Case Studies Examine Shale Drilling’s Mixed Legacy

April 11, 2014.  New case studies of the impact of shale gas drilling in Carroll County, Ohio; Greene and Tioga counties in Pennsylvania; and Wetzel County, West Virginia, provide numerous cautionary tales for New York as it considers whether or not to allow Horizontal Drilling and High-Volume Hydraulic Fracturing in the Marcellus Shale and Other Low-Permeability Gas Reservoirs.

The case studies, which were completed by the Ohio, Pennsylvania and West Virginia organizations that are part of the Multi-State Shale Research Collaborative, build upon the Collaborative’s November 2013 report Exaggerating the Employment Impacts of Shale Drilling: How and Why. That earlier report documented the ways in which the oil and gas industries and their supporters have exaggerated the employment impacts (both actual and potential) of shale drilling. It also exposed the motivations for these exaggeration strategies: to preclude, or at least to minimize, taxation, regulation, and even careful examination of shale drilling. The Fiscal Policy Institute is a member of the collaborative along with Policy Matters Ohio, the Keystone Research Center, the Pennsylvania Budget and Policy Center, The Commonwealth Institute for Fiscal Analysis (in Virginia), and the West Virginia Center for Budget and Policy.

While the case studies make important contributions to the process of identifying and exploring the social and economic costs of shale drilling booms, much work remains to be done in order to fully and accurately quantify the costs and the benefits involved in the application of horizontal drilling and high-volume hydraulic fracturing technologies. The studies also provide important reminders of the many public health and environmental questions that remain unresolved regarding the various stages of the shale drilling process. According to the case studies, issues regarding water quality and waste disposal are proving to be particularly problematical.

In addition to employment impacts being more modest than industry studies of the last five years had predicted, very few of the higher paying jobs in the drilling industry and other oil and gas industries themselves have gone to local residents. The West Virginia Center on Budget and Policy, for example, reported that:

  • “The promise of more jobs in this already hard-hit area, however, has fallen flat.  Wetzel County still suffers from double-digit unemployment despite having some of the highest natural gas production in the region.” And that
  • “According to the interviewees, many of the oil and gas jobs are going to out-of-state workers from areas of the country where the industry is more developed, and the workers more experienced.”

In addition, these out-of-state employees frequently work on schedules that minimize any ongoing economic benefits and create short term problems. As the Wetzel County case study reported,

  • “These ‘transient workers’ are often based out of state and are transported onto the work site for a period of one or two weeks before returning to their home for an equal length of time. These workers typically do not maintain permanent residence. This has kept the employment and economic gains limited to service industries, and there has yet to be a permanent increase in population or workforce due to drilling activity.”
  • When asked about the lack of local workers, gas companies claim that it is difficult to find local workers who can pass a drug test, but such claims which have also been made by gas companies in Pennsylvania remain uncorroborated.

Besides very little employment in drilling and other gas and oil industries going to local residents, the Greene, Tioga and Wetzel case studies all found that the income from signing bonuses and royalties (which increase per capita income, i.e., all the income of an area divided by the total number of residents) has not been broadly shared. It turns out that a small number of landowners, including out-of-state businesses and out-of-state residents, own a large share of the property, meaning that much of the lease and royalty income is concentrated in very few hands, and that the benefits to the local economy have been diluted as income “leaks” out of town and out of state.

The experience of Tioga County, Pennsylvania, which is part of Pennsylvania’s “northern teir” and borders New York State, is even more troubling in that it demonstrates the ephemeral nature of many shale and other natural resource booms. As the industry shifted its focus from drilling for methane, or dry gas in Tioga County to more lucrative wet gas and shale oil in Greene County and parts of Ohio and North Dakota, the story in Tioga became one of “boom and bust.” According to Sharon Ward, the lead author of the Tioga County study, “The community was largely unprepared for the sudden overwhelming presence of the industry, with few tools to manage or plan for growth and change. And then just as suddenly, the industry packed up and left town, taking many of the jobs with them.”

The case studies also do a good job of identifying the wide range of costs that are being shifted by the industry to state and local governments, and to the local economy more generally, in the form of more traffic accidents and more road congestion and road damage, increased police and emergency services costs, increased rents, increased homelessness as lower income residents are priced out of the rental housing markets, increased crime, and increased emergency room visits. In Greene County, Pennsylvania, the researchers even found that low-income families, unable to find affordable housing, were separated as children were placed in the foster care system.

Amanda Woodrum, the author of the Carroll County, Ohio, report concluded, “It’s a complicated story. Whether fracking ultimately helps or hurts the local economy will depend on whether the money stays local, where the gas is refined, who gets the jobs and business, and what the costs are to the community, the environment and public health. Overall, the economic benefits of fracking fall far short of what was promised and come with costs to safety, the environment and the community.”

Carroll County, Ohio

Policy Matters Ohio Web Report

Full Report (PDF): “Fracking in Carroll County, Ohio: An impact assessment,” by Amanda Woodrum, Policy Matters Ohio, April 2014

Press Release

Greene County, Pennsylvania

Full Report (PDF): “Measuring the Costs and Benefits of Natural Gas Development in Greene County, Pennsylvania: A Case Study,” by Stephen Herzenberg, Diana Polson and Mark Price, Pennsylvania Budget and Policy Center, and Keystone Research Center, April 2014

Press Release

Tioga County, Pennsylvania

Full Report (PDF): “Measuring the Costs and Benefits of Natural Gas Development in Tioga County, Pennsylvania: A Case Study,” by Sharon Ward, Diana Polson and Mark Price, Pennsylvania Budget and Policy Center, and Keystone Research Center, April 2014

Press Release

Wetzel County, West Virginia

West Virginia Center on Budget and Policy Web Report

Full Report (PDF): “Impacts of Gas Drilling in Wetzel County,” by Sean O’Leary, West Virginia Center on Budget and Policy, April 2014

Press Release