Appalachian Basin

*UPDATE II* On the One Hand, On the Other Hand

As a Penn Stater, I was taken aback by an article in the Binghamton Press Connects suggesting, based on a Penn  State study, that Susquehanna County “local governments are not reaping widespread economic benefits — or incurring significant extra costs — as a result of Marcellus Shale drilling.”  The headline (“Drilling Providing Little Help to Susquehanna County Economy”) was particularly disturbing, as anyone with the slightest familiarity of what’s happening in Susquehanna County knows it isn’t true.  Knowing reporters can get it wrong, I checked for myself and went to the orginal report entitled Impacts of Marcellus Shale Development on Municipal Governments in Susquehanna and Washington Counties, 2010.  What I found was a combination of a weak report with weak reporting.

There are four key problems with the study.  One is typical of many Penn State reports – equivocal “one the hand, on the other hand” writing that seeks to balance every finding with a statement that it could be otherwise, as if everything was a “six of the one, half-dozen of the other” world which, of course, it’s not.  This allows reporters or headline writers to pull whatever they want from a document.  If they don’t like seeing local “officials noted that gas development is having significant impacts on their roads, but so far the costs of repair and upgrade are being paid by the gas companies, not by local residents” they can go to a quote a few lines later that speculates “municipal governments are not experiencing major increases in revenue to help pay for any such impacts from natural gas development.”

Reading this, I felt like screaming “no kidding – you just said gas companies are paying for the impacts!”  This isn’t the issue, though – it’s the fact the editor of Press Connects chose to focus on the qualification, rather than the finding.  That editor was provided this opportunity by the failure of the report to simply state the facts without additional baseless speculation.

The second problem with the Penn State report is that it never provides key data essential to knowing what’s really happening.  What were the 15 municipalities studied, for example?  Did they include Boroughs as well as Townships (bearing in mind impacts tend to be quite different)?  Did all the communities rely upon the Earned Income Tax, or just some?  This extraordinarily unfair tax is common to much of Pennsylvania, but much less so in the Northeast, where communities rely more on the property tax due to higher percentages of out-of-county or state land ownership.  A municipality without this tax would, of course, see no increase in revenue from it but that doesn’t mean property values aren’t going up or that a school district isn’t avoiding tax increases that would otherwise be needed (many are).

Elk Lake School, Which Has Kept Taxes Down with Gas Income

This brings us to a third major problem – the fact this study is extremely subjective in nature and took place over a period of economic recession when traditional economic mainstays of the area like construction and real estate development came to a complete halt.  The report acknowledges this but does nothing to sort it out or take note of the role of natural gas in sustaining the economy and municipal budgets during these difficult times.  It’s as if they assume that the status quo would have remainded constant without natural gas development despite these massive industries taking a big hit.  This is a fantasy land where most of us don’t have the ability to reside.  Many readers of this blog know far too well the consequences of the real estate and construction downturn in Northeast Pennsylvania.  In fact, it leads   most of us frequently to say “but for gas, where would we be”.  It appears that Penn State hardly considers this question.

Finally, there is this problem – the study doesn’t address what has happened post-2009 and that makes a whole lot of difference, given the extensive expansion of natural gas development in Susquehanna County in 2010 and this year.  Some 4,000+ people didn’t turn out at the Cabot Picnic for nothing!  There are other issues as well, such as the false suggestions that lack of local police is a gas company problem and home building stopped due to gas development, but these are minor.

Notwithstanding all this, let’s not ignore the bigger problems with the Press Connects reporting.  The headline, as noted above, is an egregious distortion of the findings of the Penn State report.  The article, while much more fair, also missed the larger point of Penn State’s findings – that natural gas has not busted municipal budgets.  Whether or not revenues increased or not is irrelevant if gas companies are covering the costs of impacts, and they are!  Moreover, holding an economy steady is pretty darned good during the largest economic downturn since the great depression.  Don’t take my word for it though, ask the 10 million Americans who lost their jobs as a result.  I bet they would like them to have them back at this point.

Finally, whether or not communities are collecting increased wage taxes is irrelevant if the community doesn’t collect them or the collection agency is failing to capture them, given that such taxes apply to non-resident workers as well as residents.  The article could have also done a much better job pulling out the positives from the report.  Consider these findings:

  • Quite a few townships with significant gas development have not “spent a nickel” on gas related issues.
  • All the township officials noted that the gas companies have been proactive in repairing and upgrading roads, and they had been doing so at the company’s expense.  They generally were very satisfied with the quality of the repairs and upgrades, and noted that company policies are to leave the roads in equal or better condition than before the gas development began.
  • The township officials made frequent mention of in-kind contributions that the gas companies are making to their communities.  The most significant contributions they discussed are road upgrades and repairs, but they also noted that companies are making charitable contributions to local nonprofit activities, such as fairs, parks, and volunteer fire departments.  Several townships reported that gas companies had provided street lights, signs, and expanded utilities in their jurisdiction.
  • A few township officials reported that their township had leased land for Marcellus Shale development that typically involved a municipal park.  Most reported that they were using the leasing dollars to upgrade their recreational facilities, so they are using the dollars as an investment in their community.

More balanced reporting would have yielded these findings, but in the abscence of this I do wish my alma mater would not create these opportunities for manipulation.

UPDATE I: Several people have pointed out to us the major non-municipal contributions of gas companies to communities.  Chief Oil & Gas, for example, and Cabot Oil & Gas have both made major donations ti United Way.  Check them out here and here.  Why isn’t that being noticed by PSU and the press in their reports?

UPDATE II:  Check out how the Elk Lake School budget has been positively affected by natural gas revenues.


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