Wednesday, July 27, 2011

There will be Winners (and Losers)

Last Thursday and Friday the Finger Lakes Institute presented a conference focusing on proactive approaches to mitigating the impacts of Marcellus shale development. A number of sessions touched on economic development and impacts from the “boom-bust cycle” that accompanies extractive industries.

Timothy Kelsey, from Pennsylvania State University extension, emphasized that at some point gas activities go away. In the long run, he said, you need to ask how you make sure communities remain whole.  

There is a lot of uncertainty about the costs, risks and long-term implications, Kelsey said. But one thing is for certain: there will be “haves” and “have nots”. Communities are divided by development.

The biggest problem, though, is the rapid pace of Marcellus development in Pennsylvania’s northern tier. Kelsey believes that neither communities nor state regulatory agencies had time to adequately prepare for the rapid influx of drillers. “The timing, pace and scale of drilling drives the impacts,” he said. Although the overall impact might be felt by the state as a whole over the next 30 years, localized impacts would more likely reflect the short-term lifespan of the individual wells.

His remarks echo what Cornell professor Susan Christopherson says. She is an economic geographer with Cornell’s Department of City and Regional Planning. During a recent interview she highlighted concerns about the regional impacts of industrialized drilling.

Unconventional shale drilling and production activities depend on many ancillary services:
  • pumping stations for water withdrawal
  • waste disposal facilities
  • temporary housing for large labor force
  • gravel quarries
  • staging sites and equipment storage

While the economic effects from drilling are unevenly distributed, everyone pays the costs says Christopherson. Some towns will experience an upswing in their economies during the boom part of the cycle, but the overall region will become industrialized to support the drilling, storage and transportation of gas. Counties that never see a penny of drilling-related revenues may still feel the impacts of heavy truck traffic, gas storage facilities or pipeline.

As for the gas industry’s promise of job creation, Christopherson noted that the actual numbers coming out of Pennsylvania’s Department of Labor are only a fraction of industry predictions. The problem, she said, is that economists making rosy predictions have been simply relying on input-output models – they haven’t been checking actual labor figures.

The numbers generated by models are not real job figures, Christopherson said. They’re just crude estimates of “job creation potential”. The numbers coming out of PA are inflated, she says, because both industry and media have concentrated on the number of “new hires”. That number, however, includes rehires of previously laid-off workers.

Once you take all the figures into account, Christopherson said the actual number of jobs created by Marcellus drilling is just under 10,000. More importantly, and what’s not reflected in those numbers, is that the high-paying corporate jobs end up in Texas, where corporate headquarters are located. “What we’ll get in NY is construction jobs, retail and hospitality.” You can find her most recent report (and some other interesting reading) here.

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