Socio-Economic-Historical/Quality of Life Aspects of Gas Drilling

Economic Studies/Stories

Susan Christopherson from Cornell presented preliminary results of Cornell study at a Legislative Briefing in Albany on  11/18/10

Marcellus Shale Gas Drilling:  What Does it Mean for Economic Development?

Preliminary findings on the Economic Consequences of Natural Gas Extraction in the Marcellus Shale

SUSAN CHRISTOPHERSON, CORNELL UNIVERSITY,   SMC23@CORNELL.EDU

View Slides from the briefing:  Christopherson preliminary[1]

Following the briefing, Christopherson appeared on Capitol Pressroom — Listen to the audio:http://thecapitolpressroom.org/the-capitol-pressroom-program-for-november-18-2010/

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“A COMPREHENSIVE ECONOMIC IMPACT ANALYSIS OF NATURAL GAS EXTRACTION IN THE MARCELLUS SHALE.”  Principal Investigator, Professor Susan Christofpherson, Cornell University.

I. There will be a briefing/news conference Thursday, November 18, 9:00-10:30 AM, Room 711A, Legislative Office Building, Albany, N.Y.,  to present early results from this study.

II.  Based on the research New Yorkers for Sustainable Energy Solutions Statewide (NYSESS) has done on this issue, we expect central highlights to include:

1. The two extant economic impact studies extensively referred to as supporting shale gas development in the dSGEIS for Marcellus (Broome County study and Penn State study), are essentially fatally flawed as as documents for  public policy guidance; they do not address both positive and negative impacts. A number of analysts have previously come to this conclusion.

2,  When regions/counties with and without natural gas production are compared on a variety of socio-economic dimensions, the gas counties do not show any overall advantage and may be at a long-term socio-economic disadvantage. Again, several other analysts have reached this conclusion

3.  Energy costs to residents of gas producing states do not decrease with increases in production: no local energy advantage. This matter also was addressed by Senator A. Thompson a year ago with industry representatives and they could not confirm any local advantage.

4. Taking these together, one could conclude that New York has considerable planning and policy development yet to do before any shale gas drilling starts.

Stanley R Scobie, Ph.D., Principal, NYSESS, 607.669.4683  [NYSESS is not organizing or sponsoring this briefing, and is providing information solely for the benefit of the community]

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Summary of Christopherson’s Presentation by Janette Barth:  https://gdacc.files.wordpress.com/2010/11/barth-on-christopherson-sum.pdf

Housing

  • Hoping to ease a housing crunch, a natural gas drilling company has built a dormitory-style housing facility and training center for its workers in northern Pennsylvania. The dormitories in Athens Township, Bradford County, were built by Chesapeake Energy Corp. The complex can hold about 280 workers and includes a cafeteria, recreation center and laundry facilities.  The Oklahoma City-based energy company, the largest stakeholder in the gas-rich Marcellus Shale region, plans to hold a grand opening on Thursday.  A drilling boom in the Marcellus has led to a housing shortage and skyrocketing rents. Some housing advocates say lower-income residents have been priced out of the market.
  • “Cheaspeake officially opens housing, training facility: “…Steve Evans, who is the senior security officer for Chesapeake’s local operations, noted that the new housing and training facility represents a “substantial financial commitment” to the local community…The fencing around the facility provides a way for the company to keep an accurate count on how many individuals are in the complex at any given time, said Evans…” ” (The Morning Times) (PA)- http://www.morning-times.com/articles/2010/11/19/local_news/doc4ce67e5117adf316460953.txt

Gas Prices

  • The Energy Department said natural gas inventories held in underground storage in the lower 48 states increased by 103 billion cubic feet to 3.267 trillion cubic feet for the week ended Sept. 10.  The inventory was 5.3 percent less than last year’s level of 3.45 trillion cubic feet and 6.2 percent more than the five-year average of 3.075 trillion cubic feet, the Energy Information Administration said in its weekly report.  Analysts expected inventories to increase by 88 billion cubic feet to 92 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.  Natural gas lost 12.9 cents at $3.866 per 1,000 cubic feet on the New York Mercantile Exchange.
  • Economic Viability of Shale Gas Drilling

Where the Gas Money Goes

  • “Approximately 80% of the economic benefit of shale gas drilling would leave New York State tax free . . . “
  • 1. Cost = 80% of the cost goes out of state
    • Capital intensive with equipment (rigs, etc.) owned almost entirely by out of state contractors and rented on a day-rate, or hourly rate
    • If they move rigs back and forth between NYS and Pa., (less than 6 months in each) the owner should be able to avoid paying NYS tax on income
    • Most of the skilled crews (on the rigs) are from out of state, stay in motels and sent pay-checks back home, will not relocate to pay NYS tax.
    • Most of the suppliers – drill pipe, seismic, fracking chemicals – are from out of state.
    • So that’s 80% + of the cost
  • 2. Revenue = 75% + leaves the state at low/no tax
    • Ownership of the working interest = 75% + , ie. the operator =- Cabot, Norse, Chessie, etc.
    • (Some of the land owners are out-of-state, so some of that royalty income goes out of NYS. )
    • Almost all of the operators are domiciled out of state, so no NYS corporate income tax
    • And no NYS severance tax = since there is none . . .
    • The wells are typically owned by LLCs or LPs – which would pay a reduced tax rate.
    • If the gas is transfered at cost from the LP to the out-of-state parent, then the LP could book no profit in NYS = tax = zero.
  • What does that leave NYS ?  
    • All of the pollution.
    • Plus some rather tedious debates about “the multiplier effect” of the peanuts left in the state.
    • Which wold consist of some hotel/motel bed tax
    • Some sales tax from liquor stores and strip joints
    • And a glimpse of property tax on the fast-decline wells.
    • Income tax from locally owned frack trucks.
    • Plus property tax on the compressor stations, the tank yards, gas separation plants, frackwaste treatment centers. 

      James Northrup
    • Mr. Northrup is a retired oil executive who lives in Cooperstown for part of the year.

Community Strength/Cohesion

Boom and Bust Cycles:

Historic & Cultural Preservation

Marcellus Shale Site Development: Best Practices for Preserving Historic and Archaelogical Resources.  PA Historical & Museum Commission

Land, Water Preservation

Rural Pennsylvania town fights big gas. Sept. 2010

Employment Statistics

U.S. Unemployment rates by County 2007-2010

Jobs:

Attorneys:  http://www.bccz.com/industries/marcellus-shale-development.php

Property Values

From The Pike County Courier:  NORTHEAST Pa — Property owners may make money from leasing to Marcellus Shale gas drillers, and they may also find their property can’t be financed for a new mortgage.

“There are a lot of properties with leases in this area,” Rudalavage notes. She adds, when it comes down to obtaining a mortgage on those properties, “more and more of [the banks] are saying, ‘no, no, no.’”

…Wells Fargo would not be inclined to fund a property with a gas lease. In a memo, a top executive at the bank writes it would be “very difficult to obtain financing due to the potential hazard.” The memo continues, “Also if the Gas Leasing is new to the area there are too many unknowns.” One of the unknowns, according to the executive, is what the lease would do to “the marketability of a property.
http://www.strausnews.com/articles/2010/06/08/pike_county_courier

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