Mon October 28, 2013
How Fracking's Ups And Downs Affect Pennsylvania's Economy
Originally published on Mon October 28, 2013 7:00 am
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Fracking has unleashed a huge amount of natural gas in Pennsylvania's Marcellus Shale, but like every industry it responds to supply and demand. Overproduction led to a glut of gas, which caused companies to shift operations to other regions of the shale, in search of more lucrative natural gas liquids. Marie Cusick of member station WITF has more on the ebb and flow of the industry in Pennsylvania.
MARIE CUSICK, BYLINE: There's a bustling Friday lunch crowd at the Bullfrog Brewery in downtown Williamsport.
(SOUNDBITE OF PHONE RINGING)
CUSICK: Sarah Yates is tending bar. She's watched as the gas industry's grown in her hometown.
SARAH YATES: It's good for Williamsport because it's causing a big boom here for us, like, we've never had this much business.
CUSICK: Pennsylvania is on track to produce roughly three trillion cubic feet of gas this year. That's enough to supply about 10 percent of what the entire country consumes annually. Industry-funded commercials depict Williamsport's charming downtown as an all-American place that's been transformed by the nearby gas wells.
(SOUNDBITE OF COMMERCIAL)
UNIDENTIFIED MAN #1: Success in a town like Williamsport means success for us all.
CUSICK: But if you talk to Mayor Gabriel Campana, he'll be frank. Things have changed.
MAYOR GABRIEL CAMPANA: I would say probably about a little over a year ago, some of the growth that was occurring has receded a bit.
CUSICK: The main reason for the slowdown is simple: supply and demand. Overproduction caused the price to plummet. But not all gas is created equal, and business has picked up elsewhere. The so-called dry gas found around Williamsport isn't as profitable as the wet gas out near Pittsburgh. It naturally contains more lucrative gas liquids. And as the drilling rush has shifted, Republican Governor Tom Corbett is facing a tough reelection and he's promoting the industry as an overall success story for the state in commercials.
(SOUNDBITE OF COMMERCIAL)
UNIDENTIFIED MAN #2: And the benefits to Pennsylvanians has been remarkable. Not only is the Marcellus Shale natural gas industry supporting over 200,000 jobs, it's resulted in over $400 million returned to local communities for local projects.
TIM KELSEY: I think the story being told by both sides is not accurate.
CUSICK: That's Tim Kelsey, a professor at Penn State University who's been analyzing the economics of the state's gas boom. He says the story of shale gas and Pennsylvania's economy is nuanced.
KELSEY: People who say it's really wonderful, people who say it's really bad; in reality it's between the two.
CUSICK: The 200,000 jobs cited in Corbett's commercial include two categories: core and ancillary industries. About 28,000 people work directly in oil and gas. The rest are ancillary - which means everyone who works in, say, the trucking industry or road construction gets counted, whether they have anything to do with gas or not. But Corbett's energy executive, Patrick Henderson, points out it can be hard to quantify other ripple effects in the economy, like lower natural gas prices.
PATRICK HENDERSON: If you can lower the cost of energy, which is a prime contributor to any business's budget, you're going to increase your competitiveness.
CUSICK: But when you talk about new wealth coming into the state, Penn State Professor Tim Kelsey says royalties are a bigger deal. That's the money paid to landowners who lease their property for drilling. In the first three years of the boom, he found income related to royalties went up by about $1.5 billion. But lately, a few companies have been accused of underpaying people. Retiree Mary Jane Foelster says her monthly royalty check has dwindled because the gas company is charging her for the expenses it incurs processing and transporting the gas.
MARY JANE FOELSTER: What bothers me is that I am being cheated.
CUSICK: But bottom line, Tim Kelsey says what matters most is the long-term economic outlook. The gas will be gone at some point. So will this new wealth be invested wisely? And what kind of costs, like environmental damage, is Pennsylvania incurring?
KELSEY: So far, economists and the state and others have been largely identifying the benefits and there has been very little attention paid to the overall costs.
CUSICK: When it comes to making gas companies pay for those costs, an old debate is reemerging as the race for governor heats up. Incumbent Tom Corbett promotes the status quo, where companies pay a fee to the state for every well they drill. His leading Democratic challenger argues that's not enough. She wants to add a new production tax on top of that. For NPR News, I'm Marie Cusick. Transcript provided by NPR, Copyright NPR.