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The oil and gas industry has promised great wealth and numerous jobs from shale development, but the actual numbers belie such claims.
The industry has stated repeatedly that as many as 600,000 jobs will be generated nationwide. But these numbers were based on economic models paid for by oil and gas companies which, when assessed, were found to include extraneous jobs in the mix.
Early estimates of job creation by the industry predicted that more than 200,000 jobs would be created in Pennsylvania. Yet at the height of the drilling frenzy in 2012, IHS Global Insight released a report, paid for the industry, which said that half that estimate, some 100,000 jobs, had been created.
Still other estimates put the number of jobs created in Pennsylvania at about 20,000. Given that the state needs 6 million jobs to be at full employment and assuming that somewhere between 20,000 and 100,000 jobs were created, the industry has really provided only between .4 percent and 2 percent of needed employment. This is not game-changing.
Jobs aren’t the only problem. Gov. Tom Corbett took aim at what he called “our opponents’ anti-energy agenda, which also includes extreme proposals to raise taxes.” This is curious given the significant costs that Pennsylvania now faces due to drilling activities that could have been mitigated had severance taxes been imposed upon the industry from the start.
Nevertheless, Pennsylvania decided not to levy a severance tax on minerals. By 2012, it was clear the state had a serious problem. Considering only one of the externalities of shale development, road damages, it becomes apparent that certain drilling costs are being shifted on to taxpayers and these costs are significantly outstripping generated tax revenue.
Drilling has heavily damaged roads in Bradford and Susquehanna counties. Although PennDOT has not given actual estimates for damage due directly from drilling, it estimates the overall cost of road damages for the state at approximately $3.5 billion to maintain roads and approximately $7 billion to properly fix them. Roads that are most heavily damaged are the ones that have the most flooding problems. After Hurricane Sandy, PennDOT said that Bradford and Susquehanna counties had the most serious problems.
Pennsylvania has taken in only about $400 million in impact fee revenue from drilling. These revenues will not begin to cover the costs to repair the roads. Even in Texas, where severance tax revenue is significant, TxDOT has stated that damages to roads from drilling activities are significantly outstripping funds.
Furthermore, it is highly unlikely that revenues from Marcellus production will increase. According to the March 2014 gas production report from the U.S. Department of Energy, Marcellus gas production was virtually unchanged from figures a month earlier. But perhaps more important is that just in the last six months, production has declined in older wells. This is indicative of an impending overall decline in the drilling areas, a pattern that has already occurred in other shale drilling in the United States. In short, these are not long-lived sources of drilling, and the Marcellus appears to be tipping into decline, in which case revenues will dwindle accordingly.
In addition, the drilling industry is lagging in jobs compared with wind, solar and geothermal companies. In 2011, at the height of the drilling frenzy, the industry provided approximately 181,000 direct jobs nationwide. Wind, solar and geothermal companies provided approximately 183,000 direct jobs. This was true even though oil and gas accounted for about 45 percent of all electricity generation while renewables accounted for a mere 15 percent. This means that renewables are actually creating significantly more jobs per kilowatt than oil and gas.
And promised jobs simply are not the same as real jobs, no matter how you spin it.
Financial expert Deborah Lawrence Rogers is the founder and director of EnergyPolicyForum.