Report Warns Boom and Bust Cycle Likely to Repeat; Advises Creation of Fund

by Dee Fulton on July 22, 2011

A report issue by the West Virginia Center on Budget and Policy, a nonpartisan, nonprofit research organization, points out that the economic benefits from coal mining were not sustainable and that the boom and bust cycle is poised to be repeated with Marcellus shale gas production.  The report is entitled Boom and Busts, The Impact of West Virginia’s Energy Policy.

The report states, “In the past, West Virginia counties with a concentration in mining saw their economic performance dramatically decline after an energy development boom. Today, their economies are weaker than the rest of the state, and they are ill-positioned to compete and grow. It is uncertain whether today’s energy boom, led by natural gas extraction, will bring the prosperity to West Virginia that it promises. While the potential revenues from this boom seem to be an attractive source of economic growth for communities, history shows that natural resource booms inevitably lead to busts.

This pattern is likely to repeat itself in counties that focus heavily on the Marcellus Shale development as the main source of economic growth. Indicators suggest that relying on an energy boom is not a definite solution for long-term growth and prosperity. The Marcellus Shale development has the potential to place unprecedented strains on the communities where drilling occurs. Researchers and analysts are just beginning to understand the environmental, health, and infrastructural impact of Marcellus Shale drilling. It remains unclear if natural gas drilling can create sustained economic growth for counties.”

The report concludes that sustainable long-term economic growth can only be achieved with a diversified economy and a well-educated workforce.  It recommends the creation of a Permanent Mineral Trust Fund financed by severance taxes.   The fund would be dedicated to education projects to encourage economic diversification and to infrastructure projects to “help ensure that the wealth generated by the energy boom stays in West Virginia and remains long after the mining resources are gone.”

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