Economics and Gas Drilling in the Marcellus Shale

From the beginning of the Marcellus gas hoopla in our region, I’ve been hearing about the local benefits that drilling will bring to local communities, including my little town in the New York Catskills. Set aside for the moment the environmental issues that are getting all the press. I’m talking here about economics. Gas drilling will bring jobs, jobs, jobs, we are urged. It will bring other wealth in the form of stimulus to business activity and royalties to local landowners. We, the locals, will enjoy the benefits of the cleanest form of fossil energy, even while we’ll be doing our part to free the U.S. from dependency on foreign oil. These are the reasons we should bow to the wisdom of our state governments and welcome out-of-state developers to dig for gas in our hills and valleys.

None of these “benefits”seem to me to pan out, at least not at the end of the day. Here’s my take on them, below. If you disagree, I invite you to refute what I say, but with facts, please, not rhetoric. And that's not just rhetoric on my part;I really do want to receive some feedback from both sides of the gas drilling debate.

Jobs: Start with on-site jobs. The best of the jobs, I’ve been informed, come along with the gas operators. These are professional and management posts, and the rig jobs that are filled by highly paid itinerant workers. No kidding, these rig operators pull down some $75,000 a year and up. Do these jobs figure into the impressive Pennsylvania statistics that we’ve seen, for example, on gas play job growth? They shouldn’t. These workers are residents of other states whose local jobs will end and who are not likely to stay or to invest their riches locally. We’re told that the well drilling and fracking processes will be completed in a matter of weeks or a few months, so that rig workers, and presumably the managers, professionals, foremen, et al, will at that point move on. What seems to be in the offing for locals in the way of industry jobs are truck driving, security, and some low-level office work

Non-industry jobs and business development: Yes, the workers will need to be housed and fed as long as they are around, so there will be new staffing at delis, restaurants, bars, and real estate agencies. For how long? Weeks? I’m hearing the sound of a quickee boom, and then a bust. Gravel quarries will do well in the longer haul. But what the yea-sayers are leaving out is that much of the other work that will generated by the gas play will be in the nature of policing, social services and cleanup. And that will need to be funded, not by the gas companies or out of gas income, but by the same strapped taxpayers who will not have benefitted from the gas play in any way, including those whose real estate values have plummeted through proximity to it.

Landowners: Those who have entered into well-negotiated leases will certainly come out ahead economically. Even many of them may be unsettled to learn of the extent to which their lives and their land will be disrupted, but they will probably be rewarded in due proportion to the harm that comes their way. That is, a protracted disruption will be due to high production which will also produce substantial royalty payments. So, the more damage is done, the more likely it is that they will move away, leaving their property desolated and taking their disposable income with them.

Clean energy: Many reporters have noted the distinction between the environmental effects of the harvesting process and those of the use of gas as a heating fuel: the former is very dirty; the latter is clean as fossil fuels go. The people in the Marcellus will be getting the dirty. Many will not get the clean, as there is no natural gas service throughout large rural reaches of the region.

Patriotism: Finally, there’s the What’s Good for the Country is Good for You argument. “Our” gas will be used in the U.S.and help to wean our country from reliance on wicked oil suppliers in the Middle East. Nonsense, I say. We’re not geared to keeping the gas here for future use, and have nowhere to put it all. I’m certain that much of Pennsylvania’s gas is already destined, if it has not been delivered, to overseas markets. Who is it that controls where the volumes pumped out of the Marcellus via the massive pipelines, such as the newly expanded Millennium, will go? It’s the gas companies, including the foreign entities like Statoil that hold substantial interests in them, who will decide. It won’t be Uncle Sam.


So, if these arguments are supposed to be delivering the good news on gas drilling, they’re lost on me.