Research & Commentary: Shale Revolution Has Been a Giant Boon to Pennsylvania’s Economy

Published September 28, 2016

The U.S. Chamber of Commerce’s (USCC) Institute for 21st Century Energy released a report in September 2016 titled What If … America’s Energy Renaissance Never Happened? The report paints a bleak picture, describing the fictional economic environment of a post-2009 Pennsylvania that was never lucky enough to have benefited from the U.S. “energy renaissance” in oil and natural gas extraction, which is mainly the result of technological advancements in hydraulic fracturing and horizontal drilling.

Pennsylvania, currently the second-largest producer of natural gas in the country, would have lost, according to the USCC report, $13 billion in state gross domestic product (GDP), $7.2 billion in labor income, and more than 117,000 jobs if this energy revolution never came to be. Of the total costs, $4.5 billion in lost GDP, $2.3 billion in labor income, and 27,500 jobs would come directly from the oil and gas industry’s extraction process; the remaining economic costs would be the result of substantially higher energy costs.

The study’s authors also say without the “energy renaissance,” a “significant portion” of Pennsylvania’s “downstream” economy would be “at risk of being lost.” This includes $69.9 billion in state GDP, $39.9 billion in labor income, and over 546,000 jobs in annual employment. 

“One specific industrial sector that would have been placed at considerable risk if energy prices had remained high is Pennsylvania’s paper industry, which directly contributes $640 million in annual state GDP as of 2015,” the authors wrote. “Rather than continue production in Pennsylvania, one can assume that the paper manufacturing industry could have moved operations to a region or country with lower energy costs, or been forced to close altogether. The impact would not only have been $640 million in direct state GDP losses, but an additional $1.1 billion in state GDP losses (for a total of $1.7 billion in state GDP losses) due to the economic ripple effect from lost sales in the supply chain and lost employment income across the Pennsylvania economy.”

The benefits noted by USCC are buttressed by a first-of-its-kind study released by Clemson University. It examines nearly 372,000 residential mortgages in regions of Pennsylvania where there is significant shale extraction and finds between 2004 and 2011, shale-extraction properties had a mortgage default rate that was 58 percent lower than the state average.

“When there’s discovery of a mineral resource, a property becomes more than a place to live,” said Lily Chen, the chief researcher on the study, in an accompanying press release. “The mineral rights are tied to property ownership. If a person defaults on the mortgage and loses the property, they lose the mineral rights and the potential revenue they could have generated from those rights.”

There is no scientific justification for banning hydraulic fracturing, commonly called “fracking,” or over-regulating it out of existence. The fracking process has transformed the energy outlook of the United States over the past decade, and the rise of shale gas as a replacement for coal has been primarily responsible for the United States now enjoying its lowest level of carbon-dioxide emissions since 1989.

Drilling is currently being conducted in the Commonwealth of Pennsylvania in a safe and responsible manner, and as the U.S. Chamber of Commerce’s study shows, it has significantly transformed the energy outlook of the Keystone State for the better. As my colleague Isaac Orr has stated, “Hydraulic fracturing and the shale gas boom have provided the United States a cost-effective, clean, and abundant source of fuel that will stimulate economic growth while reducing greenhouse-gas emissions in a practical and significant way.”

The following documents provide more information about hydraulic fracturing.

What If … America’s Energy Renaissance Never Happened?
This report by the U.S. Chamber of Commerce’s Institute for 21st Century Energy examines the impact the development of shale oil and gas has had on the United States. The report’s authors found that without the fracking-related “energy renaissance,” 4.3 million jobs in the United States may not have been created and $548 billion in annual GDP may have disappeared since 2009. Electricity prices would also be 31 percent higher and gasoline prices 43 percent higher.

Hydraulic Fracturing a Game-Changer for U.S. Energy and Economies
In this Policy Study from The Heartland Institute, Heartland Research Fellow Isaac Orr explains the advantages and disadvantages of smart drilling and its alternatives. Orr reviews the background and potential of hydraulic fracturing in the United States and puts that potential in the context of the supply of and demand for oil and gas. He addresses the environmental impacts of hydraulic fracturing, both positive and negative, as well as the public safety issues raised by activists, such as potential harm to drinking water supplies. Orr also discusses how oil and gas production is regulated at the state and national levels and suggests appropriate policies for the industry.

Bill McKibben’s Terrifying Disregard for Fracking Facts
This Heartland Institute Policy Study, written by Research Fellow Isaac Orr, examines how methane emissions are measured, reports the effect those emissions may have on global warming, and discusses several falsehoods journalist Bill McKibben repeats from the discredited movie Gasland. It also evaluates the available fracking alternatives and discusses the relatively small impact new methane-emissions rules enacted by the Environmental Protection Agency will likely have on Earth’s climate.

Fracking Facts: The Science, Economics, and Legal Realities
Hydraulic fracturing, commonly known as fracking, has been employed in the United States since the 1940s. Although innovation has improved the precision of the process, the essentials are the same. Utilizing horizontal drilling, a mixture of mostly water, sand, and trace amounts of chemicals, are used to create fissures in underground shale deposits to allow oil and natural gas trapped in hard rock to move toward the surface to be collected. Activists have blamed fracking and the processes associated with it for emissions of pollutants, earthquakes, and even groundwater contamination, though independent evidence consistently shows these allegations to be false. Leigh Thompson of the Texas Public Policy Foundation argues the evidence supporting fracking bans looks slim when attention is drawn to the facts.

Managing the Risk of Hydraulic Fracturing: An Update–of-hydraulic-fracturing-an-update?source=policybot
Kenneth P. Green of the Fraser Institute argues policymakers should ignore the siren song made by those calling for moratoria or bans on fracking.

Hydraulic Fracturing: Critical for Energy Production, Jobs, and Economic Growth
Increased energy production on private lands in the United States has been one of the most promising economic success stories in recent years. A large part of the success is due to an energy-extraction process known as hydraulic fracturing. Misconceptions about hydraulic fracturing, also called fracking, abound. The Heritage Foundation’s Nicolas Loris explains hydraulic fracturing is safe when regulated effectively and says fracking greatly increases the nation’s energy production, thus promoting job creation.

Assessment of the Potential Impacts of Hydraulic Fracturing for Oil and Gas on Drinking Water Resources
This assessment from the Environmental Protection Agency provides a review and synthesis of available scientific literature and data to assess the potential impact hydraulic fracturing may have on the quality or quantity of drinking water resources, and it identifies factors affecting the frequency or severity of any potential impacts. The scope of this assessment is defined by the hydraulic fracturing water cycle, which includes five main activities: water acquisition, chemical mixing, well injection, flowback and produced water, and wastewater treatment and waste disposal.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the website of Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

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