Economic / Socioeconomic Issues

Given the value of recoverable natural gas in the Marcellus shale (some estimates are $1.4 trillion), drilling has the potential for significantly large economic and socioeconomic impacts.

Publications on the economic and community impact of natural gas.

It is too early to accurately estimate these impacts, but the experience in several other states is a helpful indicator of the potential impact in Pennsylvania.

Experience in North Texas

The Barnett shale play in northern Texas, around the Dallas/Fort Worth area, is very similar in geology to the Marcellus, making it a good indication of technological and industry needs. Since development of the Barnett Shale started in earnest in 2001, there have been documented employment and income impacts.

Overall Economic Impact

Overall, the Perryman Group report estimates that Barnett shale accounts for $8.2 billion in annual output (8.1% of total output in the regional economy), and 83,823 jobs (8.9% of total jobs).

This is a significant number, particularly because the Barnett shale region is predominantly an urban area, which already boasts a large and extensive economy.

In addition, experts suggest that the stability of the natural gas economy has essentially shielded the region from economic downturns. Potential impacts in areas of Pennsylvania could be much higher on a percentage basis considering that the local economy is relatively smaller.

Where the Jobs and Income Are

As with most economic activity, the impacts of natural gas affect more than just the specific firms directly involved in the industry.

  • Local businesses that supply the industry (such as oil field service companies, local contractors, area surveyors, attorneys, and local fuel and stone suppliers)
  • Effects of employee spending (local retailers and restaurants).
  • Leasing and royalty income, which is currently of much interest in Pennsylvania, actually accounts for a very small share of the economic impact.

The Perryman Group report identifies three separate types of economic activities related to natural gas and their share of economic activity including:

  1. Exploration, drilling and operations (67 percent gross product [GP], 62% personal income [PI])
  2. Leasing and royalties that go to landowners (11 percent GP, 12 percent PI)
  3. Pipeline infrastructure (22 percent GP, 27 percent PI)

The employment impacts related to natural gas in the Perryman report show similar trends:

  • Exploration, drilling, and operations (58 percent of new permanent jobs)
  • Royalty and lease payments (14 percent)
  • Pipeline infrastructure (28 percent)

As the industry expands within Pennsylvania, more of these jobs and revenues should be reaching local residents, either as new hires or as the industry employees purchase or rent homes in the region. Communities can increase the possible economic benefits of a growing natural gas industry by planning ahead to respond to the growing population within their area.

Which Industries Benefit

  • The industrial sector with the largest gain from the Barnett shale is the crude petroleum and natural gas industry, accounting for about one fifth (21 percent) of personal income product increases and 7 percent of new jobs.
  • Retail trade accounts for about 16 percent of increased personal income and 27 percent of the new jobs,
  • New construction accounts for 10 percent of increased personal income and 9 percent of new jobs.
  • Eating and drinking establishments similarly benefit accounting for 5 percent of personal income and 15 percent of new employment.

For any individual industry the difference between their impact on gross product and on employment partially reflects wages and salaries within that industry. Retail trade and eating and drinking establishments, for example, together account for 21 percent of new personal income but 42 percent of total new employment, reflecting that many such jobs are relatively low paying.