Blog: A Few Inconvenient Shale Truths

Publication Date: 
February 25, 2014

Chris LilienthalCross posted at Third and State

For a long time, we've been making two points about natural gas drilling in the Marcellus Shale. One, Pennsylvania's drilling impact fee brings in a fraction of what a severance tax comparable to those in other large energy-producing states would generate. And, two, the claims of job creation by the industry and its supporters (often used to cut off any talk of enacting a severance tax) are greatly overstated.

But don't take it from us. The Allentown Morning Call's Steve Esack has a pair of Sunday stories making the very same points.

The first story observes that a severance tax would have raised much more revenue than Pennsylvania's impact fee, which has generated about $200 million in each of the last two years:

The record-high 3.1 trillion cubic feet of gas uncorked from Pennsylvania's 4,904 wells in 2013 would have generated about $425 million for the 2013-14 budget if the Legislature had copied West Virginia's gas policies, The Morning Call found after analyzing records of the state Department of Environmental Protection and the U.S. Energy Information Administration. That's because severance tax revenue fluctuates with production, meaning the more gas that's extracted, the more money that goes to the state. ...

The impact fee remains much lower than severance taxes in Wyoming, New Mexico and Texas. ...

The second story finds that Pennsylvania has inflated fracking-related job numbers:

Gov. Tom Corbett praises the natural gas industry as a key cornerstone of the state's economy. ...

But state records show the gas industry has not created as many jobs as state officials have claimed. In addition, the state's estimates of ancillary job growth have been inflated to include employment in places drilling isn't even taking place, further skewing the impact the natural gas industry has had on employment.

The Morning Call explains that the state Department of Labor and Industry publishes job numbers for what it calls "Marcellus Shale-related ancillary industries," taken from Pennsylvania’s Quarterly Census of Employment and Wages. But those job numbers are not based solely on employment trends in the counties where drilling is occurring:

The report includes statewide employment trends in trucking, engineering, highway construction and about two dozen other career sectors. So jobs in the Lehigh Valley, Philadelphia and other areas where there are no wells have been counted as ancillary gas jobs.