by Mark Green
Pennsylvania, Ohio and New York. Three states blessed with vast shale resources, three stories:
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.
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.”
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.”