Some previous studies have examined the economic impact of exploration and production. As the Marcellus numbers grow and the industry awareness level rises, the industry is becoming better understood. This has started many studies on Marcellus drilling and the impact it has on the economy. There are direct effects of the drilling and indirect effects caused by the Marcellus Shale development.
Some indirect effects are additional economic activity of some unrelated businesses and households caused by Marcellus drilling. Kathryn Klaber, President and Executive Director of the Marcellus Shale Coalition, states “It doesn’t stop with the natural gas companies. There are law firms, accounting firms, small town grocers, and dry cleaners all starting to realize in the areas where this is happening – that there is a business to be had and economic opportunities throughout the supply chain.”
It is predicted that the spending by Marcellus producers will have ripple effects throughout the economy. For example, drilling companies hire trucking companies to haul pipe, water, and other materials to a well site. The trucking company must in turn buy fuel and other supplies to supply these services and hire drivers to operate the trucks. The truck drivers in turn acquire goods and services from other firms such as shops, parts distributors, and other suppliers. When the drivers go out and spend their paychecks, that spending stimulus sets in motion a similar chain reaction for the economy. These economic impacts are known as indirect effects of the Marcellus drilling. It is estimated that the indirect spend is almost as large as the direct impact.
The “Site Construction” phase of Marcellus drilling involves the design and layout of the well site for the construction of the Road or Pad. The site is surveyed, site design and layout is planned, construction is worked on roadways to the well site, and onsite trailers are placed on site. The drilling phase is next and this will take approximately 23-25 days per well. There is added value and a unique factor to every wellhead. The geology underneath each specific well is different and some can provide a very big “sweet spot,” while others do not have many resources. The steps to drill all wells are the same, but the cost and economic impact for each well is very different.
Some experts are predicting an increased environmental or compliance costs associated with shale gas production. Drilling taxes or fees, such as severance taxes, could change the economic model for Marcellus Shale exploration and production. The increased taxation, environmental, or compliance costs will change the economic impact of exploring and producing natural gas from a Marcellus Shale well.
The Marcellus Shale drilling is predicting an increase in employment. Firms in the industry have grown by adding or planning to add more employees. While projections are high, certain economists have argued that encouraging oil and gas production is not an effective strategy for creating jobs.
While there are many direct and indirect impacts of the Marcellus Shale development, the extent of these impacts are not very well understood. Future research should better explore many of these impacts as they result from exploitation of Marcellus Shale. While the costs of Marcellus Shale drilling are significant, the drilling is likely to have considerable economic impact on the region.