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Marcellus shale could generate $1B in taxes, 100,000 jobs, study finds

| Thursday, July 22, 2010

An industry-backed study shows that drilling for Marcellus shale natural gas in Pennsylvania and West Virginia could generate $1 billion a year in taxes and indirectly support 100,000 jobs during the next decade as investments filter through the local economy.

The American Petroleum Institute, which paid for the study, said Wednesday that the findings underscore the industry's enthusiasm for the gas pocket that runs a mile beneath Appalachia. State lawmakers, they said, could slow that potential growth by imposing a severance tax on the gas, as proposed for Oct. 1.

The study by Timothy Considine of Wyoming's Natural Resource Economics Inc. says the industry next year could support 72,160 jobs and generate state and local taxes worth $652 million. With modest growth during the decade, it could employ 101,975 people and produce $945 million in tax collections.

"The Marcellus is a very exciting development," Considine said. "I view it as a generational resource that will last well into this century."

With robust growth and additional drilling in New York by 2020, the industry could employ 282,716 people and generate nearly $3 billion in state and local taxes, the study found.

Release of the study took place as the Environmental Protection Agency prepares for hearings today in Canonsburg and later in Binghamton, N.Y., on issues related to hydraulic fracturing, or "fracking," a drilling process now exempt from agency scrutiny. The industry opposes having the process regulated by the agency.

Those numbers include direct jobs, indirect jobs in related industries and induced jobs supported by people working in the industry who spend money locally, Considine said. Drilling a gas well sets off a chain of spending, he said, that includes trucking firms hiring drivers and the drivers then spending their wages.

The industry estimates Pennsylvanians filled only 30 percent of Marcellus-related jobs created in the state so far, and even that might be overestimating, said Jim Hayes, director of work force and economic development at Westmoreland County Community College in Youngwood.

The school said yesterday it will lead a consortium of community colleges that received a $4.9 million grant from the U.S. Department of Labor to train workers for the industry. Each gas well requires about 400 workers in 150 occupations, but the jobs are physically demanding and require people to work long hours, Hayes said.

Some say, however, the industry is inflating its impact.

Considine wrote a previous analysis at Penn State University that raised questions. It did not have significant errors, but William E. Easterling, dean of Penn State's College of Earth and Mineral Sciences, wrote in a June 9 letter that he "found flaws in the way that the report was written and presented to the public."

Considine's Penn State study did not identify the Marcellus Shale Coalition industry group as sponsor of the research, a "clear error," Easterling told the Responsible Drilling Alliance, a Williamsport volunteer organization that raised questions about the study.

Considine and his co-author "could and probably should have been more circumspect in connecting their findings to policy implications" for the state, and they "may well have crossed the line between policy analysis and policy advocacy," Easterling said.

The university retracted the initial version of the report and reissued a version that identified the funding source. An updated study released in May followed Penn State's publication guidelines. Easterling could not be reached for comment.

Geoff Rushton, a university spokesman, said the school stands by the new version of the report.

"We don't take any position on what that research yields," Rushton said.

Considine said nothing was wrong with the tone of the initial study. Now employed by the University of Wyoming, he consults for the Marcellus Shale Coalition and American Petroleum Institute.

"We didn't make any policy recommendations. ... I just shoot straight on this and give it my best estimate," he said.

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