not going to go into the ground and create more reserves. That’s a larger number of jobs that’s not going to be created. It’s bad fiscal and public policy.”

But Keystone Research Center, a member of the MSMSRC, disagrees.

“What we have in Pennsylvania is an impact fee,” says Mark Price, KRC’s labor economist. “When you look at the revenue that’s being generated from natural gas extraction, it falls short of what other states are collecting in terms of tax revenues. We are making a bad choice by not imposing the same taxes those places do. We are still going to get the same level of economic activity but we are collecting less tax revenue to cover resources.”

Price believes those resources should include strategic investment for future economic development similar to a trust fund created in West Virginia from a trust fund created from part of its severance tax.

“What happens is natural resource extraction crowds out other economic activity that might be more sustainable in the long run for those communities,” he says. “If you harvest the resource and the activity goes away, when it goes away, it also means that all those other economic activities that might have been there otherwise won’t be there. If you had a more robust severance tax you could set aside some of that revenue and make sure it’s going to the development of new enterprises and industries to help support these industries when the drilling goes away.”

According to Price, the impact fee collected only supports infrastructure repairs and other immediate needs within the community.

“This is an industry that’s important where the drilling is happening,” says Price. “But in the overall thrust and direction of the Pennsylvania economy, this remains a sector that represents less than a percentage point of all employment in the state. In the grand scheme of things, this is not a thing that is moving the Pennsylvania economy or in the long run reshaping the way our economy works and the amount of income available for the Pennsylvania citizens.”

Price also disputes the methodology used for reports generated by the Pennsylvania Department of Labor and Industry in its Marcellus Shale Fast Facts, December 2013 Edition . He believes the core industries and not the ancillary job numbers better reflect the true employment growth in the industry.

“Everybody would agree that you can use different techniques, different methodologies to come up with job numbers,” says Shawn Good, director of government affairs with the Pennsylvania Chamber of Business & Industry, Harrisburg. “We can split hairs about fewer or more jobs being created based on one type of econometric methodology versus another but the reality is that this industry has created jobs. Nobody can dispute that the natural gas industry has created a lot of good-paying jobs, directly and indirectly related to the industry.”

Fast Facts found 241,926 Marcellus Shale-related industry jobs created between the second quarter of 2009 and the second quarter of 2013 with an average wage of $84,400 in the core industries.

In addition to the good-paying jobs, Good notes other positive economic impacts including $1.8 billion paid to the state through tax revenues, lower-cost energy for manufacturers and consumers and local impact fees assessed to address environmental protections and repairs to roads and bridges. According to Good, the abundance and accessibility of gas also creates potential for establishing a petro-chemical industry in Pennsylvania.

“I wish more groups like the Keystone Research Center and Pennsylvania Budget and Policy Center would embrace the industry or at least start to acknowledge that what we have with the Marcellus Shale is leading to energy independence for our state and eventually for our nation potentially,” says Good. “We should all embrace that as a positive effect for our state and our nation. Frankly, this report fits into their known agenda of wanting a severance tax on the industry. The Keystone Research Center and Pennsylvania Budget and Policy Center have not been shy that this natural gas industry does not pay enough in taxes. We have data that refutes that: the $1.8 billion paid to the Pennsylvania Department of Revenue. That’s not chump change.”

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