By Philip Gruber, Lancaster Farming, March 26, 2021

Fracking has rapidly raised the economic output of northern Appalachia, but a new report finds rural residents haven’t gained much from that growth.

“In a perfect world, the other indicators — jobs, income and population — would go up more or less proportionately (with output), and that’s what manifestly did not happen,” said Sean O’Leary, the author of the document for the Ohio River Valley Institute.

Natural gas organizations said the report cherry-picks data, and they pointed out that it comes from a think tank that supports transitioning away from natural gas.

The report looks at the change in several economic metrics for 22 fracking-heavy counties in Pennsylvania, Ohio and West Virginia between 2008 — before the drilling boom — and 2019.

The most spectacular increases came in gross domestic product — the value of goods and services produced. The shale counties grew at three times the national average, O’Leary said.

How has natural gas drilling affected the regional economy?
March 27, 2021
They also produced the 10 largest GDP increases among the nearly 300 counties in Ohio, Pennsylvania, West Virginia, New York and Maryland, according to supplementary analysis by Lancaster Farming.

The latter two states contain part of the Marcellus shale formation but have banned fracking. The newspaper’s findings are based on data from the U.S. Bureau of Economic Analysis and the Census Bureau.

A big boost in GDP would usually mean local people see their incomes rise accordingly, but O’Leary found that only about 20% of the economic growth entered the county economies.

Many natural gas workers and allied businesses come from out of state, and royalty recipients are not spending or investing all of their windfall locally.

“Much of the revenue is landing elsewhere,” O’Leary said.

Still, Pennsylvania’s Marcellus Shale Coalition said the industry contributes heavily to the state’s economy and well-being.

Gas drilling has generated $10 billion in lease and royalty payments on both public and private land, and more than $7 billion in taxes and fees for the state, the group said.

Counting Jobs

Job growth was one of the biggest selling points for the industry at the advent of the drilling boom. Studies projected fracking would feed the three states over 450,000 jobs — more than the population of Pittsburgh.

By O’Leary’s count, the industry has fallen far short of that hype, eking out just 5,600 jobs across the 22 counties.

“Those numbers (from the industry studies) were statewide, but presumably a large portion of them would have landed in the places where the gas was actually being produced,” he said.

About half of the fracking counties gained jobs, with four growing more than 10%, based on Lancaster Farming’s analysis.

The American Petroleum Institute says natural gas and oil support over 320,000 jobs in Pennsylvania. A third of those positions are in the industry itself, with the rest in related services, sales, transportation, manufacturing and other sectors.

The state had 67,000 natural gas wells and 7,000 crude oil wells in 2017, according to the Pennsylvania Independent Oil & Gas Association.

Drilling, by the way, did not have a clear effect on the counties’ number of farm jobs.

All of the Ohio fracking counties gained farm jobs, while most of the Pennsylvania counties lost. West Virginia was mixed, Lancaster Farming found.

Measuring Income

Total personal income grew slower in the natural gas region than in Ohio, Pennsylvania or West Virginia as a whole. O’Leary found only two fracking counties that beat the national average.

The natural gas counties do rank near the top of the region for growth in per capita and median household income, measurements that compare earnings to the number of people in an area.

But in this case, O’Leary said he focused on the change in total dollars of income because the counties’ declining populations skew averages and medians.

Per capita income — in dollars, not the percentage of change — is interesting for another reason.

Lancaster Farming’s ranking on that metric shows that two-thirds of the natural gas counties ranked in the bottom half of the five-state region.

In other words, despite the growth from natural gas, the average income in those counties is still weak compared to other parts of the Mid-Atlantic.

That’s not to say that drilling workers themselves are poorly paid.

In Ohio, the median annual wage for key drilling-related jobs ranges from $27,000 to $95,000, with most job categories trending above the state median income of $37,000, according to the state’s Department of Job and Family Services.

People Are Still Leaving

One of the early criticisms of O’Leary’s report was that it glosses over falling unemployment rates, good news for the gas region.

“Shale development clearly, through the $86 billion our members have invested, has had a positive impact across Appalachia,” Mike Chadsey, a spokesman for the Ohio Oil and Gas Association, told Youngstown’s NBC TV affiliate.

O’Leary agrees that unemployment rates fell in some natural gas counties, but he doesn’t see it as a positive. Those counties lost population even faster than they lost jobs.

“There are two ways to reduce the unemployment rate,” O’Leary said. “One way is to add jobs. That’s the good way. The bad way is to reduce workers from your workforce.”

Indeed, population is one of the metrics in which the drilling counties have fared the worst.

Only one of the 22 counties gained residents — Doddridge County, West Virginia, which picked up a mere 400 inhabitants. Half of the counties saw serious population losses ranking in the bottom 20% for the region.

Sixteen of the gas counties also have a poverty rate above the national average, Lancaster Farming found.

O’Leary himself no longer lives in Appalachia, and more than one shale industry group has criticized him for presuming to pass judgment on the region from his home in Washington state.

“We’d strongly encourage the ‘researcher’ to visit Washington or Lycoming County,” said David Callahan, president of the Marcellus Shale Coalition.

That argument is a bit curious, coming as the pandemic has normalized remote work and prompted many Americans to consider moving away from the cities where their offices are. O’Leary is a West Virginia native.

The Politics of Shale

If the Ohio River Valley report has gotten a chilly reception in the drilling industry, it may fare little better with elected officials. Many lawmakers, especially Republicans, are staunch allies of natural gas.

The industry’s clout comes in part from its association with economic development, which O’Leary believes is overstated, and from the tax revenue it generates.

In Monroe County, Ohio, oil and gas money paid for 70% of paving and road stabilization costs last year, Commissioner Mick Schumacher said in a meeting covered by The Marietta Times.

In Pennsylvania, Republicans across the state have made a ritual of shooting down Gov. Tom Wolf’s plans for an additional tax on gas extraction.

GOP Sen. Kristin Phillips-Hill did so in a hearing just this week when a state Cabinet secretary linked the tax proposal to funding for rural internet. “Please, look for a way to further deploy broadband that is not reliant on something that will probably never happen,” said Phillips-Hill, who is one of Harrisburg’s biggest supporters of rural broadband and whose York County district is far from the Marcellus formation.

Republicans say new taxes would hurt the competitiveness of an industry already beset by low natural gas prices.

Over the past decade, plenty of farmers have also welcomed drilling as a new source of revenue. Larry Cain, a farmer in Belmont County, Ohio, has used gas royalties to build and repair barns, buy equipment, and switch to robotic milkers.

“We could not have done all of this without the additional income from the development of the natural gas on our property. Our farm has a much brighter future now and for generations to come,” Cain said in a quote provided by the Ohio Oil and Gas Association.

O’Leary acknowledged that some landowners have benefited substantially from natural gas development, but he said the rising tide doesn’t seem to be lifting all boats.

As a result, he said, governments in the shale region should aim to get more out of the industry, perhaps with new taxes on drillers or tightened local regulations on noise, pollution and road damage.

The counties could also seek different ways to diversify their energy economies, such as wind turbines and federal programs that improve the energy efficiency of buildings.

Unlike gas drilling, upgrades to structures generally rely heavily on local labor, not outsiders.

“In addition to helping reduce bills and increase people’s disposable income, it’s also a shot in the arm economically for jobs in local businesses,” O’Leary said.

The counties examined in the report are Bradford, Greene, Lycoming, Sullivan, Susquehanna, Tioga, Washington and Wyoming in Pennsylvania; Belmont, Carroll, Guernsey, Harrison, Jefferson, Monroe and Noble in Ohio; and Doddridge, Harrison, Marshall, Ohio, Ritchie, Tyler and Wetzel in West Virginia.

https://www.lancasterfarming.com/farming/energy/fracking-no-cure-all-for-appalachia-s-economy/article_a1a561ff-c33b-5fdd-929e-744545a43a01.html

By Rachel Wagoner, Farm & Dairy, March 24, 2021

The Biden administration is presenting some challenges for the oil and gas industry.

President Joe Biden started off his presidency with several executive orders directly impacting the industry. First was the cancellation of the Keystone XL oil pipeline, which was to send oil from western Canada to Nebraska.

“That certainly sent a chill through the industry,” said David Callahan, president of the Marcellus Shale Coalition. President Donald Trump’s administration was seen as quite friendly to oil and gas, rolling back a number of environmental regulations in an effort to boost domestic production.

The industry that employs tens of thousands of people in Ohio, Pennsylvania and West Virginia must now figure out how to proceed. The Biden administration’s actions around oil and gas development, the environment and the climate have created a lot of uncertainty, industry leaders say.

“All that uncertainty drives changes,” said Mike Chadsey, public relations director with the Ohio Oil and Gas Association. “It can impact a lot of different things. That’s not what our folks are looking for. They’re looking for regulatory, certainty.”

Construction on the 1,200-mile Keystone XL pipeline, owned by Canadian company TC Energy Corp., began in April 2020. TC Energy said it was laying off more than 1,000 construction workers as a result of the pipeline cancellation. The company is based in Calgary, but it also owns and manages thousands of miles of natural gas pipeline in Ohio, Pennsylvania and West Virginia.

Ohio Attorney General Dave Yost joined 20 other attorneys general March 18 in suing Biden and members of his administration for revoking the permit for the Keystone XL pipeline.

Next, came the moratorium on new oil and gas development on federal lands. While people may not think of Ohio and Pennsylvania when thinking about public lands, there are national forests in both states.

In addition to Biden’s moratorium, a federal judge recently ordered for new fracking and leasing activity to be put on hold in Ohio’s Wayne National Forest until a review can be done on the environmental impacts of the practice.

In addition to actions on the Keystone XL pipeline and federal lands, Biden rejoined the Paris Climate Accord after Trump withdrew the U.S. from the international agreement. Biden set a target to make the U.S. carbon neutral by 2050. The president also ordered the review of many Trump-era decisions to rollback or revise environmental regulations, including Waters of the U.S., methane emissions from oil and gas facilities and the Endangered Species Act.

Andrew Casper, director of legal and regulatory affairs for Ohio Oil and Gas Association, wrote about some of these regulatory changes in the group’s monthly magazine, The Drill Bit. He said they are continuing to monitor the possible changes and working to “stave off or help mitigate regulatory impacts to Ohio’s oil and gas industry.”

The industry, of course, believes natural gas has a place in the clean energy transition as it burns relatively cleanly compared with other fossil fuels. The big problem, environmental groups argue, is the process to get it out of the ground, particularly fracking.

A recent report completed by the Ohio River Valley Institute also found that the Appalachian fracking boom didn’t deliver on its promise of economic prosperity for local residents. Local officials and the Ohio Oil and Gas Association pushed back on the report’s claims, saying the data was cherry picked to fit a narrative.

The thing is, when drilling is stopped, temporarily or permanently, it doesn’t just hurt the workers on the well pad, Chadsey told Farm and Dairy. “There’s this big long logistics supply chain. You start turning off the wells … there are all the people downstream that that impacts,” he said.

There have been other actions in the region that have put a big question mark over fracking’s future. Fracking was permanently banned in Pennsylvania’s Delaware River basin last month. The Delaware River basin covers a 13,000 square-mile area in Pennsylvania, New York, New Jersey and Delaware, but the ban impacted Pennsylvania’s northeastern Marcellus Shale gas fields the most.

Callahan said in a statement at the time that the vote by the Delaware River Basin Commission defied “common sense, sound science and is a grave blow to constitutionally protected property rights.” All the while, drilling has continued in the region. Though it slowed significantly last spring, when the pandemic began, it picked back up in the latter half of the year.

Annual natural gas production nationwide was down by 1% in 2020, according to the U.S. Energy Information Administration, but production in Appalachia actually increased. Ohio, Pennsylvania and West Virginia produced 33.6 billion cubic feet per day in 2020, an increase over 2019 production of 32.1 billion cubic feet per day.

The average rig count this month in Ohio is 8, according to data from Baker Hughes, an oil field service company. In Pennsylvania, the average rig count is at 19. That’s the lowest rig count in Pennsylvania in a decade, but the Marcellus Shale Coalition said it’s not as dire as it seems. Drilling is more efficient, there are longer laterals and more frack stages.

Through the challenges, there are a few things to look forward to. As more people get vaccinated and things begin opening up more, people will travel. “That’s more people on airplanes, on the road,” Chadsey said. “We’re encouraged.”

Another bright spot is Shell’s ethane cracker plant, being built in Beaver County, Pennsylvania. The Beaver County Times reported March 16 the plant is expected to be completed next year. The facility is in early stages of commissioning and start-up activities. There are thousands of construction workers building the plant, which is expected to support about 600 permanent jobs once complete.

Callahan told Farm and Dairy that the coalition is eager to see the start-up of the cracker plant, not only for the jobs it will create directly, but the ones it could create downstream. The plant is expected to produce 1.6 million tons of polyethylene plastic each year, which can be used in many other products.

“There are already some manufacturers that use polyethylene in the area,” Callahan said. “You could have others that move operations closer to the source.”

https://www.farmanddairy.com/news/new-administration-new-challenges-for-oil-and-gas-industry/655483.html