Marcellus Shale

Marcellus Shale Facts, Falsehoods and Flaky Statements

Getting the straight, untwisted facts concerning any aspect of natural gas development is very difficult.  Moreover, the anti-natural gas element seems particularly adept at emotional presentations that are half truths rather than facts.  Since my background is finance, I was particularly interested in Jannette Barth’s study on the economic impact of Marcellus Shale.  In her study and at anti-natural gas meetings Barth states, “Studies used to support the claim that drilling will bring economic benefits to New York are either biased, dated, (or) seriously flawed.”

Then, she produces a study that is, “biased, dated and seriously flawed.”

Barth compares gas’s economic impact in New York’s top 10 gas producing counties to neighboring non-gas producing counties. She unequivocally concludes that ‘gas counties’ are not doing better economically than neighboring counties. But gas jobs and payroll in “gas counties” make up less than 4/10s of 1% (.004) of those counties’ jobs and payroll, indicating these counties could hardly be characterized as major gas producing areas to contrast with others.  Her conclusion, as a result, can certainly be described as seriously flawed, based on the insignificant difference between the two sets of counties.

Barth dismisses the natural gas industry’s economic multiplier of 1.4 (every $1 payroll having $1.40 total impact on the local economy.)   She concludes that, “On economic impact alone, gas drilling should not necessarily be encouraged…it would appear to make more sense to encourage an alternative industry that would provide a greater economic impact…such as tourism.”  Barth never gives an economic multiplier for tourism, however.  Here is what the New York State Department of Labor had to say about the tourism (leisure and hospitality) multiplier as compared to other select industries (emphasis added):

The value of multipliers vary considerably across industry groups and even among industries within the same broad group … These range in value from a high of 3.41 for information to a low of 1.50 for leisure & hospitality.

Barth also ignores the fact there has to be at least two parts to a multiplication equation; in this case, the average salary to be multiplied.  Since Barth’s paper was issued, wages by industry data has been published for 2010 by the New York State Department of Labor.   Here is what it shows:

New York State Department of Labor, Wages by Industry, 2010

The two tourism categories (“Arts, Entertainment, and Recreation” and “Accommodation and Food Services”) had average salaries of $45,173 and $22,191, respectively, while “Oil and Gas Extraction” produced average wages of $93,722 – more than twice one category of tourism and more than quadruple the other.  Just to equal the impact of natural gas, these tourism industries would need economic multipliers of 2.07 to 4.22.  Which industry would you rather grow?  Isn’t the answer obvious?

On rural environments, Barth states, “Unfortunately, it is difficult to assign precise monetary values to aesthetic benefits.”  Of course, it’s difficult to value aesthetics, primarily because someone else usually owns it!  But the anti-natural gas activists don’t want someone else’s property rights to interfere with their aesthetics.

Throughout, Barth uses possibilities in a way that can be described, as follows:

it’s a fact that it’s a possibility

A few examples:

Barth states, “It is possible that local land owners who get rich from natural gas will move to Florida or other points south, taking their new found wealth with them”.  (She ignores that it’s also possible they might not move!  And even if half moved, the half that stayed would be pumping NEW MONEY into the local and state economy.)

Due to negative economic issues, Barth states that, “It is quite possible that…existing homeowners may be driven out”.  (That they might also stay, due to positive economic issues, isn’t mentioned.)

“To some extent, gas drilling and other industries (tourism, sport fishing and hunting) may be mutually exclusive.”  (Or maybe not?)

“Far fewer retirees will choose to settle and second home owners would certainly be vastly reduced in numbers.”  (Based on what study of occurrences that have not yet occurred?)

Barth quotes a study by Headwater Economics, which compared western U.S. counties that focused on fossil fuel extraction as an economic development strategy, to counties that did not focus on such industries.  Barth quotes, “While energy focused counties race forward and then falter, non energy peer counties continue to grow steadily.”

Other Headwater studies provide a more complete and accurate description of their research, “Energy producing states outperformed their peers fiscally at the start of the recession, but ultimately the decline in fossil fuel prices and reduced revenue exposed (them) to the impacts of the recession.”

Headwater studies also say, “Predominantly rural areas with high levels of drilling and limited economic diversity may be the most overwhelmed by the buildup phase of the energy boom, but also are the places that ultimately may see the greatest long term fiscal gain from energy development.”

Further, Headwater states, “The tax revenue from fossil fuel extraction is the longest lasting legacy of fossil fuel development…it continues to accrue.”  On green energy, Headwater notes, “Colorado made energy revenue funding available for regional clean energy initiatives…the funding helped launch an effort that has grown businesses and jobs and has funded clean energy infrastructure.”  I wonder those energy revenues came from – maybe Natural gas?  What do you think.

Barth’s study, as is plain to see, is seriously flawed and full of falsehoods, whether deliberate or accidental.  It is really just a lot of speculation on what she hopes is the case, based upon her unjustified fear of what might take place.  One of four studies that Barth trashes is a Penn State study.  Of it, she says, “An intelligent lawmaker should not take this study seriously.”  I would suggest, after having read her study, that anyone with a room temperature IQ should not take her study seriously.



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