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Energy
Tomorrow
Tale
of Three Shale States
by Mark Green
Apr. 4, 2013
Pennsylvania,
Ohio and New York. Three states
blessed with vast shale resources, three stories:
Pennsylvania
The
shale natural gas revolution has
revolutionized the state’s economy. A recent IHS report:
The
adoption of hydraulic fracturing in
Pennsylvania was the main driver of double digit job growth in
Pennsylvania in
2010 and 2011, providing a bulwark against deep recession at a time
when many
other sectors of the state economy were struggling.
In
terms of jobs:
The
economic activity associated with
unconventional gas will directly and indirectly (support) nearly
103,000 jobs
in the state in 2012, especially in the drilling and completion and
steel and
metal fabrication manufacturing sectors. These two sectors accounted
for 22% of
the state’s total manufacturing jobs in 2012. The state’s
unconventional
gas-related employment is expected to more than double to nearly
221,000 by
2020 and grow to 387,000 by 2035. These jobs would employ 5.6% of the
state
labor force by 2035, helping to reduce unemployment and creating a
steady
source of payroll growth for the next two decades.
And
economic growth and revenue generation for
government:
Unconventional
gas activity contributed
value-added economic activity of over $14 billion in Pennsylvania in
2012. We
forecast that this contribution will grow to just over $49.0 billion by
2035.
As for labor income, the average annual wage in Pennsylvania in 2012 is
$58,400, while the average wage of direct jobs in unconventional gas
activity
is much higher, at $97,000.There is also the contribution of
unconventional gas
employment to government revenues. In Pennsylvania in 2012, it
generated nearly
$3 billion in taxes for state and federal coffers. This includes almost
$1.3
billion in state and local taxes, or the equivalent of 3.9% of the
state’s 2011
tax revenues.
Thanks
to ample shale reserves, the combination
of hydraulic fracturing and horizontal drilling and a tax system that
encourages development while generating revenues at the state, county
and local
level - $204 million in 2011 – Pennsylvania’s economy weathered the
recession
and continues to advance. It illustrates for other states what can
happen with
safe and responsible oil and natural gas development – encouraged by
common-sense state regulatory and tax policies.
Ohio
The
Utica shale formation that dominates the
eastern half of the state holds much promise, and energy development is
just
getting started. Chesapeake Energy, for example, has spent more than $1
billion
in Ohio, paying more than $650 million to land and mineral rights
owners.
The
state’s energy potential, as well as more
mature shale development in next-door Pennsylvania, already is
generating
growth in associated industries, including manufacturing. According to
IHS,
unconventional drilling employment supports 38,000 jobs, but that is
projected
to expand to 143,000 by 2020 and 266,000 by 2035. IHS:
Unconventional
gas activity contributed
value-added economic activity of $4.1 billion in Ohio in 2012. We
forecast that
this contribution will grow to $35.2 billion by 2035. As for labor
income, the
average annual wage in Ohio in 2012 is almost $55,000, while the
average wage
of direct jobs in unconventional gas activity is $81,000, providing a
sizable
economic boost. There is also the contribution of unconventional gas
employment
to government revenues. In Ohio in 2012, it generated nearly $1.5
billion in
taxes for state and federal coffers. This includes over $910 million in
state
and local taxes, or the equivalent of about 3.6% of the state’s $25
billion in
2011 revenues.
The
last thing state leaders should do is risk
hindering the upward trajectory of figures for employment, wage and
income and
revenue generated for government – which a proposed increase in the
state’s
severance tax could do.
Ohio
voters sense that would be bad for their
state’s energy development and bad for the state economy. A new Harris
Interactive survey of registered Ohio voters found 68 percent agree
that an
increased severance tax could slow oil and natural gas development in
the
state, while 69 percent agree that increasing the tax could eliminate
oil and
natural gas jobs – as well as jobs in other sectors. Other key poll
results:
76
percent agree that increasing Ohio’s
severance tax could harm the state’s economy because companies might go
to
other states for energy production.
77
percent agree that increasing Ohio’s
severance tax could end up hurting consumers of gasoline and home
heating
fuels.
More
broadly, 75 percent agree that increasing
energy taxes, like taxes on oil and natural gas companies, hurts
everyone
because those tax hikes could drive up energy costs for consumers.
67
percent agree that raising taxes only on America’s
oil and natural gas companies – or on just a few companies as has been
proposed
in Washington – would be bad, unfair and discriminatory tax policy.
Ohio
Petroleum Council Executive Director Chris
Ziegler:
“Ohio
voters understand that increased taxes on
energy development could have a direct negative impact them. This
survey tells
us Ohioans are leery of anything that hinders the promise of high
paying jobs
and a better quality of life associated with shale energy development.
Ohioans
worry that any tax increase could lead to higher costs.”
New
York
Residents
of the Empire State remain spectators
to the shale energy revolution ongoing in Pennsylvania and getting
under way in
Ohio. The energy-rich Marcellus shale formation that has spawned so
much growth
in Pennsylvania reaches up in to New York as well. But the state has
had a
drilling moratorium in place since 2008 – in effect, a moratorium on
shale
energy jobs, shale energy economic stimulus and shale energy revenue
for
government. In February, unemployment was 8.4 percent (compared to 7.7
percent
nationally), and unemployment in the state’s non-metro upstate counties
was
10.4 percent.
Yet,
state officials continue to dither –
again, after more than four years of study, review and conversation in
the
public square. In an op-ed for the New York Daily News last month,
former
Pennsylvania Gov. Ed Rendell, who presided over the dawn of his state’s
energy
renaissance, urged New York officials to go forward with natural gas
development:
As
a Democrat, I understand the worries of
those who question natural gas development. I have shared some of their
concerns. But I would ask that folks do as I did: Step back and look at
the
facts. See the bigger picture. We must push for natural gas development
with appropriate
oversight and regulation. But most importantly, we must push forward.
The
benefits, the environment, our citizens and our energy security are
just too
great to ignore.
New
York State Petroleum Council Executive
Director Karen Moreau:
“During
his time in office, Rendell saw the
possibilities safe natural gas development could provide to struggling
communities and took action. He brought the industry to Pennsylvania
under
strong oversight, keeping in mind the concerns of others while paying
attention
to the facts. Using his knowledge that natural gas development can be
done
safely and securely, Governor Rendell helped to create thousands of
reliable,
well-paying jobs, revitalized a sluggish economy and put his state on a
path to
lasting success. … It’s time for New Yorkers to know what it’s like to
have a
strong economy, reliable jobs and a safer, cleaner energy source. It’s
time for
Governor (Andrew) Cuomo to take the advice of Governor Rendell … and
the
countless others advocating for the end of the ban on hydraulic
fracturing.
It’s time to bring safe natural gas development to New York.”
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