Exaggerating Shale Drilling's Employment Impacts: How & Why

 
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This report was released by the Multi-State Shale Research Collaborative, a joint effort of the Pennsylvania Budget Policy Center, Keystone Research Center, Fiscal Policy Institute in New York, Policy Matters Ohio, West Virginia Center on Budget & Policy, and The Commonwealth Institute in Virginia.

Report Overview

Over the last five years, firms with an economic interest in the expansion of drilling in the Marcellus and Utica shale formations — and their allies, supporters, and trade associations — have used a variety of tools and techniques to exaggerate the employment impacts of shale drilling. These strategies have ranged from the use of inappropriate measures, such as data on new hires, to represent job growth to the misleading attribution of all jobs in “ancillary” industries to the shale industry.

A review of statements by representatives of shale drilling firms and their allies makes the motivation for this exaggeration clear — to preclude, or at least to minimize, taxation, regulation, and even careful examination of shale drilling.

An explicit example of this “defense by exaggeration” strategy occurred on July 19, 2012, at a Harrisburg press conference during which the Pennsylvania Chamber of Business and Industry joined the U.S. Chamber of Commerce for the launch of its “Shale Works for US” campaign.

At this event, Karen Harbert, the president and CEO of The Institute for 21st Century Energy, the energy policy arm of the U.S. Chamber of Commerce, said the goal of “Shale Works for US” was to make sure that lawmakers “don’t squander or obstruct this opportunity” and to “ensure no hindrance or regulatory barriers” to natural gas drilling.[1]

As reported in The Patriot-News of Harrisburg, the Chamber’s employment claims exceeded those reported by the Pennsylvania Department of Labor and Industry, whose Secretary shared the stage with Harbert that day. In its release, the Chamber stated that shale gas production “created over 300,000 new jobs in the last two years,” while the most recent Department of Labor and Industry data at the time indicated that, between the 4th quarter of 2008 and 4th quarter 2011, the industry created a total of 18,007 jobs in “core” Marcellus industries, with an additional 5,611 jobs added in “ancillary” industries.[2]

The Department of Labor and Industry explained the discrepancy by stating that the U.S. Chamber’s figures “relied on a two-year-old industry-funded Penn State study that focused on projected jobs” [3] and that the Labor and Industry figures, 23,618 jobs, were the “most current, real jobs numbers as they pertain to Marcellus Shale.”

Based on the questioning it received at and after the July 19, 2012, press conference, the U.S. Chamber itself issued a revised press release[4] that changed the 300,000 jobs “created” to 180,000 jobs “supported” by natural gas.[5] The U.S. Chamber did not explain the basis for (or the source of ) this revised claim.[6]

The press conference in Pennsylvania’s Capitol could have occurred in any state experiencing a shale boom. Industry officials make claims about the economic benefits of hydrofracking that are intended to impress — but overstate job growth, which remains small relative to overall state employment, and fail to mention the costs imposed by drilling on communities, local governments, and the environment.[7]

An accurate assessment of the short- and long-term impacts of shale development is necessary to adequately prepare drilling communities for the emergence of the industry, to estimate negative externalities associated with this industry (such as road damage, water treatment, and habitat loss), and to recover the costs of these externalities.

That accurate assessment must include defensible estimates of the number of jobs created in the industry, the wages associated with those jobs, the distribution of those jobs between in-state and out-of-state workers, and the relationship to total state employment.

To answer those questions, the Multi-State Shale Research Collaborative has examined employment in the Marcellus and Utica Shale in six states: Maryland, New York, Ohio, Pennsylvania, Virginia, and West Virginia. Our findings include:

  • New York, Ohio, Pennsylvania, and West Virginia have a long history of gas and oil production and a core of extraction-related jobs created well before the emergence of hydrofracking. Together, Ohio, Pennsylvania, and West Virginia had 38% of all producing wells in the country in 1990 and 32% in 2000.
  • Some counties with a long history of mineral extraction have experienced a shift in employment from coal to shale extraction.[8]
  • Natural gas development has advanced quickly in the Marcellus Shale bringing with it some economic benefit to counties with significant drilling activity. Those impacts helped to insulate those counties from the worst effects of the Great Recession but had little overall impact on the state economy in any state studied.
  • Job growth in the industry has been greatest (as a share of total employment) in West Virginia, but shale-related employment is less than 1% of total West Virginia employment and less than half a percent of total employment in all the other states.
  • Region-wide, shale-related employment accounts for nearly 33,000 jobs, one out of every 794 jobs. The education and health sectors, by contrast, account for 4.5 million jobs in the region, one out of every 6 jobs.
  • Between 2005 and 2012, less than four new shale-related jobs have been created for each new well. This figure stands in sharp contrast to the claims in some industry-financed studies, which have included estimates as high as 31 for the number of jobs created per well drilled.[9]
  • Employment estimates have been overstated, and the industry and its boosters have used inappropriate employment numbers, including equating new hires with new jobs and using ancillary job figures that largely have nothing to do with drilling, even after the flaws in those numbers have been brought to their attention.
  • In addition, industry-funded studies, including those by Dr. Timothy Considine and co-authors, have substantially overstated the total jobs impact of the shale industry. With the passage of several years since the earliest Considine studies, we now know that actual Pennsylvania job growth has been much less than his initial estimates for 2011 and 2012.
  • Finally, employment gains in some counties have already been reversed as drilling activity, which is highly sensitive to commodity prices, shifted to more lucrative oil shale fields in Ohio and North Dakota. In fact, shale-related employment across the six-state Marcellus/Utica region fell over the past 12 months for which data exist, from the 1st quarter of 2012 to the 1st quarter of 2013.

Some residents of shale drilling counties have, it should be acknowledged, benefited from the emergence of the industry, particularly during the depths of the recession.

It is also true that Ohio, Pennsylvania, and West Virginia have long histories with coal and oil “resource curses,” which have provided wealth for a few but left a legacy of environmental degradation and poverty in their wake. The decline of shale employment in Pennsylvania in the 12 months ending in the 4th quarter of 2012 is a reminder that resource extraction has rarely proved a reliable route to sustainable regional prosperity. Policymakers in shale-rich regions should view employment projections with caution and recognize that even robust gains can be quickly reversed.

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Footnotes

[1] Gilliland, Donald, “US Chamber of Commerce launches pro-gas campaign with inaccurate jobs numbers,” Harrisburg Patriot-News, July 19, 2012, http://www.pennlive.com/midstate/index.ssf/2012/07/us_chamber_of_commerce_launche.html.

[2] Figures in this sentence come from Gilliland, Donald, “US Chamber of Commerce launches pro-gas campaign with inaccurate jobs numbers,” July 19, 2012, http://www.pennlive.com/midstate/index.ssf/2012/07/us_chamber_of_commerce_launche.html. As explained in the body of this report, even the 5,611 additional ancillary jobs do not measure drilling-related employment created.

[3] The exaggerations embodied in this industry-funded study are examined in a later section of this report.

[4] U.S. Chamber’s Energy Institute Launches “Shale Works for US” campaign in Pennsylvania, July 19, 2012, http://www.energyxxi.org/us-chamber%E2%80%99s-energy-institute-launches-%E2%80%9Cshale-works-us%E2%80%9D-campaign-pennsylvania

[5] Gilliland, Donald, “US Chamber of Commerce launches pro-gas campaign with inaccurate jobs numbers,” July 19, 2012,http://www.pennlive.com/midstate/index.ssf/2012/07/us_chamber_of_commerce_launche.html.

[6] “Pennsylvania is already a leader in shale gas production which, by 2012, supported 180,000 jobs and will generate over $2.5 billion in state and local tax revenues.” U.S. Chamber’s Energy Institute Launches “Shale Works for US” campaign in Pennsylvania, July 19, 2012, http://www.energyxxi.org/us-chamber%E2%80%99s-energy-institute-launches-%E2%80%9Cshale-worksus%E2%80%9D-campaign-pennsylvania

[7] Tom Feran, “Ohio Oil and Gas Association touts 40,000 new Ohio jobs, Truth-O-Meter Says: Pants on Fire,” Cleveland Plain Dealer, April 29, 2013, http://www.politifact.com/ohio/statements/2013/apr/29/ohio-oil-and-gas-association/ohio-oil-andgas-association-touts-40000-new-ohio-/; Whitney Burdette, “Natural Gas Industry Creates Jobs in West Virginia, Pennsylvania, The (Charleston) State Journal (published online by Energy Speaks), June 17, 2011, http://justbeneaththesurfacewv.com/post/Natural-Gas-Industry-Creates-Jobs-in-West-Virginia-Pennsylvania.aspx; Friends of Natural Gas NY, “Jobs,” Friends of Natural GasNY.com, 2011, http://www.friendsofnaturalgasny.com/why-natural-gas/jobs/.

[8] Amanda Weinstein and Mark Partridge, The Economic Value of Shale Natural Gas in Ohio, The Ohio State University Swank Program, December 2011, http://aede.osu.edu/sites/aede/files/publication_files/Economic%20Value%20of%20Shale%20FINAL%20Dec%202011.pdf

[9] Timothy Considine, Robert Watson, and Nicholas Considine, The Economic Opportunities of Shale Energy Development, The Manhattan Institute, May 2011, http://www.manhattan-institute.org/pdf/eper_09.pdf