Fracking Nonsense: The Job Myth of Gas Drilling

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CEPR Blog

Fracking Nonsense: The Job Myth of Gas Drilling

by
Helene Jorgensen

Natural gas companies are trying to sell fracking as the solution to all of the economic ills ailing this country.  Supposedly fracking can bring the economy out of its current stagnation by creating uncountable new jobs, without running up government deficits, and even save us from global warming in the process.  So how come local residents and environmentalists oppose fracking? The short answer is that fracking does not create local jobs, it lowers property values, and pollutes the water we drink and the air we breathe.

Hydraulic fracturing, or fracking for short, is drilling for gas buried more than a mile under ground in hard rock layers. In order to extract the gas, a toxic cocktail of chemicals is pumped deep into the ground to fracture the rock. In recent years, the state of Pennsylvania has embraced the fracking boom and more than 4,500 wells have been drilled there since 2007. The state of New York has taken a more prudent approach by implementing a moratorium until the environmental and economic effects have been evaluated. The New York Department of Environmental Conservation is currently seeking public comments on the issue (deadline January 11).

In an intensive lobbying campaign to influence a skeptical public’s opinions about fracking, the gas industry has commissioned a number of economic studies that find huge job gains from fracking. A recent study by the economic forecasting company IHS Global Insight Inc., paid for by the America’s Natural Gas Alliance, projects that fracking will create 1.1 million jobs in the United States by year 2020. However, a closer read of the study reveals that the analysis also projects that fracking will actually lead to widespread job losses in other sectors of the economy, and would result in slightly lower overall employment levels the following 10 years, compared to what it would be if fracking were restricted. In another study, commissioned by the Marcellus Shale Coalition, researchers with Penn State University estimated that gas drilling would support 216,000 jobs in Pennsylvania alone by 2015. The most recent data from the Bureau of Labor Statistics show employment in the oil and gas industry to be 4,144 in Pennsylvania.

Rather than trying to project what will happen in the future, one could look at what the employment impact has been from Pennsylvania’s love affair with fracking since 2007, using actual employment data readily available from the Bureau of Labor Statistics.

What the data tell us is that fracking has created very few jobs. In fact, employment in five northeast Pennsylvania counties (McKean, Potter, Tioga, Bradford and Susquehanna) with high drilling activity declined by 2.7 percent. Of course, the economy was in a recession, and it is possible that employment would have decreased by more had it not been for fracking.  To evaluate this, one can look at the employment trend in five adjacent New York counties (Allegany, Steuben, Chemung, Tioga and Broome) which had a moratorium on fracking.  By assuming that the change in employment in the five PA counties would have been the same as in the five NY counties, a baseline for employment can be established if no hydraulic fracturing had occurred. In the five NY counties, employment declined by 5.2 percent over the three year period.  Had employment declined by the same rate in the PA counties as in the NY counties since 2007, employment would have been 51,950 instead of 53,300 in 2010. This suggests that hydraulic fracturing contributed to the creation of around 1,350 jobs – this includes both direct jobs in the gas industry, indirect jobs in the supply chain and induced jobs from spending by workers and landowners. (An industry-funded study by the Public Policy Institute of New York projects that the same drilling level would create 62,620 jobs in New York).

In rural areas with few job opportunities and high unemployment rates, the creation of 1,350 jobs would still be good news, if it were not for the fact that most of the jobs go to workers from out-of-state. A survey of gas companies, conducted by the Marcellus Shale Education & Training Center, showed that 70 to 80 percent of workers were out of state. Including the many truck drivers bringing in fracking water and trucking out the fracking wastewater to be deposited in underground wells in Ohio in such large quantities that it has triggered earthquakes.

Essentially, fracking in Pennsylvania became a job program for people from Texas and Oklahoma.  The costs are borne by the local population in terms of polluted drinking water, deteriorating roads from heavy truck traffic, smog, a noise-level equaling that of a busy interstate, a landscape marred by wells, pipelines and holding pools. The latter also poses a risk of leaking chemicals into the surrounding grass pastures. In many cases this has lead to illness or death of livestock. Moreover, a number of landowners have reported a rise in fracking-related illnesses, including asthma, heavy metal poisoning, and allergies, afflicting their families, especially children.

Still landowners lease their lands with the expectation of income from leasing bonuses and royalty payments. Leasing bonuses range from $500 per acre to over $20,000 per acre near Fort Worth, TX. For struggling farmers, unemployed workers and others affected by the economic downturn, leasing of land can provide much-needed extra income. But looking at the bottom-line, land leasing may not be such a good deal.  Gas drilling lowers property values.  The underground rights have been leased off, and landowners in the process have lost full control of land use above ground. Active gas wells devalue the land and lower the quality of life of residents and their neighbors. If something goes wrong, such as contamination of underground water due to faulty well casting, the property may not be sellable at any price.

Leasing land for gas drilling does not miraculously create a big pot of money for landowners and gas companies. The costs may very well outweigh the revenues generated. And local residents are left bearing most of the risks.

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