Pages tagged "Energy"
This report card evaluates the current policies of Ohio, Pennsylvania, and West Virginia in a range of policy areas informed by the research of the Multi-State Shale Research Collaborative (MSSRC). It compares policies across the three states that address the social and economic issues that unconventional drilling delivers to the communities in which it occurs. The Scorecard thus informs policy-makers about the strengths and weaknesses of their respective policies. The three states can enhance their overall prosperity, and that of shale gas communities, by improving their grades – adopting policies that better mitigate the unanticipated negative impacts of unconventional gas drilling and that take better advantage of new economic activity and revenue generated by natural gas extraction. Read report.
This report card’s grading of state policies is limited to areas in which MSSRC has expertise. For example, we do not address environmental policies and, except for policies related to tracking health impacts, we do not address public health issues.
The table below shows the grades. In two of the nine policy areas, severance and property taxes, West Virginia earns an A: Ohio and Pennsylvania could score higher by emulating West Virginia policies. In four other areas at least one state receives a B. In three areas no state receives more than a C. All three states receive at least one F. These grades mean that all three states could achieve a solid report card if they adopted the policies of the state with the highest grade in each area. A report good enough to make the honor roll would require lifting grades in some areas above the current grade of any of the three states.
This handbook provides recommendations to county and local governments, human and social services, police and emergency services, and other local officials dealing with unconventional gas drilling. These recommendations are based on previous research conducted by the Multi-State Shale Research Collaborative (MSSRC) to document the human and social service impacts of increased drilling. Read PDF of report. The MSSRC brings together non-partisan, independent research and policy organizations from Pennsylvania, West Virginia, Ohio, New York and Virginia to monitor trends in employment, tax policy and community impacts from unconventional gas drilling. Prior research focused on the impact on jobs of drilling in six states; case studies of four counties in West Virginia, Ohio and Pennsylvania; and the human and social service impacts across these three states. Throughout this report, we pull from lessons learned from these studies, especially information we gathered from our case study counties — Tioga and Greene counties, Pennsylvania; Wetzel County, West Virginia; and Carroll County, Ohio.
The development of the Marcellus Shale has led to a boom in West Virginia’s natural gas production. But aside from the increase in drilling activity and state and local tax revenue, the natural gas boom has not brought with it the jobs and economic growth that many predicted. While the state’s natural gas production has increased dramatically over the past several years, West Virginia has lagged behind the rest of the country in terms of job growth and fewer West Virginians are employed today than before the boom. Even in the counties where production has increased the most, job growth has been lackluster. PDF of report
The capital intensive nature of natural gas drilling can dampen its economic impact, creating fewer jobs than other more labor-intensive industries. However, there may be bigger economic and job opportunities related to chemical-based manufacturing that needs the raw materials found in natural gas liquids, abundant in the Marcellus Shale region.
West Virginia and countless other states have a long history of using tax incentives to boost economic development and jobs. But the impact of the incentives is unclear, including the case of West Virginia’s so-called “cracker bill,” which failed to encourage the development of an ethane cracker plant or other major downstream activity.
With no large-scale ethane cracker facility and associated chemical-based manufacturing from natural gas liquids produced in West Virginia, other states are profiting on the state’s natural resources. As West Virginia Secretary of Commerce Keith Burdette said, after Chesapeake Energy signed a contract to ship 75,000 barrels of ethane a day out of the Marcellus Shale region, “They’re shipping out gas that could support investment here.”
West Virginia can avoid these past failures while still using tax policy as a tool to encourage economic development. This brief proposes a modification of West Virginia’s severance tax that would increase state revenue and also help realize the economic potential of the state’s natural gas liquids.
Given that the Marcellus Shale region extends beyond West Virginia, and the overlap of West Virginia’s shale economy with those of Pennsylvania and Ohio, policymakers should encourage a three-state dialogue about common severance tax policies that encourage processing within the region.
- While natural gas production is booming in West Virginia, the boom has not led to greater economic development. Overall, West Virginia lost jobs during the boom, and growth has been disappointing in the counties that have seen the biggest increase in gas production.
- With little success, West Virginia has offered large tax incentives to encourage chemical-based manufacturing plants to locate in the state and use its natural gas liquids. Instead, companies pipe the liquids out of West Virginia to be used elsewhere, taking jobs and economic growth with them.
- A new severance tax incentive, based on a higher rate for natural gas liquids, with a credit to related in-state industries, may encourage ethane cracking and other chemical manufacturing to create in-state jobs while generating additional tax revenue for investment in infrastructure and human capital.
- If West Virginia increased its severance tax on natural gas liquids from five to ten percent, it would increase revenue by an estimated $168 million over the next five years.
On May 20, 2015, WVCBP Executive Director Ted Boettner took part in a legislative briefing in Columbus, Ohio sponsored by the Multi-State Shale Research Collaborative and Ohio Assembly members Jack Cera (District 96) and Michele Lepore-Hagan (District 58) to discuss how Ohio can maximize benefits and minimize costs in shale drilling in Ohio.Ted's presentation explored how states like Ohio can create permanent natural resource trust funds to ensure long-term benefits of shale drilling.
The first hydraulically fractured shale wells were drilled in Pennsylvania and West Virginia nearly a decade ago. Drawing on existing experiences in these states, and the rapid advance of hydrofracking in Ohio, we can begin to assess the effect of shale development on the most active drilling communities. As pressure mounts to increase domestic oil and gas production, and shale development continues to grow, communities anticipating a shale energy boom need to understand what to expect, how to respond, and what to avoid. Read PDF of Executive Summary.
Read Wetzel County case study: Impacts of Gas Drilling in Wetzel County Researchers with the Multi-State Shale Research Collaborative set out to document the impact of shale drilling on the economy, community, government agencies, and human services in four counties with significant shale development – Carroll County in Ohio, Greene and Tioga counties in Pennsylvania, and Wetzel County in West Virginia. Using publicly available data, press reports, and local interviews, the collaborative has identified both the benefits and costs of drilling, and ways in which these communities have been transformed as a result. All four counties are small, rural, and generally poorer than the state as a whole. All are experiencing shale industry development and are among the largest producers in their respective states. Their experiences have been remarkably similar: Each reported a rapid influx of out-of-state workers; few local land-use limitations were in place when drilling took off; and for the most part companies have operated independently from local government oversight. There are differences among the counties, too, particularly as the industry shifted from developing methane (dry) gas to shale oil and wet gas rich in higher-priced liquid gas products. In Carroll, Greene, and Tioga, growth in drilling brought positive economic benefits and some new jobs as well as additional costs for police, emergency services, road damage, social services, increased rents, and a shortage of affordable housing. In Wetzel County, the story was slightly different. While the county produces 17 percent of West Virginia’s shale gas, it is home to a much larger number of conventional gas wells and better equipped to handle shale industry development. The county did report both positive and negative impacts from the growth in shale drilling, but not to the same degree as the other counties. For instance, Wetzel did not see a boom in population or a tightening in the housing market as other counties did. Greene County is no stranger to extractive industries with its long history of coal mining and conventional gas drilling. The expansion of shale gas drilling has had positive economic benefits so far, but Greene’s first-hand knowledge of the long-term economic and environmental impacts of mineral extraction offer a cautionary tale. In Tioga County, we found a community unprepared for the sudden overwhelming presence of the industry, with few tools to manage, let alone plan for, growth and change. Drilling brought economic benefits at the height of the boom, but those benefits proved temporary. As the industry shifted away from Tioga to other more lucrative shale plays in Ohio, Southwestern Pennsylvania, and North Dakota, businesses closed, employment declined, and the boom ended. Carroll County is home to half of Ohio’s gas wells. Residents, businesses, and labor leaders have welcomed new jobs in the county but are concerned that the best and highest-paying jobs are going to out-of-state workers rather than local residents. While local governments in Carroll and Wetzel saw an increase in tax revenue with more drilling, the same was not true in Greene and Tioga because of Pennsylvania’s local tax structure. The state enacted a local impact fee in 2012 that has provided local governments with new resources to mitigate some drilling impacts. Below is a summary of the key findings from each of the four case studies. To read the case studies themselves, go to http://multistateshale.org/case-studies.
Demographics and Drilling Activity
Leases, Signing Bonuses, and Royalties:
In all four counties, signing bonuses and royalties have increased the incomes of local residents and businesses benefiting from increased spending – but the economic benefits have not been shared equally or broadly
- Landowners are organizing to negotiate better lease agreements, which have been controversial.
- In Greene, Wetzel, and Tioga, a handful of landowners, including out-of-state residents and businesses, own a large share of the property, meaning that substantial lease and royalty income is concentrated in the hands of a few. This has diluted benefits to the local economy as income “leaks” out of town and out of state.
Employment and Economic Benefits:
Each of the four counties reported growth in oil and gas drilling jobs, but overall shale-related employment is still a small share of total county employment.
- Greene experienced the most significant growth in employment of the four counties. Private-sector employment grew by 40.2 percent between 2005 and 2012, and more than a quarter of the county’s workers are employed in natural resources and mining, although seven in 10 jobs are in coal.
- In Tioga, jobs and other economic benefits proved to be temporary, as the industry shifted to more lucrative shale plays. Tioga’s unemployment rate, which was below the state average during the boom, has risen, as statewide unemployment has fallen.
- Wetzel’s unemployment rate has remained consistently higher than the state average. Small local businesses, like gas stations, construction firms, and motels, have seen an increase in business. Shale-related employment itself accounts for only 2 percent of jobs in the county – 93 jobs.
- Jobs have been added in Carroll, but far fewer than promised. Unemployment fell from a recessionary 14 percent to 8.3 percent but remains higher than pre-recession levels (5.8 percent in July 2007). Statewide, shale-related employment is at fewer than 3,000 jobs, less than one-tenth of 1 percent of total Ohio jobs.
- Many oil and gas drilling jobs have gone to “transient” workers from parts of the country where the industry is more developed and the workers more experienced.
Out-of-state oil and gas workers have created increased demand for temporary housing in Carroll, Greene, and Tioga counties. Hotels filled up and new rooms were added, but growth was not sufficient to resolve what has become a problem. This insufficient housing supply has caused rents to increase, creating challenges for many local renters, including seniors, young people, and low-income individuals and families.
- In Carroll, rent increased significantly, in some cases doubling or tripling. Some low-income families received modest rental assistance, but it has not been enough.
- Greene, which faced a shortage of quality rental housing before the boom, has been hit particularly hard.
- Both Tioga and Greene reported an increased demand for housing assistance and an increase in homelessness. In Greene, some low-income families unable to secure adequate housing were separated and children were put into the foster care system.
- Hotel and campground occupancy by out-of-state workers increased in Wetzel, but the county did not experience the same level of housing cost increases as the others.
Roads and Infrastructure:
In all four counties, drilling activity has increased traffic of heavy trucks carrying gravel, equipment, water, chemicals, sand, and waste. This has caused greater wear and tear on roads not designed for heavy truckloads, and increased motor vehicle accidents.
- In Carroll, increased truck traffic created congestion, drove up traffic accidents, and raised costs for emergency services and road and guardrail damage.
- In Greene, truck traffic is damaging roads and bridges, increasing highway maintenance costs.
- Road damage has been a problem in Tioga, where roads were not posted and bonded at first; that has changed as gas drilling increased.
- Both Greene and Tioga reported increases in traffic-related accidents.
- Traffic and road safety are primary concerns in Wetzel. The sheriff’s office reported an increase in traffic citations for violations, including speeding and driving left-of-center. Heavy truck permits, maintenance costs, and vehicle accidents have all increased.
Crime data varied between the Pennsylvania communities and Wetzel County.
- In Greene and Tioga, researchers documented an increase in criminal activity as drilling activity increased.
- Wetzel, on the other hand, did not experience any increase in crime or social services costs, other than traffic violations attributed to drilling activity.
Health and Environmental Impacts:
The risk of water contamination near well sites and drilling waste disposal were key concerns in all four counties.
- In Carroll, citizens reported concerns about the potential of fracking wastewater contaminating drinking water supplies. 95 percent of county residents draw drinking water from wells.
- Greene residents reported concerns about water contamination and the increased costs that come with it, including costs for residents who had to re-build damaged water wells, haul water, find safe water for livestock, and buy bottled water to drink.
- In Wetzel, there are concerns about drilling waste disposal. In one month in 2013, the Wetzel County Landfill accepted 25,000 tons of drilling waste, prompting worries about the drilling waste’s potential radioactivity and its effect on landfill workers.
Emergency Room Visits:
Hospital data from Greene and Tioga counties showed an increase in emergency room visits as drilling activity increased.
- Greene’s Southwest Regional Medical Center had a steady and dramatic increase in emergency room visits between 2005-2006 and 2010-2011.
- At Tioga’s Soldiers and Sailors Memorial Hospital, emergency room visits were relatively steady between 2000-01 and 2007-08, but increased substantially during the boom years, along with uncompensated care costs.
Few drilling company workers brought families with them to any of the counties studied. School enrollments, for the most part, remained stable or continued to decline in all four counties.
- The dropout rate grew in Greene, exceeding the state average, as some students left school to take high-paying jobs in the industry. As companies moved elsewhere more recently, young men without high school diplomas have sought help from local human service providers.
- In Tioga, officials saw a decline in the share of low-income students, reporting that rising rent drove low-income families out of the area.
- Both Greene and Tioga reported an increase in the need for special education services. Drilling families in Greene accounted for one-quarter of those seeking early intervention services, while more students in Tioga required special education services, including emotional and learning supports.
- School enrollment had been declining in Wetzel before the drilling boom and has continued to decline.
- In Carroll, increased economic activity has generated more sales tax revenue for local government. More income is being generated from recording more deeds, mortgages, and leases, and heavy trucks paying the fuel tax. Local government and nonprofit organizations, including the Carrollton School District and the county itself, are benefiting from the leasing of mineral rights.
- In Wetzel, total property tax revenue has nearly tripled since 2005, and the county’s share of revenue from the severance tax and local hotel occupancy tax has increased. The county has collected more in property taxes assessed on natural gas reserves and drilling equipment.
- In Pennsylvania, initial increases in hotel occupancy taxes fell off because hotel occupants who stay over 30 days – many of them drilling workers – do not pay the tax. An impact fee authorized in Act 13 of 2012 has provided local governments with new resources to mitigate some drilling impacts.
- School enrollment had been declining in Wetzel before the drilling boom and has continued to decline.
- All four case studies recommend that local officials gather as much information as possible up front before drilling begins in their communities. The Carroll, Greene, and Tioga studies recommend following in the footsteps of Wetzel by creating a local oil and gas task force to coordinate discussions between government agencies, local communities, stakeholders, and companies.
- The Multi-state Shale Research Collaborative has recommended that Ohio, Pennsylvania, and West Virginia adopt severance taxes of no less than 5 percent, as is currently assessed in West Virginia, in order to help cover the costs of shale drilling activity. The case studies echo this call, recommending adoption of a severance tax in Pennsylvania and a higher tax rate in Ohio.
- The Wetzel case study recommends that drilling communities consider enacting local fees on gas wells and setting aside the revenue for future use.
- All four case studies recommend that state and local officials increase investments in fixing and policing the roads and take steps to address the shortage of affordable housing.
- The Carroll case study recommends that policymakers protect landowner and citizen rights, while the Greene and Tioga case studies recommend that local landowners organize to help each other navigate the growth of the oil and gas industry.
- The Carroll study recommends that policymakers investigate methods to encourage the oil and gas industry to hire more local workers and provide health insurance.
- The Greene and Tioga case studies recommend Pennsylvania require that local governments conduct assessments to ensure impact-fee money adequately addresses the impacts of increased drilling.
Full Case Studies: To read the four case studies, go to http://multistateshale.org/casestudies. The Multi-State Shale Research Collaborative conducts in-depth research and interviews to produce trend analyses and policy recommendations on the impacts of drilling in the Marcellus and Utica Shale. Member organizations include Fiscal Policy Institute of New York, Policy Matters Ohio, Keystone Research Center/Pennsylvania Budget and Policy Center, Commonwealth Institute for Fiscal Analysis in Virginia, and West Virginia Center on Budget and Policy.
Over the last five years, firms with an economic interest in the expansion of drilling in the Marcellus and Utica shale formations — and their allies, supporters, and trade associations — have used a variety of tools and techniques to exaggerate the employment impacts of shale drilling. These strategies have ranged from the use of inappropriate measures, such as data on new hires, to represent job growth to the misleading attribution of all jobs in “ancillary” industries to the shale industry. Read the full report.
A review of statements by representatives of shale drilling firms and their allies makes the motivation for this exaggeration clear — to preclude, or at least to minimize, taxation, regulation, and even careful examination of shale drilling.
An explicit example of this “defense by exaggeration” strategy occurred on July 19, 2012, at a Harrisburg press conference during which the Pennsylvania Chamber of Business and Industry joined the U.S. Chamber of Commerce for the launch of its “Shale Works for US” campaign.
An accurate assessment of the short- and long-term impacts of shale development is necessary to adequately prepare drilling communities for the emergence of the industry, to estimate negative externalities associated with this industry (such as road damage, water treatment, and habitat loss), and to recover the costs of these externalities.
That accurate assessment must include defensible estimates of the number of jobs created in the industry, the wages associated with those jobs, the distribution of those jobs between in-state and out-of-state workers, and the relationship to total state employment. To answer those questions, the Multi-State Shale Research Collaborative has examined employment in the Marcellus and Utica Shale in six states: Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia. Our findings include:
- New York, Ohio, Pennsylvania, and West Virginia have a long history of gas and oil production and a core of extraction-related jobs created well before the emergence of hydrofracking. Together, Ohio, Pennsylvania, and West Virginia had 38% of all producing wells in the country in 1990 and 32% in 2000.
- Some counties with a long history of mineral extraction have experienced a shift in employment from coal to shale extraction.
- Natural gas development has advanced quickly in the Marcellus Shale bringing with it some economic benefit to counties with significant drilling activity. Those impacts helped to insulate those counties from the worst effects of the Great Recession but had little overall impact on the state economy in any state studied.
- Job growth in the industry has been greatest (as a share of total employment) in West Virginia, but shale-related employment is less than 1% of total West Virginia employment and less than half a percent of total employment in all the other states.
- Region-wide, shale-related employment accounts for nearly 33,000 jobs, one out of every 794 jobs. The education and health sectors, by contrast, account for 4.5 million jobs in the region, one out of every six jobs.
- Between 2005 and 2012, less than four new shale-related jobs have been created for each new well. This figure stands in sharp contrast to the claims in some industry-finance studies, which have included estimates as high as 31 for the number of jobs created per well drilled.
- Employment estimates have been overstated, and the industry and its boosters have used inappropriate employment numbers, including equating new hires with new jobs and using ancillary job figures that largely have nothing to do with drilling, even after the flaws in those numbers have been brought to their attention.
- In addition, industry-funded studies, including those by Dr. Timothy Considine and co-authors, have substantially overstated the total jobs impact of the shale industry. With the passage of several years since the earliest Considine studies, we now know that actual Pennsylvania job growth has been much less than his initial estimates for 2011 and 2012.
- Finally, employment gains in some counties have already been reversed as drilling activity, which is highly sensitive to commodity prices, shifted to more lucrative oil shale fields in Ohio and North Dakota.
- In fact, shale-related employment across the six-state Marcellus/Utica region fell over the past 12 months for which data exist, from the 1st quarter of 2012 to the 1st quarter of 2013.
On February 13, 2012 Executive Director Ted Boettner presented at the Annual Conference of the West Virginia Association of Counties on the benefits of an economic diversification fund in West Virginia. Such a fund would provide revenue for the state during times of economic slowdown which can especially hard-hitting to local and county governments and school systems. View the presentation in PDF format
Executive Director Ted Boettner was invited by the Senate Economic Development Committee to present information on a West Virginia Future Fund. Senate Bill 182 would create such a fund and is under consideration by the committee. He provided data on natural gas production and prices and gave estimates on how much revenue could accumulate in a Future Fund over the next 20 years. View the presentation in PDF format.
As one of the least economically diverse states in the nation, West Virginia relies heavily on its natural resources for revenue. Funds from these resources fluctuate and, one day, will be gone. As the Marcellus “Gold Rush” comes to West Virginia, it is time for policymakers to consider establishing a permanent mineral trust fund in West Virginia, similar to what six other states have done. “Creating an Economic Diversification Fund: Turning Nonrenewable Natural Resources into Sustainable Wealth for West Virginia” highlights the benefits that such funds have brought to other states and how one could benefit West Virginia. Read
As policymakers debate regulating Marcellus Shale gas drilling, the state needs to protect itself from the booms and busts of energy development that have left many counties with undiversified economies, a less-educated workforce and poorer health outcomes. This is according to a new report by the West Virginia Center on Budget and Policy, "Booms and Busts: The Impacts of West Virginia’s Energy Economy", that looks at the impacts of the cyclical nature of the energy sector on the state’s economy and mining counties. Read