MAP – Tompkins

The Marcellus Accountability Project
for Tompkins County

Economic and Social Impacts:

Economics of Extraction
Economic Impacts
Social Impacts

 

Economics of Extraction

Shale Gas Reserves May Not Contain as Much Gas as Predicted: Censored Article (11/5/09)
Arthur Berman’s article, originally written for World Oil, but pulled after pressure was exerted by Petrohawk Energy, a shale-gas producing company. It discusses how shale-gas reserves may not contain as much gas that is economical to extract as has been predicted. It ends with, “The time has come for the companies that operate in the shale plays to show the data that supports their optimistic forecasts for natural gas supply in the US. The economic viability of shale gas is a serious issue with profound implications for capital investment, alternate energy research funding and national policy. To simply say that those that have doubts about shale plays are wrong will no longer satisfy the many intelligent people who follow this debate.”

Lessons from the Barnett Shale Suggest Caution in Other Shale Plays: 2009 Industry Study
Short article by Arthur Berman, a consultant in the oil and gas industry, discussing how production trends in the Barnett Shale have not lived up to predictions, and advocating caution in making wildly optimistic predictions on production from the Marcellus Shale. Among shale layers currently in production, the Barnett is thought to be the one most similar to the Marcellus. He found that production from the Barnett Shale was greatly overestimated both in time and amount, that horizontal wells were not significantly more productive than vertical wells, and that average horizontal well performance has declined steadily since 2003.

Why is Shale Gas Drilling still Increasing as Prices are Falling? 3/29/10
"The Curious Gas Drilling Upswing." Peter Tertzakian. The Calgary Herald. March 29, 2010.
This short, readable article discusses the apparent contradiction that, as of late March 2010 there is an oversupply of natural gas and gas prices are steadily falling, yet the number of rigs drilling is still rising. It gives three major reasons: (1) Gas companies that have leased land are contractually obliged to drill and produce wells by a set expiry date or they will lose their leases. (2) Gas companies have the ability to "lock in" or "hedge" future prices, which keeps investment capital flowing, hence the companies are able to grow. (3) The market strategy of gas companies is to grow as fast as possible, at any cost.
Nevertheless, according to economist Peter Tertzakian, falling gas prices can only be ignored for so long before future prices cannot be locked in and investors shy away. Capital for more drilling should begin to dry up.

Financial Times: Shale Gas Not Breaking Even but Companies Continue to Drill (3/20/10)
"A Glimpse Through the Smoke and Mirrors of Shale Economics." John Dizard. The Financial Times, UK. FT.com. 3/20/10.
This article argues that despite all the fanfare about the profits to be made from shale gas production, the numbers, when calculated over the long term, tell a different story. Industry-source numbers reveal a price of $7.50 to $8 per mcf (thousand cubic foot) would be needed to cover all costs and break even--a 60 percent increase over the price today. Discusses why the industry continues to drill as much as they do with prices as low as they are.

Shareholder Movement to Lessen the Effects of Natural Gas Development on Water and Health (1/26/10)
"Investors Target Marcellus Shale Drillers," Anna Driver.  Reuters.  1/26/10
Shareholder proposals ask gas companies to increase transparency regarding the effects of their drilling on the environment and encourage companies to switch to less-toxic hydraulic fracturing fluids. The proposals are sponsored by Green Century Funds and the Investor Environment Health Network and are aimed at 12 companies, including Chesapeake Energy, EOG Resources, and ExxonMobil.

Shareholder Resolutions Ask for More Disclosure and Safeguards on Fracking (6/29/10)
"Analysis: Investors Urge Safeguards on U.S. Shale Gas Drilling." Jon Hurdle.  Reuters.  June 29, 2010.
Short article describing the following: In spring 2010, twelve companies faced shareholder resolutions calling for better disclosure or safeguards against environmental damage from hydraulic fracturing. Shareholders say the risk of environmental damage is a financial liability. The enormous NYS Common Retirement Fund backed these resolutions at Range Resources, Exxon Mobil, and Hess, in which it owns stock. Although the resolutions did not pass, 21 to 42 percent of shareholders supported them, which is very high for environmental resolutions.


Economic Impacts

Energy Boomtowns & Natural Gas, Including Implications for Development of the Marcellus Shale
A must-read for everyone located above the Marcellus Shale. This 2009 study by Jeffrey Jacquet at Penn State (now at Cornell) reviews in detail research from the 1970s and 1980s on the economic and social effects on small, rural towns of rapid industrialization due to energy extraction (the "Boomtown" Impact Model). It then presents a current case study of the negative and positive economic and social effects of natural gas extraction on Sublette County, Wyoming-a rural area similar to many areas within the Marcellus Shale, and discusses the implications for towns in the Marcellus Shale. Very readable.

Headwaters Economics Study (7/11/09) on Economic Effects of Gas Drilling on Western Counties
This detailed study compares counties that relied on gas extraction for economic growth to similar counties that did not. It found that gas-reliant counties, over the long term, had (1) less economic diversity and resilience, (2) lower levels of education in the workforce, (3) a greater gap between high and low income households, (4) a growing wage disparity between energy-related workers and all other workers, (5) less ability to attract investment and retirement dollars, and (6) economies that grew more slowly. 

Penn State Economic Report on Gas Drilling Under Attack
On July 24, 2009, Penn State released a widely cited report on the economics of Marcellus shale gas extraction, titled "An Emerging Giant: Prospects and Economic Impacts of Developing the Marcellus Shale Natural Gas Play."
On May 25, 2010, they released an update titled "The Economic Impacts of the Pennsylvania Marcellus Shale Gas Play: An Update."
Both were funded by The Marcellus Shale Coalition, a group of over 100 gas companies, which paid Penn State more than $93,000 for the studies, according to the Associated Press. The first version of the report was widely criticized for not disclosing funding sources, for prominently using the Penn State logo and name on every page (these aspects were changed in a version released a month later), and for taking a political advocacy position against a severance tax on natural gas production in PA. Both have been criticized for not even acknowledging any economic, environmental, or health costs of shale gas extraction, let alone considering those costs, and for presenting results that favor the gas industry and are not fact-based. The Responsible Drilling Alliance (RDA), based in Williamsport, PA, wrote a letter to Penn State asking the university to publicly disavow the reports, Penn State responded, and RDA wrote a response.

June 4, 2010: Letter from RDA to Penn State President, Dr. Graham Spanier

June 9, 2010: Letter from William E. Easterling, Dean of the Penn State College of Earth and Mineral Sciences, to RDA
In this letter, Easterling says "the assumptions underpinning the analysis in the paper may certainly be debated" but the "analysis is sound." He also says the initial version of the first study was flawed in that it didn't list the funding source, may have "crossed the line between policy analysis and policy advocacy," and featured Penn State's logo all over it.

June 25, 2010: Letter from RDA responding to Dean Easterling

Associated Press Story about this issue.

DISH, Texas, and its Fight to Protect Itself from Gas Drilling: Is the Juice Worth the Squeeze?
Blog by Calvin Tillman, mayor of DISH, Texas, telling the story of the negative economic and social effects of gas drilling on this small town: decreasing property values, increased road damage and costs for road repair, and little economic return to the town.

Chart of Potential Marcellus Income Compared to Income from Existing Upstate Businesses
This bar chart prepared by John Schwartz shows the relative size of the potential income from Marcellus shale royalty income in New York compared to the existing revenue currently generated by agriculture, outdoor recreation, and tourism in upstate New York.  The Marcellus Shale income is only about 5% of the revenue generated by these other activities.

Current and Future Gas Drilling Impacts on PA & Superb Gas Drilling Issues Overview (3/31/10)
"Marcellus Drilling Transforms the State." Hannah Abelbeck. Voices of Central Pennsylvania. 3/31/10.
This extremely well-researched article very nicely sums up the massive scale of gas drilling in PA and some of the effects to date, as well as those expected in the near future. It includes interviews with residents, researchers, and county planners. Describes how rents have increased, drinking water and streams have been contaminated and what companies have provided as compensation, and reveals that 1 in 10 PA residents don't own their own mineral rights. The article also discusses the basic drilling process, chemicals used, water withdrawal and air pollution issues, exemptions, and disposal, and describes a local citizens watch group, Waterdogs. It describes the sharp decline of gas production from Marcellus wells, and how gas companies must continually drill more wells to keep making a profit.

Hancock and the Marcellus Shale, Spring 2009, Columbia U. Urban Design Research Seminar
Subtitled “Visioning the Impacts of Natural Gas Extraction Along the Upper Delaware,” this 35-page report discusses the potential effects of gas drilling—both positive and negative—on the Town of Hancock, NY.  Includes excellent underground diagrams of how gas is held in and extracted from shale (pp. 4-5), and an overview of the gas extraction process. Looks, also, at the economic costs and benefits (pp. 16-21), tax subsidies for gas (p. 31), the history of gas production in the US (pp. 28-29), and the role of the Marcellus in energy independence for the US (pp. 32-33).  Superb photos and diagrams.

Marcellus Shale: What Local Government Officials Need to Know
This 2008 report by Penn State discusses development of the Marcellus Shale, likely economic, social, and environmental effects, existing regulations, and what (few things) local governments can do to prepare. In particular, p.7 discusses jobs, pp. 14-19 discuss local economic impacts, and pp. 19-22 describe actions for local governments to take.

 

Social Impacts

Energy Boomtowns & Natural Gas, Including Implications for Development of the Marcellus Shale
A must-read for everyone located above the Marcellus Shale. This 2009 study by Jeffrey Jacquet at Penn State (now at Cornell) reviews in detail research from the 1970s and 1980s on the economic and social effects on small, rural towns of rapid industrialization due to energy extraction (the "Boomtown" Impact Model). It then presents a current case study of the negative and positive economic and social effects of natural gas extraction on Sublette County, Wyoming-a rural area similar to many areas within the Marcellus Shale, and discusses the implications for towns in the Marcellus Shale. Very readable.

DISH, Texas, and its Fight to Protect Itself from Gas Drilling: Is the Juice Worth the Squeeze?
Blog by Calvin Tillman, mayor of DISH, Texas, telling the story of the negative economic and social effects of gas drilling on this small town: decreasing property values, increased road damage and costs for road repair, and little economic return to the town.

DISH, Texas You Tube Videos with Calvin Tillman
Three video segments, 7 to 9 minutes each, on a tour with Calvin Tillman, mayor of DISH, Texas (population less than 200). He shows some of the town’s 11 gas compressor facilities and discusses the serious problems resulting from the gas industry’s callous treatment of his small town. An interesting, first-hand account.

Perceptions of Socioeconomic Impacts of Unconventional Gas Extraction in the Barnett Shale
“Local Leaders’ Perceptions of Energy Development in the Barnett Shale,” by Brooklynn J. Anderson and Gene L. Theodori. 
Southern Rural Sociology 24(1), 2009, pp. 113–129.  The researchers interviewed community leaders and a few concerned citizens to learn their perceptions of the benefits and costs of gas drilling in their communities. Small sample size, but an interesting first study.  Unlike “boomtown” studies, which have looked at rural areas that develop quickly (as will occur in the Marcellus Shale of NY), this study looks at urban areas. In their introduction, they sum up boomtown models by saying “In spite of some criticism (Wilkinson et al. 1982), the consensus among researchers is that the negative consequences of boomtown growth have traditionally outweighed the advantages. The negative impacts encountered have been grouped into three general categories (Albrecht 1978), including social problems, service delivery problems, and environmental problems.” They conclude “Overall, our findings demonstrate that localities experiencing unconventional energy development do face negative consequences in addition to positive impacts......Concerns regarding negative consequences were greater among respondents in Wise County, the site where energy development was more mature.”

Current and Future Gas Drilling Impacts on PA & Superb Gas Drilling Issues Overview (3/31/10)
"Marcellus Drilling Transforms the State." Hannah Abelbeck. Voices of Central Pennsylvania. 3/31/10.
This extremely well-researched article very nicely sums up the massive scale of gas drilling in PA and some of the effects to date, as well as those expected in the near future. It includes interviews with residents, researchers, and county planners. Describes how rents have increased, drinking water and streams have been contaminated and what companies have provided as compensation, and reveals that 1 in 10 PA residents don't own their own mineral rights. The article also discusses the basic drilling process, chemicals used, water withdrawal and air pollution issues, exemptions, and disposal, and describes a local citizens watch group, Waterdogs. It describes the sharp decline of gas production from Marcellus wells, and how gas companies must continually drill more wells to keep making a profit.

Marcellus Shale: What Local Government Officials Need to Know
This 2008 report by Penn State discusses development of the Marcellus Shale, likely economic, social, and environmental effects, existing regulations, and what (few things) local governments can do to prepare. In particular, p.7 discusses jobs, pp. 14-19 discuss local economic impacts, and pp. 19-22 describe actions for local governments to take.

NEOGAP Video (9.5 min.): Residents Commenting on Gas Wells within 100 Feet of their Homes
This August 2009 video from the North East Ohio Gas Accountability Project (NEOGAP) shows clips of residents voicing concerns to representatives from the Division of Mineral Resources Management (the DEC equivalent) and a State Senator. Four wells are being drilled 89 feet from homes in a residential area, to extend horizontally under homes. The people do not own mineral rights and will receive no royalties. They are angry! Gives a vivid picture of problems that may arise in other areas as drilling in the Marcellus Shale begins in earnest.

Heartbreaking Stories from Leased Landowners in West Virginia and Pennsylvania (12/10/2009)
"Heartbreaking Stories Warn New Yorkers of What May Be in Store if the State OKs Controversial Gas Drilling," Maura Stephens, AlterNet, 12/10/09.
Maura Stephens talked to landowners with gas leases in West Virginia and Pennsylvania about their experiences with gas drilling. Her summary: "Most of these Pennsylvanians told us they rue the day they signed the gas leases." The comments from these landowners give sad insight into what it is like to live with hydrofracturing: lack of privacy, lack of control over what the gas companies do, incessant noise, and a lack of respect for the land and what is on it.


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