Penn State Study Documents Economic Benefits of Shale Production

Published April 11, 2011

Marcellus Shale natural gas production in Pennsylvania is boosting employment, improving personal income, and providing much-needed state revenue, according to a newly released study by Pennsylvania State University.

County-Specific Tax Data
Researchers at the Penn State Cooperative Extension Marcellus Education Team analyzed various tax data between 2007 and 2010, comparing counties with many Marcellus Shale natural gas wells, versus those with few or no such wells. The results were striking.

“The data indicate that counties with 150 or more Marcellus wells experienced an 11.36 percent increase in states sales tax collections between 2007 and 2010. Counties with fewer Marcellus wells reported declining sales tax collections, but they still did better than counties with no Marcellus wells, which reported steeper declines,” the study reported.

“Sales tax collections are a marker of the level of retail activity occurring within a county. Higher local retail sales mean more state sales tax collections, while declining local retail sales means lower collections,” the study explained.

The study found similar results regarding personal income tax collections.

“Counties with Marcellus activity showed greater increases in tax income than non-Marcellus counties even though there was little difference in the number of returns filed. Counties with ten or more wells reported an average of 6.96 percent increase in taxable income, and counties with between one and nine wells reported a 3.08 percent increase. Those areas with no wells witnessed a 0.89 percent increase in taxable income,” the study observed.

Jobs, Revenues Created
The implications of more taxable economic activity are far-reaching, the report observed.

“Leasing and royalty income paid to mineral right owners increases household income, and since it is taxable under the state’s personal income tax, it will affect state income tax collections,” the study explained. “Increases in local employment or earnings due to Marcellus-related work can likewise affect state income tax collections. If mineral right owners and those employed due to Marcellus development spend more money locally, state sales tax collections can increase.”

World’s Second Largest Deposits
If fully developed, the Marcellus Shale field has the potential to be the second largest natural gas field in the world. Only the South Pars/Asalouyeh field, shared between the nations of Iran and Qatar, has more natural gas production potential.

Currently, the Barnett Shale area in Texas is the largest natural gas producing field in the United States, with about 3,500 wells. But the sheer geographical size of the Marcellus Shale field would support significantly greater amounts of drilling than the Barnett Shale field.

Statewide, National Benefits Cited
“The responsible development of clean-burning natural gas is creating tens of thousands of good-paying jobs, providing stable, American energy supplies for consumers, and generating hundreds of millions of dollars in tax revenues at the same time,” said Kathryn Klaber, president and executive director of the Marcellus Shale Coalition (MSC), in a March 21 press statement. “This data brings into perspective the enormous amount of taxes our industry’s work is generating for Pennsylvania’s economy, especially in rural communities. Without question, each and every Pennsylvanian is benefitting from Marcellus Shale development.”

Chris Tucker, spokesman for Energy In Depth, an outreach and education effort started by independent oil and gas producers in 2009, says the study proves the benefits from natural gas production are widespread.

“This report essentially takes a wrecking ball to one of the main talking points put forth by shale opponents—namely, that the only folks who benefit from responsible Marcellus development are the ones drilling the wells,” said Tucker. “Turns out, the entire community benefits from these activities, and the jobs that are created from them extend well beyond the well pad. Two sectors of the economy in Pennsylvania created jobs in 2010—the natural gas industry, and the Census. I’ll let you decide which is the better choice around which to build the future of our economy.”

“Geologists are telling us the Marcellus Shale may be the second largest natural gas field in the world. Not in the mid-Atlantic, the United States, North America, or the Western Hemisphere, but the entire world. And just as you’d expect from a field of that singularity, it has the potential to fundamentally reorder energy markets around the world, starting right here at home. It’s exciting, and propitious. Five years ago, the conventional wisdom was the United States was running out of natural gas. Now the only debate is on whether we have 100 years worth of supply, or 200 years,” Tucker explained.

Valued as Transitional Energy Source
Robert Watson, associate professor emeritus of petroleum and natural gas engineering and environmental systems engineering at Penn State University and a member of the Penn State Cooperative Extension Marcellus Education Team, says the abundance of Marcellus Shale gas provides the nation with an affordable, low-emissions energy source that can fuel the U.S. economy until renewable energy technology is affordable and more feasible.

“Shale development goes well beyond the borders of the Commonwealth in that the abundance of a domestic energy source buys this country decades to develop renewable energy source technology. The reality today is that renewable energy sources provide less than 1 percent of the energy needed to sustain our standard of living. If renewable energy is to move beyond this very low number, significant breakthroughs in technology must occur,” Watson explained.

Alyssa Carducci ([email protected]) writes from Tampa, Florida.

Internet Info:

“State Tax Implications of Marcellus Shale: What the Pennsylvania Data Say in 2010,” Pennsylvania State University College of Agricultural Sciences Cooperative Extension,