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How Shale Gas Extraction Affects Drilling Localities: Lessons for Regional and City Policy Makers

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INTRODUCTION
High volume hydraulic fracturing for
natural gas (HVHF, or as it is frequently
called, ‘hydro-fracking’ or ‘fracking’) is
being attempted in shale deposits around
the world, including in the UK,
Continental Europe and Canada. In the
USA, the discovery of large shale gas
deposits in many areas of the country has
stimulated natural gas development,
producing historically low prices for the
commodity. At the national scale, the
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
1
How shale gas extraction affects
drilling localities: Lessons for
regional and city policy makers
Accepted following review: 14th December, 2011
Susan Christopherson
is a professor in the Department of City and Regional Planning at Cornell University. She is an economic geographer, who has
led a series of policy research projects to develop, analyse or evaluate strategies for regional economic development, both in the
USA and internationally.
Ned Rightor
is President of New Economy Dynamics LLC, a research and consulting firm focused on workforce development and economic
development projects throughout north eastern USA.
Abstract In countries around the world, the public debate over the prospect of high
volume hydraulic fracturing for shale gas has revolved around its environmental impacts,
while taking as a given that exploitation of this newly available natural gas asset will
produce significant economic benefits for local and regional economies. In this paper the
authors use multiple methods, including a case study of the Marcellus Shale gas ‘play’ in
the USA, to examine how the economic costs and benefits of high volume hydraulic
fracturing have been assessed. They argue that the economic impact models, which have
been used to project potential benefits and job creation, provide only a fraction of the
information needed to understand the consequences of drilling for the regions in which it
occurs. The paper also examines some of the challenges local communities face in
responding to the costs posed by shale gas extraction. The authors’ analysis indicates
that, while shale gas development may increase jobs and tax revenues in the
predominantly rural regions where drilling occurs, it can also impose significant short- and
long-term costs. To fully assess the economic effects of hydraulic fracturing, local and
regional policy makers need to understand the boom-bust cycle that characterises natural
gas development. This cycle has implications for local costs and benefits short term, and
for the longer-term economic development prospects of localities in drilling regions.
Keywords: Marcellus Shale, shale gas, high volume hydraulic fracturing, economic impact,
economic development, local planning, local regulation
Susan Christopherson
Department of City and
Regional Planning,
Cornell University,
Ithaca, New York 14850,
USA
Tel: + 1 (607) 255 8772
Fax: + 1 (607)255 1971
e-mail: smc23@cornell.edu
Christopherson and Rightor
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
discovery and exploitation of natural gas
assets has been welcomed, particularly in
the wake of long-term economic
stagnation.
At the local level, the calculation of
costs and benefits is more complicated.
Like all resource extraction industries,
hydraulic fracturing is characterised by a
boom-bust cycle. Jobs and spending rise
dramatically in localities during the
drilling or boom phase of shale
development, but drillers leave the region
when the commercially viable resource is
fully extracted, producing an economic
bust. In situations such as that occurring
in contemporary USA, where a number
of states are engaged in shale gas
extraction, drilling rigs may move at short
notice from one region to another,
causing a series of economic disruptions as
drilling starts up, shuts down and starts up
again.
1
Regions hosting natural resource
development industries have historically
been characterised as afflicted by a
‘resource curse’ because, while the natural
resource extraction boom brings jobs and
population growth for a few years, it also
increases public service costs and ‘crowds
out’ other industries. Boom towns also
frequently experience social problems
brought about by the influx of a transient
population that follows the oil and gas
industry rigs from one place to another.
After the boom ends, and the drilling
crews and their service providers depart,
the region may have a smaller population
and a poorer economy than before the
extraction industry moved in. If the
boom-bust cycle is combined with
environmental damage, the long-term
costs to regions hosting the hydraulic
fracturing gas extraction boom may be
considerable.
Despite the potential economic and
social problems associated with
boomtown economies, it is
environmental issues that have dominated
public discussion of shale gas drilling in
the USA. Environmental concerns
revolve primarily around a particular
technology HVHFthat uses millions
of gallons of water along with chemical
additives in a drilling process that
fractures shale along bores drilled
horizontally as well as vertically to
extract more gas from formations deep
underground. The questions about this
technology have focused particularly on
its effects on water supply and quality.
Many of the environmental risks
associated with fracking, however, are a
result of the regional industrialisation
connected with natural gas development.
They occur on the surface rather than
underground at the well site, including
for example, air pollution from the
thousands of trucks required to service
the wells and from compressor plants
along the pipelines that move the
extracted gas to market. These risks are
evaluated differently from one
community to another and from one
country to another. France has banned
hydraulic fracturing because of worries
about its effects on wineries and tour ism;
earthquakes connected with test drilling
have stalled hydraulic fracturing in
Lancashire in the north west of England;
the Canadian province of Quebec has
instituted a moratorium because of
public fears about water contamination;
and in the USA, the state of New York
established a one-year morator ium on
hydraulic fracturing in order to better
assess its effects on the environment,
including on local community character.
While there is an active international
debate about the environmental
consequences of hydraulic fracturing, it
has been difficult for localities and regions
to assess the predictions about how their
economies will be affected by the drilling.
Very little research has been conducted on
the economic and social costs associated
with hydraulic fracturing during the
boom phase of development, or on what
AQ1
will happen when the drilling phase ends.
In an attempt to close this gap, the
authors review the evidence concerning
the short-term (economic impact) and
long-term (economic development)
consequences of shale gas drilling and
production, and examine the methods that
have been used to project economic
benefits. They demonstrate why an
understanding of the boom-bust cycle of
natural resource extraction is critical to an
accurate calculation of how hydraulic
fracturing will affect the local and regional
economies where it takes place. They also
describe some of the significant costs to
communities that are typically associated
with natural resource extraction booms.
Finally, some of the planning measures that
can mitigate the costs associated with
natural resource extraction for the affected
regions and localities are examined.
2
As an empirical anchor, particular
attention is paid to a specific region at the
centre of shale gas development in the
USA — the Marcellus Shale gas play in
the northern counties of Pennsylvania and
southern counties of New York (Figure 2).
HOW HAVE THE ECONOMIC
BENEFITS AND COSTS OF
HYDRAULIC FRACTURING BEEN
ASSESSED?
Despite concerns about the environmental
damage that may result from fracking, US
policy makers and the public generally
assume that exploitation of this new
natural gas asset will produce significant
economic benefits for the regions where it
occurs, reducing natural gas costs to
residents and industries, and providing for
long-term economic development. Media
coverage of issues surrounding shale gas
development has tended to reinforce this
assumption.
The idea that dramatic, widespread and
long-term economic benefits will
accompany shale gas drilling is put
forward in a series of input/output model
based economic impact reports (EIRs) that
have been supported by the oil and gas
industry or its associated lobbying
organisations.
3
For policy makers and citizens, the
utility of the information provided by
these models depends on a clear
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
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How shale gas extraction affects drilling localities
Figure 1: Image from the report World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the
United States prepared for the US Energy Information Administration (EIA), US Department of Energy (April 2011),
available at: http://www.eia.gov/analysis/studies/worldshalegas
understanding of the assumptions behind
and limitations of input/output (IO)
models. In presentations of model results,
however, critical information needed to
assess the model results is sometimes
missing. A model developed by IHS
Global Insight, for example, projects that
the shale gas industry supported 600,000
jobs in the US economy in 2010 and will
support 870,000 in 2015. The model
predictions are based on the number of
wells to be drilled in the USA.
4
But
because no information is provided on the
number of wells the industry predicts it
will drill, it is impossible to assess or
validate the results of the model.
In addition, while IO models project
the number of jobs that could be created
from a certain level of expenditures on
each well, they cannot tell us how many
actual jobs will be created, who will get
those jobs, or what they will pay. The fact
that IO models can only provide job
estimates is often ignored, and those
estimates are portrayed incorrectly as real
job numbers. Ultimately, because of the
simplifying assumptions necessary to
construct IO models, they cannot be used
to analyse wide-ranging structural changes
in a regional economy, such as those that
occur in conjunction with hydraulic
fracturing. These kinds of changes might
include increased competition for labour
across industries, or decreased ability to
retain or attract other industries because of
the noise and pollution associated with
HVHF.
Kay
5
provides a thorough analysis of the
IO model approach to economic impact
prediction, emphasising that models can
Christopherson and Rightor
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
Source: Energy Information Administration based on data from publisherd studies. Updated: May 9, 2011.
Figure 2: Map image available from the US Energy Information Administration website at:
http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm#field
produce very different results depending
upon the assumptions on which they are
built. The most important assumptions
affecting the results from these models are
those regarding the pace, scale and
geographic distribution of drilling activity.
An example of the care that needs to be
exercised in evaluating the results of IO
models and their underlying assumptions
is the Broome County, New York
economic impact study, which was
developed very early in the learning curve
on Marcellus shale gas drilling. The study
authors assumed that hydraulic fracturing
would occur uniformly across the
County.
6
Analyses of actual drilling
patterns in Pennsylvania demonstrate that
this scenario (and the assumptions about
expenditures that follow from it) is not
realistic. Drilling locations are influenced
by infrastructure (pipeline and compressor
station) access, by topographic and
geologic data used to target ease of
drilling and high value results, by political
considerations including proximity to
potentially sensitive locations such as
hospitals and schools, and potentially, by
zoning regulation.
7
These locations are
unlikely to be spread evenly across the
terrain of a county. Calculating the
amount of drilling that will occur by
assuming that wells will be drilled over
every acre of the County produced an
unrealistic estimate of the amount of
expenditures likely to occur in the
County. The authors qualify their
assumption by presenting a second
scenario that cuts the total number of
wells to be drilled in the County in half,
but this is no more than a guesstimate. The
authors do not attempt to determine
either the pace or scale of drilling that is
likely to occur in the County (based on an
analysis of the pattern of drilling in other
shale gas plays, for example), or factors
likely to affect industry investment in a
natural gas market where, in 2011, prices
are at historic lows. Rather, they assume
full development of the County’s natural
gas well sites within a short time frame.
The projections of job creation and
local revenues constructed in IO analyses
also depend on assumptions about where
expenditures associated with the drilling
of each well will be made. Given the
geographic organisation of the US oil and
gas industry and the concentration of all
inputs (manufacturing of equipment,
drilling labour, engineering services, etc)
in Texas and Oklahoma, it is expected that
— while there are local industries that
could provide inputs to the drillers — a
high proportion of expenditures associated
with Marcellus shale drilling will be made
outside New York or Pennsylvania. Again,
an IO model only estimates potential
regional expenditures. It cannot show that
the projected expenditures will actually
occur in the drilling region or whether
they will rebound to the benefit of the
region. Although oil and gas companies
indicate that the largest portion of their
expenditures in Marcellus Shale regions
will take the form of payments to
landowners,
8
there is little information to
show where landowner leasing bonuses or
royalty payments will be spent. If land or
mineral rights owners live outside of the
drilling region, it is unlikely that they will
spend their payments in the localities
where drilling is occurring, although they
will be subject to taxes in those localities.
Evidence from already developed shale
plays indicates that shale gas drilling relies
heavily on a workforce that resides in
Texas and Oklahoma and moves with the
rigs from one shale play to another. Local
employment is concentrated in trucking,
construction, and retail jobs — many of
which are part-time, short-term, and
low-wage. Input/output model projections
are rarely compared with actual
employment data after the industry begins
to develop. Using Pennsylvania
Department of Labor and Industry data,
however, the Keystone Research Center in
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
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How shale gas extraction affects drilling localities
Christopherson and Rightor
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
Pennsylvania indicates that Marcellus core
industries have created approximately
9,300 jobs in that state since the shale
development boom began in 2007. These
numbers are significantly lower than the
48,000 jobs projected in the
industry-supported IO studies.
9
Finally, the types of IO models typically
used to measure the economic impact of
HVHF are only snapshots of the regional
economy during the entire drilling cycle;
they are static rather than dynamic.
Because they are constructed around
projected expenditures for the drilling of
each well, the models do not indicate
when expenditures will be made, whether
they will be volatile or predictable, and
when they will end. They focus their
attention on the boom period, when
money and population are flowing into
the region. In reality, the drilling boom
phase of the boom-bust cycle that
characterises resource extraction industries
may be brief, lasting under ten years.
Input/output models cannot forecast what
to expect in terms of the time frame for
drilling investment, or what will happen
when drilling ends.
The limitations of the models that
have been used to project the economic
impact of shale gas dr illing suggest that
local policy makers need to read the
results of EIRs carefully and with some
skepticism. They need to look at the
assumptions that underlie calculations of
jobs and revenue to see if they
realistically portray where, when and how
drilling and the expenditures associated
with it are likely to occur. While these
models provide projections of job
creation and tax revenues, they cannot
substitute for an analysis of the actual
costs and benefits of the production
process. For newer shale development
regions like the Marcellus Shale, some
information ‘grounded’ in actual
experience is available: from case studies
of regions that have been through the
unpredictable production cycle that
characterises natural gas extraction.
10
In the next section the authors examine
why it is necessary to know more about
the factors that influence the pace and
scale of drilling in order to understand its
impact on shale gas drilling regions, both
in the short term — the drilling phase,
and in the long-term — once drilling has
declined as a major stimulus to the
regional economy.
THE PACE AND SCALE OF DRILLING
AND THE BOOM-BUST CYCLE
The extraction of non-renewable natural
resources such as natural gas is
characterised by a boom-bust cycle, in
which a rapid increase in economic
activity is followed by a rapid decrease
(Figure 3). The rapid increase occurs when
drilling crews and other gas-related
businesses move into a region to extract
the resource. During this period,
population increases and there is a modest
increase in jobs outside the extraction
industry
11
in construction, retail and
services. When drilling ceases, either
temporarily or permanently (because the
commercially recoverable resource is
depleted), there is an economic bust.
Population and jobs leave the region.
12
Because of the costs of boom-bust cycles,
communities and states anticipating this
kind of economic cycle need to
understand what will influence the pace
and scale of drilling. In the case of HVHF,
the pace and scale of drilling will
determine the duration of the boom
period of the cycle.
There are two ways to understand the
pace and scale of drilling in a shale gas
play. The first is based on an analysis of
total potential natural gas reserves and the
capacity of existing or anticipated
technologies. For example, according to
Engelder, the Marcellus might contain as
much as 500 trillion cubic feet (tcf ) of
natural gas, and in a 2008 report with
Lash, he estimated that perhaps 10 per
cent of that gas (50 tcf ) might be
recoverable.
13
The following year, he
estimated that recoverable reserves could
be as high as 489 tcf.
14
More recent
estimates of recoverable gas fall in the
200-300 tcf range. From a geologist’s
perspective, extraction of these total
recoverable reserves could take decades.
Another perspective on the pace and
scale of drilling looks at what are the
likely firm strategies in response to their
profit opportunities in particular shale
plays and among potential extraction sites.
For example, given a limited number of
drilling rigs, they will be deployed in those
places (within a gas play or across gas
plays) where profits are most likely. The
question for an energy company is not
whether a well is viable in terms of
potentially recoverable gas, but whether it
is commercially viable — that is, will it
make money for the operator (the owner
of the mineral rights) and the drilling
companies. An understanding of the
choices made by operators and their
subcontractors in a shale play requires an
analysis of the costs and delivery rates of
drilling operations, margins of commercial
profitability, and corporate financial and
competitive relationships.
Production in shale plays is
unpredictable and only a small number of
wells may be able to produce commercial
volumes of gas over time without
re-fracking, which is very costly. Evidence
from the Barnett and Haynesville shale
plays in the USA, for example, indicates
that high initial production rates may drop
off rapidly, making it difficult for operating
companies to cover their finding and
development costs. Industry investment
advisors are cautious about the long-term
productivity of the US natural gas plays.
Their advice to investors is simple: ‘Shale
production is characterised by a steep
decline curve early in its productive life.
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
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How shale gas extraction affects drilling localities
Amounts generated
Time (whether over months or years)
The pattern of the Boom-Bust cycle in royalties, business income, 
tax revenues and jobs
(green line)
Adapted from Tim Kelsey (2011), 'Annual Royalties in a Community'.
Figure 3:
AQ2
The more oil and/or gas that you can
make up front the better the economics.
15
And, according to geologist and
investment adviser Arthur Berman, who
has analysed production trends across US
shale plays:
… most wells do not maintain the
hyperbolic decline projection indicated
from their first months or years of
production. Production rates commonly
exhibit abrupt, catastrophic departures from
hyperbolic decline as early as 12–18 months
into the production cycle but, more
commonly, in the fourth or fifth years for
the control group. Pressure is drawn down
and hydraulically produced fractures close…
Workovers and additional fracture
stimulations may boost rates back to
previous levels, but rarely restore a well to
its initial decline trajectory. More often, a
steep hyperbolic or exponential terminal
decline follows attempts to remedy a well’s
deteriorating perfor mance.
16
The possibility that only some wells will
exhibit the hyperbolic production curves
that are used to describe trends across wells
in a shale play adds to the uncertainty for
investors, operators and for the
communities where drilling occurs.
17
Because shale plays may not produce the
long-term commercial results indicated by
the hyperbolic curves used by the industry
to describe production (and encourage
investment), they add to the financial risks
already attendant to shale gas drilling.
18
The risks and uncertainties facing
investors and drilling communities have
been exacerbated by the debt-driven
character of development in shale plays.
Operators have sought to buy up leases
and hold them during a period when
money and leases can be had cheaply, but
this has put them into debt. The
short-term prospects for reducing that
debt are uncertain because of depressed
US natural gas prices. A typical boom
occurs during a period when energy
prices are high. The current shale gas
drilling boom in the USA, occurring
during a period of low US natural gas
prices, appears to be driven as much by
the low cost of borrowing capital and
global investment as by anticipated profits
from the natural gas itself (if sold in the
USA at current prices).
Despite the financial risks associated
with natural gas drilling anywhere in the
USA, the Marcellus Shale is considered to
have among the best economics of the
large US shale gas plays because of the
potential richness of its reserves, but also
because of low transport costs to the
major domestic natural gas markets,
inexpensively-acquired leases, and the
absence of severance taxes. It also has
significant drawbacks because of its
proximity to populated areas, and the
prospect of regulatory controls over water
withdrawal and wastewater disposal as well
as on the drilling process.
For those living in the Marcellus Shale
region, gas operating company assessments
of the commercial viability of wells and
how to best exploit the resource have
important consequences. Evidence from
the Barnett Shale (in Texas) suggests that
individual Marcellus wells may have short
commercial production lives. Because the
Marcellus play is large and geologically
complex, however, the play as a whole is
likely to have natural gas drilling and
production over an extended period of
time. Individual counties and
municipalities within the region are likely
to experience accelerated boom and bust
cycles, while the region as a whole is
industrialised to support continued
drilling, storage, and transportation of
natural gas. Counties where
drilling-related revenues were never
realised or now have ended may still be
impacted by this regional industrialisation,
such as truck traffic, gas storage facilities or
pipelines. These more widely distributed
impacts need to be taken into account
Christopherson and Rightor
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
when anticipating what effects natural gas
drilling will have on communities, their
revenues, and the regional labour market,
as well as on the environment.
In anticipating some of the costs, it is
possible to learn from the experience of
already developed shale gas plays in the
USA.
WHAT DO WE KNOW ABOUT WHAT
OCCURS IN LOCAL COMMUNITIES
AND REGIONS WHERE SHALE GAS
DRILLING OCCURS?
Natural resource extraction industries
typically play a small role in national
economies. They are capital rather than
labour intensive industries and their
employment impact is tiny compared to
industries such as retail or health
services.
19
On the other hand, these
industries have major impacts on the
regions where production takes place.
Shale gas drilling brings a short-term
economic boom to the regions that
experience it. As drilling companies move
into a community, local expenditures rise
on everything from car parts to pizza and
beer. New jobs are created in
construction, hotels and retail. Landowners
receive mineral leasing and royalty
payments and have extra spending money
in their pockets. This increased economic
activity is very welcome, especially in light
of the ‘great recession’.
In the USA, high volume hydraulic
fracturing for shale gas has been taking
place since the early 2000s, primarily in
the western states. In the Marcellus Shale
states of eastern USA hydraulic fracturing
is even more recent. Even over this short
period of time, however, experience is
providing critical lessons. Each state has a
distinctive set of issues because of
differences in ownership (public vs. private
land), climate, terrain, proximity of the
play to population centres, and the
availability of skilled labour. Yet despite
these differences, the experience of shale
gas regions can be used to identify
common issues that are likely to arise with
shale gas extraction. Among the most
consistent local policy and planning issues
across shale gas regions are those that
derive from the boom-bust cycle of shale
gas development, and the unpredictability
of drilling and production activity across
time and space.
Unfortunately, a full description of
impacts on local communities is difficult
to assemble because — with the exception
of data on crime statistics — data must be
assembled county-by-county, or
agency-by-agency locally. There is an
analysis of social and economic impacts
common to counties in the Western
States, where the local impacts of rapid
development of shale gas drilling have
been documented,
20
and anecdotal
evidence from counties in the northern
tier of Pennsylvania. Although not
definitive, the accumulating body of
evidence provides a picture of what
localities can expect with natural gas
extraction and what they should plan for.
In the next section, the authors examine
some of the most prominent of those
impacts — on population, employment,
and public services.
LOCAL SOCIAL AND ECONOMIC
IMPACTS OF SHALE GAS
DEVELOPMENT
At the heart of the social and economic
challenges facing communities where
natural gas development occurs is the
rapid increase in a transient population
using the region as a production site.
Perhaps unexpectedly, this rapid increase in
activity is not associated with a
commensurate increase in population
resident in the counties where the drilling
occurs. The authors’ analysis of population
change in core natural gas drilling
counties during the first decade of the
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
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How shale gas extraction affects drilling localities
2000s indicates that the resident
population in these largely rural counties
has grown marginally if at all. There are
various reasons that population growth
does not occur in these core counties, but
the most frequently cited are the absence
of services, the higher cost of living, and
the lower quality of life in an
industrialised environment. For these
reasons, the economic and social impacts
of natural gas development are likely to be
felt not only locally but regionally,
affecting cities and counties in areas
adjacent to the drilling localities
themselves.
Another reason for the absence of new
residents in drilling counties is the
character of the workforce engaged in
drilling and the transient demand for the
services provided to drillers and drilling
companies. As described by Jacquet,
21
the
drilling phase of shale gas development
usually depends on an out-of-state
workforce. Although resident workers may
be employed during the drilling phase as
truck haulers or in service and
construction jobs, even these jobs may be
filled by workers who move into the
drilling area while maintaining a
permanent residence in another state. This
in-migration of transient workers has been
exacerbated by the great recession in the
USA and the paucity of job opportunities
elsewhere in the nation. In the case of the
drilling workforce itself, this means a
sudden influx of young men — some
with families, many without. Some will be
experienced gas field veterans, others will
be those drawn from other places to the
boom and the prospect of work.
In Sublette County Wyoming, for
example:
As the number of gas wells drilled per year
(authors’ emphasis) exploded from 100 in
(the year) 2000 to more than 500 in 2007,
the population of Sublette County swelled
by 24%. During that same period,
Wyoming’s population grew by just 4%,
indicating that workers and their families
were flocking to the area to meet the new
labor demands. The largest increase in
population came from teens and young
adults, aged 15 to 24, followed by adults
aged 25 to 44.
22
This short-term population influx also
creates significant demands on public
services.
According to Jacquet,
23
traffic on major
roads increased, as did the number of
traffic accidents, the number of emergency
room visits, and the demand for
emergency response services. In addition,
local schools experienced increased
demand as new workers entering the
region enrolled their children. And, as
demand for all manner of good and
services increases and local businesses seek
to exploit the boom, prices go up — not
just for temporary residents, but for
long-time local residents as well. Jacquet
found that local prices in Sublette County
increased by twice the national rate over a
six-year period.
Williston North Dakota is an isolated
prairie town where another shale gas
boom is occurring, and it has been
inundated by people from all over the
USA looking for work. While they
frequently find work, they have nowhere
to live. The homelessness rate in the city
has risen to at least 19 per cent, with
many people living for long periods in
temporary quarters.
24
Unfortunately, the
boom-bust cycle of gas development
discourages investment in the housing
needed for this workforce. Local
interviews indicate: ‘Developers have been
slow to build more apartments, largely
because they got stung by the region’s last
oil boom that went bust in the 1980s.
25
The price inflation characteristic of
shale boom areas especially affects rental
housing. Evidence from across shale plays
indicates that rents rise dramatically in
Christopherson and Rightor
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drilling areas. Local long-term renters who
cannot afford their apartments any longer
are displaced, and may seek housing
assistance from local government. Hotels
and motels fill up with transient gas
drilling workers.
This increased demand for hotel rooms
may benefit hotel and motel owners and
local restaurants, but it hurts other local
businesses, as hotels may have few rooms
available for a more traditional clientele:
business travellers, recreation seekers, and
tourists.
In the long run, given the population
declines suffered by many communities in
the Marcellus region, this influx of new
people may be welcome. Some
newcomers may like the area and decide
to stay. According to a recent US
Associated Press story,
26
the small state of
Wyoming has seen population increases
and an unemployment decline over the
past decade, especially in communities
near gas drilling areas. But for local
governments, this population influx comes
with added costs, both in the short run
and in the long run.
The consistent theme is that local
governments — counties, cities, townships,
villages — are subjected to a wide range
of demands for new services or increased
levels of service, and that the
administrative capacity, staffing levels,
equipment, and outside expertise needed
to meet those demands are beyond
anything that has been budgeted.
Infrastructure impacts
One critical area of impact is on local
roads and bridges. As Randall points out:
Dust, noise, and road damage from industry
truck travel are tops on the list of citizen
complaints in areas where gas is extracted
via shale gas drilling. A typical Marcellus
well requires 5.6 million gallons of water
during the drilling process, in almost all
cases delivered by truck. Liquid additives are
shipped to the well site in federal
DOT-approved plastic containers on flatbed
trucks; hydrochloric acid and water are
delivered — and flowback is hauled away
— in tanker trucks. Millions of gallons of
liquid used in the short (weeks-long) initial
drilling per iod account for half of the
estimated 890 to 1340 truckloads required
per well site. Because of its weight, the
impact of water hauled to one site (364
trips) is the equivalent of nearly 3.5 million
car trips. Few roads at the town level in
New York State have been built to
withstand this volume of heavy of truck
traffic.
27
Pennsylvania state officials report
scrambling to re-route trucks in the wake
of rural roads sometimes rendered
impassable for local motorists or
emergency responders, while sources in
the Barnett Shale region of Texas cite early
deterioration of city streets that increases
the burden on taxpayers. That is because,
even though access roads to the well sites
are built and maintained by the operators,
many of the journeys made by all those
trucks are on public roads. Most roads,
especially the rural roads that predominate
in the Marcellus region (and especially
under Winter and Spring freeze-thaw
conditions), are not designed to withstand
the volume or weight of this level of truck
traffic.
In Pennsylvania, local governments can
utilise State Department of Transportation
protocols to post weight limits and require
permits and bonding of overweight truck
operators, an incentive for the operators to
either do the excess maintenance
themselves or pay for damage to the roads.
However, operators are inclined to post
bonds only in municipalities or counties
where they have well sites, while the
trucks travel much longer routes through
other towns and counties. Their roads are
left vulnerable.
Recommendations from those in
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
11
How shale gas extraction affects drilling localities
already developed shale plays centre on
the planning, posting, and enforcement of
truck routes that minimize the
intrusiveness and damage caused by
high-volume truck traffic, and on local
Road Use Agreements (RUAs) or
state-level fees that support accelerated
road maintenance while gas drilling or
production activity is underway.
These need to be supported by
comprehensive traffic impact studies,
well-documented baseline data backed by
video and photographs of
pre-development road conditions, and
specialized legal advice — processes that
require additional staff and, for most
communities, funds for consulting
engineers and lawyers as well.
Whatever regulation and technical
assistance the province or state may
provide, many of the costs of drilling fall on
local governments. And, these costs are
likely to fall on some localities where
drilling makes no appreciable contribution
to the economy either through job creation
or tax revenues. Contemporary shale gas
drilling is likely to have both intense local
impacts for the drilling period, and
longer-term regional consequences as well
because of the widespread industrialisation
that accompanies contemporary hydraulic
fracturing.
Regional industrialisation impacts
Well pads are not the only feature in the
industrial landscape brought about by shale
gas development. Water extraction sites
must be developed to fill trucks
transporting water to the well pads. After
extraction, the gas has to move from the
well sites to the main transmission lines via
a network of pipelines and compressor
stations. Toxic flowback and produced
water from the wells has to be transported
to treatment facilities, which must be built
to handle its particular array of toxic waste.
These elements of the industrial
landscape will be located where geologic
or logistical factors dictate, but not
necessarily in the jurisdictions where
drilling is currently taking place or
production (and therefore tax revenue) is
being generated. For local governments,
the same questions as for well sites or
pipeline infrastructure apply to these
facilities: Who — the state, the province,
or the localities — is to regulate them, and
monitor and enforce standards; what
staffing and resources will that require; and
how shall the funds to support those
efforts be provided?
These facilities typically include:
‘Man camps’ (essentially caravan sites)
for short-term out-of-state workers
Depots for equipment
Staging areas
Gravel quarries
Water extraction sites
Wastewater treatment plants capable of
handling toxic material
Injection wells
Disposal areas (landfills)
Gas storage facilities.
Connecting all these facilities and services
are rail spurs and thousands of heavy
trucks.
These industrial facilities create a wide
range of potential environmental hazards
and stressors, all of which have
implications for the regional economy and
adjacent industries, such as tourism and
agriculture. For example, apart from the
dangers inherent in a widespread network
of pipes full of methane or in
high-pressure equipment generally, noise is
a major concern related to compressor
stations: they produce noise levels in the
85 to 95 decibel range. These levels are at
or above the US Occupational Safety and
Health Administration (OSHA) threshold
of safety for an 8-hour day, and
compressors work a 24-hour day. These
environmental stressors can have an effect
Christopherson and Rightor
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
on nearby citizens, adjacent property
values, and on other industries in the
vicinity, particularly agriculture and
tourism.
In the USA, regulation of this extensive
industrial infrastructure is likely to occur
at a level of government above that of the
locality. Localities may have a role in the
permitting of pipeline routes along
city/county rights-of-way. Local
government may also require filings and
notice to abutters, and demand incident
reporting and filing of as-built drawings
for emergency planning. For compressor
stations, local regulation may be able to
establish setbacks, maximum noise levels,
fencing and landscaping requirements, and
enhanced standards for units adjacent to
residential areas.
If not reused, flowback fluids from the
hydro-fracking process or the produced
water from producing wells must be
removed from the well sites by trucks and
transported to treatment facilities or
injection wells. These facilities, too, may be
subject to permit or construction standards
that are set or implemented at the local
level. All of these local or regional
activities require expertise, administration,
monitoring, and enforcement capacity, and
all entail planning and public
administration costs.
One example of the impact industrial
facilities may have on a region is provided
by the proposed gas storage facility in the
Finger Lakes region of New York State, a
major area for tourism because of its scenic
beauty, small towns and vineyards. This
facility is being planned by Inergy
Midstream, LLC for the former US Salt
plant just north of Watkins Glen, New
York, with underground storage for 1.45
billion cubic feet of natural gas. The new
owners propose to add an up-to-88.2
million gallon liquid propane storage
facility, also underground, plus a 14-acre, 92
million gallon brine pond on the surface.
The site for this major facility is near
the intersection of two gas transmission
pipelines and, as a salt mine, is an
appropriate natural gas storage site. But
Watkins Glen is in Schuyler County,
which is not part of the ‘fairway’the
purported ‘sweet spot’ for Marcellus
drilling in New York, so it is not likely to
obtain local tax revenue from well
production. Whatever the plant may
contribute in the way of local taxes,
Watkins Glen currently depends on
revenue from Finger Lakes tourism,
attendance at its famous road race, the
local wine industry and agriculture.
Consequently, the potential hazards to air
or water from such a facility, or the
prospect of a fire or explosion, are
particularly troubling to local policy
makers. On the other side of the equation,
this capital-intensive plant operation is
expected to produce only ten jobs after its
construction.
Officials in regions already experiencing
shale gas drilling encourage planning and
the development of fewer, centralised
locations for all these industrial functions,
in order to minimise the impacts on local
communities. Because hydraulic fracturing
entails a regional industrial infrastructure,
this planning will necessarily require
inter-county cooperation and state
assistance.
Finally, the regulation of whatever
facilities are constructed will be a
responsibility shared between the state and
local governments, in ways as yet unclear.
Localities will have to allocate resources to
negotiating with the state — and many
departments of state government are
involved — for agreements that protect
their interests and those of their citizens.
HOW ARE LOCALITIES RESPONDING
TO THE CHALLENGES POSED BY
SHALE GAS DRILLING?
Different communities respond differently
to the prospect of natural resource
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
13
How shale gas extraction affects drilling localities
extraction in their region, as do their
policy makers. One factor in these
differing responses lies with citizens’
familiarity or unfamiliarity with the
industry. Another appears to be a
difference between a ‘dominion’ and a
‘stewardship’orientation toward the natural
world. In a survey of 6,000 households in
the drilling regions of New York and
Pennsylvania, respondents who perceive
lower risks from hydraulic fracturing think
of the natural environment in terms of its
utility, while those who perceive higher
risks see humans as part of — and
responsible for — the ecosystem. The
survey indicates that most residents value
the quality of life in their largely rural
communities and they are concerned
about the lack of jobs, but they weigh
those concerns differently. Although there
is a large middle group of respondents
who are not clear about what will happen
to their communities, there are sizable
groups that are polarised in their
expectations about the impacts of shale gas
development, and that trust different
sources of information on what is
occurring. This bodes a fractious political
environment for local officials, and
suggests the need for careful planning: 58
per cent of those surveyed think that the
negative impacts associated with hydraulic
fracturing can be prevented, but only 22
per cent indicate that those negative
impacts can be repaired once they occur.
28
In the USA shale gas plays that have
been in operation for some time, local
government officials have the benefit of
looking back on their experience and on
what they think are the most important
measures that communities can undertake
when faced with the challenges posed by
natural gas drilling. Their
recommendations emphasise efforts to
educate the general public and landowners
in particular, and to make the process of
natural gas development as transparent as
possible.
According to these experienced local
officials, administrative costs for all manner
of planning, permitting, monitoring, and
enforcement activities rise, as does the cost
for computer systems to support them. So
do demands on the police, courts, jails,
services to displaced renters, and other
social services. To these are added demands
on the school system, on the public health
department, and on the healthcare system
generally. Fire and emergency services
must be prepared for the kind of fire,
accident, or spill incident that drilling
operations can produce, requiring new
equipment and training, though many
communities have volunteer or ‘call’
operations that may not ever be prepared,
or willing, to take on a major hazardous
materials incident.
A Clinton County Pennsylvania review
of the early impacts on their departments
turned up one additional factor in the
costs to government: losing their
employees to private sector jobs in the gas
play. That adds the cost of recruiting and
training new staff, and the need to
increase salaries to attract or retain them.
All this suggests to local governments
three crucial elements of preparation:
1. The need for baseline data. Without
the baseline data on roads, water
treatment, rents, traffic, use of
government equipment, etc, local
governments cannot hold the well
operators or their subcontractors
accountable for the increased cost to
local services that their activities
generate, nor can they make a good
case for relief from the state.
2. The need for a dedicated revenue
stream from gas production.
3. The need to budget for future
costs. Just as the unfolding of demands
on localities from the effects of shale gas
development may not correspond to
the flow of tax revenue from gas
production or lease/royalty payments to
Christopherson and Rightor
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
landowners, so the effects of shale gas
exploration may last far longer than the
boom in drilling activity in any given
locality. Lowering property taxes during
the revenue boom may only lead to
raising them even more when the full
effects on local government operations
are realised. Better to utilise the variety
of budgeting instruments — fiscal
impact fees, trust funds, capital reserve
funds and a healthy fund balance —
designed to stabilise the tax rate by
setting aside monies to defray future
costs.
WHAT DO WE KNOW ABOUT THE
LONG-TERM ECONOMIC EFFECTS OF
HVHF SHALE GAS DEVELOPMENT ON
LOCAL AND REGIONAL ECONOMIES?
In this paper, the authors distinguish
between the short-term impacts of HVHF
natural gas drilling — on jobs, revenues,
and costs to communities — and the
long-term consequences for economic
development. Economic development (as
distinct from economic impact) is defined
here in terms of indicators that show
whether a county or region’s population
has an improved standard of living, job
opportunities, and the kind of diverse
economy that can weather downturns in
any particular industrial sector.
It is evident that natural gas drilling will
create work in shale gas regions during the
drilling phase. The population flowing into
the region will create demand for retail
businesses and in hospitality industries,
such as hotels and restaurants.
Construction activity will also increase.
Analyses of what kinds of jobs are likely to
be produced during the drilling boom
underscore that these three sectors are
most likely to create jobs outside of the
drilling industry itself. However, as Barth
notes,
29
there are reasons to be cautious
about the natural gas drilling industry as a
route to long-term economic
development, especially in rural counties.
This caution arises from studies that show
that rural regions whose economies are
dependent on natural resource extraction
frequently have poor long-term
development outcomes. In some cases,
they may end up worse off after a
boom-bust cycle than they were before it
started. While this may seem surprising
given the economic activity that floods
into a region during the drilling phase,
there are some readily understandable
reasons for poor long-term prospects.
First, the crews who come into a region
place demands on a limited housing stock
and housing prices rise, driving low
income renters to leave the area, and
creating a potential labor shortage for
other businesses. This type of displacement
can be seen in Northern Pennsylvania,
where low-income families are being
displaced by drillers in the local rental
markets around the drilling sites.
30
While competition for labour creates
some short-term winners among locals,
such as truck drivers, it also raises costs for
other businesses in the region as labour
costs for those occupations rise. For
example, dairy farmers in the Marcellus
region of northern Pennsylvania and the
southern tier of New York, who are
already in a marginal economic situation,
are being further squeezed because of
rising costs for transporting their milk to
the dairies. These businesses may go under
during the drilling phase, leaving the
region with fewer businesses outside of gas
drilling, and thus a less diverse and more
volatile economy.
Economists refer to the situation in
which short-term but high-wage resource
extraction leads to a poor business climate
for other businesses as ‘crowding out’.
While crowding out particularly affects
businesses that require a reliable low cost
labour supply (agriculture, tourism, or
retirement communities, for example), even
higher wage businesses such as
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How shale gas extraction affects drilling localities
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Journal of Town & City Management Vol . 2, 4, 000–000 Henry Stewart Publications 1756-9538 (2012)
manufacturers may be deterred from
investing in a resource extraction economy.
Higher housing costs, labour competition
and social issues make the resource
dependent region less attractive to other
employers than alternative locations.
Resource extraction regions are also
infamous for having serious governance
challenges. Volatile revenue leads to poor
government planning and a lack of
accountability, even as demands on
government rise and may continue to
persist long after the tax revenue from the
drilling phase has dried up. When the local
boom ends, the human and physical
infrastructure built to support a
boomtown population is left for a much
smaller population to support. As Feser
and Sweeney describe in their study of
such communities’ experience with
out-migration and population loss:
During the boom period, the county’s
physical infrastructure was planned and
installed to accommodate an expanding
population. The nature of infrastructure
such as roads, sewer and water facilities, and
schools is that once it is built, it generates
ongoing maintenance costs (as well as debt
service costs) even if consumption of the
facilities declines … the departure of mine
workers and higher income, mobile
professionals left the burden of paying for
such costs to the remaining smaller,
lower-income, population.
31
In general, US counties that have hosted
drilling activities show evidence of
population loss after the drilling ends. For
example, counties in New York and
Pennsylvania with significant natural gas
drilling (1994–2009) are characterised by
greater population loss when compared
with similar rural counties in their
respective states.
Finally, although there are some local
winners in a resource extraction economy,
in the long term their numbers appear to
be outweighed by the local losers. After
the initial construction and drilling phases,
there are very few well-paying, stable jobs
available in the production phase or in the
industrial facilities servicing the regional
industry (such as gas storage sites). As a
result, income inequality tends to increase
in natural resource extraction counties.
Evidence suggesting caution in
projecting long term economic
development from natural gas drilling
comes from a study of 26 counties in
western US states that have based their
economic development on the extraction
of fossil fuels (natural gas, oil, and coal).
32
This study shows that these counties
(those that have at least 7 per cent of their
total jobs in resource extraction industries)
have not performed as well as similar
counties without extraction industries.
Both their average annual growth in
personal income and their employment
growth (1990–2005) were lower than
their peer counties without extraction
industries. These energy-dependent
county economies exhibited a set of
similar characteristics. They had:
Less economic diversity
Lower levels of educational attainment
More income inequality between
households
Less ability to attract investment.
Also, a majority of the energy industry
focused counties (16 of the 26) lost
population during this period. Though the
reasons for this loss are not fully
documented, anecdotal information
suggests that they may include the higher
cost of living in these counties and the
displacement of residents who do not
want to live in an industrialised landscape
— for example, retirees.
In part, the difference between the
extraction-focused counties and other
counties has emerged because new
service-based industries, especially
tourism, have been growing in rural
AQ3
western US counties and are creating
more jobs than extraction industries. The
extraction counties do not attract as many
tourism dollars as counties without
extraction industries. The picture is
uneven, however. While energy extraction
counties underperformed in terms of the
growth of real personal income,
employment, and population, they
outperformed their peer counties in terms
of growth in earnings per job and per
capita income. But for these measures —
average earnings per job and per capita
income — there was only a modest
positive difference (0.6 per cent per year
from 1990 to 2005).
33
In general, the research that has been
done on resource extraction in rural areas
offers no guarantee that counties where
fossil fuel reserves are developed will have
a significant long-term advantage over
counties where they are not.
WHAT IS MOST IMPORTANT IN
EVALUATING THE ECONOMIC
CONSEQUENCES OF SHALE GAS
DRILLING?
If one wants to understand how natural
gas drilling will affect communities, the
economic impact models typically used to
project potential job creation give only a
fraction of the information that is needed.
Economic impact models do not address
major questions about the cumulative costs
to communities that come with drilling,
and about how the pace and scale of
drilling will affect royalty payments and
the tax revenues to pay those costs. There
are also potential negative consequences
for other industries located in the drilling
region, including agriculture and tourism.
A realistic assessment of how natural gas
drilling will affect the regional economy
must have a framework that has been
missing from IO models, one that looks at
long-term consequences and cumulative
impacts.
In the case of high volume hydraulic
fracturing for shale gas, the evidence from
across shale plays
34
and from broader
studies of natural resource dependent
economies indicates that one should be
cautious about expecting positive
long-term outcomes (beyond 5–10 years).
Natural resource extraction has a poor
record of leading to strong, diversified
regional economies.
In thinking about and responding to
the environmental and economic
challenges posed by shale gas drilling,
elected officials and other policy-makers
need to start with the realisation that
natural gas is a non-renewable resource.
Good stewardship from an environmental
perspective requires assessing the
long-term costs and benefits of HVHF
technologies and their implications for the
natural and human environment in which
gas extraction occurs. Although the
economic consequences of HVHF gas
drilling have been counter-posed to
environmental concerns, positive
economic outcomes cannot be taken for
granted. Thus, elected and appointed
officials also need to take responsibility for
careful management of the local and
regional economies affected by HVHF gas
drilling and their longer-term
sustainability. This means anticipating what
may occur in the short term during a
boom, and in the longer term when
drilling ends. Both of these periods will
present difficult issues. It is only by
anticipating what may occur, planning for
change, and communicating a concrete
vision for the future that policy makers
can make the kinds of choices that will
stand the test of time. There will be no
second chances.
Notes and References
1. Best, A. (2009), ‘Bad gas or natural gas, the
compromises involved in energy extraction’,
Planning Magazine.
2. This paper draws upon research conducted by a
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
17
How shale gas extraction affects drilling localities
multidisciplinary team of researchers at Cornell
University on the short-term and long-term
effects of shale gas development in US regions
where HVHF extraction is occurring. Because the
authors were trying to answer complicated ‘how’
and ‘why’ questions, they used multiple methods
including case studies, interviews, and descriptive
statistics. Ultimately, their goal was to develop a
framework for thinking about the questions that
shale gas drilling raises for local and regional
policy and for long-ter m economic development
in shale gas production regions.
3. See for example: Considine, T. (2010), ‘The
economic impacts of the Marcellus Shale:
Implications for New York, Pennsylvania, and West
Virginia’, report to the American Petroleum
Institute, published by Natural Resource
Economics, Inc, Laramie, Wyoming; or IHS Global
Insight (2011) ‘The economic and employment
contributions of shale gas in the United States’,
report prepared for America’s Natural Gas
Alliance, Englewood, Colorado.
4. IHS Global Insight, ref. 3 above.
5. Kay, D. (2010), ‘The economic impact of Marcellus
Shale gas drilling: What have we learned? What are
the limitations?’, Working Paper Series for A
comprehensive economic impact analysis of natural gas
extraction in the Marcellus Shale, Cornell University
Department of City and Regional Planning,
available at: http://greenchoices.cornell.edu
/development/marcellus/policy.cfm (accessed 2nd
July, 2011).
6. Weinstein, B. L. and Clower, T.L. (2009), ‘Potential
economic and fiscal impacts from natural gas
production in Broome County, New York’, report
prepared for Broome County, NY, available at:
http://www.gobroomecounty.com/countyexec
/broome-county-releases-natural-gas-economic
-impact-study (accessed 14th July, 2010).
7. Whether localities can use zoning regulation to
restrict where HVHF occurs is a matter under
litigation in Pennsylvania and New York, and will
be decided in the courts.
8. Considine, T., ref. 3 above.
9. Herzenberg, S. (2011), ‘Drilling deeper into job
claims’, Keystone Research Center, Harrisburg,
Pennsylvania, available at:
http://keystoneresearch.org/sites/keystoneresearch
.org/files/Drilling-Deeper-into-Jobs-Claims-6-20-
2011_0.pdf (accessed 15th November, 2011).
10. Jacquet, J. (2008), ‘Sublette County socioeconomic
impact study’, Phase I Final Report, prepared for
the Sublette County, WY Commissioners,
published by Ecosystem Research Group,
Missoula, MT.
11. Marchand, J. (2011), ‘Local labor market impacts of
energy boom bust boom in Western Canada’,
available from the author at the Department of
Economics, University of Alberta, 7-29 HM Tory,
Edmonton, AB, Canada, T6G 2H4.
12. Feser, E. and Sweeney, S. (1999), ‘Out-migration,
population decline, and regional economic
distress’, report prepared for the US Economic
Development Administration, US Department of
Commerce, Washington, DC.
13. Engelder, T. and Lash G. (2008), ‘Marcellus shale
play’s vast resource potential creating stir in
Appalachia’, American Oil and Gas Reporter, Vol. 51,
No. 6, pp. 76–87.
14. Engelder T. (2009), ‘Marcellus 2008: Report card
on the breakout year for gas production in the
Appalachian Basin’, Fort Worth Basin Oil & Gas
Magazine, August, pp. 19–22, available at:
http://www.geosc.psu.edu/~jte2/references
/link155.pdf (accessed 2nd July, 2011).
15. McFarland, G. (2010), ‘Shale economics: Watch the
curve’, Oil & Gas Evaluation Report, Obsidian
Energy Company, LLC. , 17th March, available at:
http://www.oilandgasevaluationreport.com/tags
/shale-play/ (accessed 2nd July, 2011).
16. Berman, A. (2009), ‘Lessons from the Barnett Shale
suggest caution in other shale plays’, available at:
http://www.aspousa.org/index.php/2009/08
/lessons-from-the-barnett-shale-suggest-caution
-in-other-shale-plays/ (accessed 2nd July, 2011).
17. The unpredictability of HVHF shale gas drilling is
shown in the volatility of extraction in the Jonah
Field in Wyoming (See Jacquet, ref. 10 above).
Ultimately, these patterns indicate the volatility of
the drilling phase and the difficulty in making
accurate projections about its duration.
18. Urbina, I. (2011), ‘Insiders sound an alarm amid a
natural gas rush’, The New York Times, 25th June,
available at: http://www.nytimes.com/2011/06/26
/us/26gas.html?_r=1&ref=us&pagewanted=all
(accessed 2nd July, 2011).
19. Headwaters Economics (2011), ‘Fossil fuel
extraction and Western economies’, available at:
http://headwaterseconomics.org/energy/western/
maximizing-benefits (accessed 26th April, 2011).
20. Sammons/Dutton LLC and Blankenship
Consulting LLC (2010), ‘Socioeconomic effects of
natural gas development, a report prepared to
support NTC Consultants, Saratoga, New York.
21. Jacquet, J. (2011), ‘Workforce development
challenges in the natural gas industry’, Working
Paper Series for A comprehensive economic impact
analysis of natural gas extraction in the Marcellus Shale,
Cornell University Department of City and
Regional Planning, available at:
http://greenchoices.cornell.edu/development
/marcellus/policy.cfm (accessed 2nd July, 2011).
22. Jacquet, ref 10 above.
23. Ibid.
24. Davey, M. (2010), ‘A state with plenty of jobs but
few places to live’, New York Times, 21st April,
available at: http://www.post-gazette.com/pg
/10111/1052141-84.stm
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Christopherson and Rightor
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growth in energy boom areas’, Billings Gazette, 3rd
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31. Feser and Sweeney, ref. 12 above at p.33.
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34. Berman, ref 16 above.
Henry Stewart Publications 1756-9538 (2012) Vol. 2, 4, 000–000 Journal of Town & City Management
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How shale gas extraction affects drilling localities
[P1]Authors please insert callout for Figure 1 within
the text.
[P2]Authors please provide a caption for this figure.
[P3]Author: we assume that this is the same as ref 12.
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... Commuting is a particularly relevant case to consider in this analysis, for two reasons. First, sociological accounts of the oil and gas industry document that employees often do not live directly by the drilling site but rather in the surrounding areas, due to negative externalities linked to drilling, as well as limited provision of services and consumption amenities where extraction takes place (Christopherson and Rightor, 2012). ...
... Second, most jobs generated by fracking tend to be relatively short-lived, mainly occurring in relation to the set-up of the drilling site. As a result, employees are frequently out-oftown hires: transient workers active on several sites across vast regions, temporarily living in purposely arranged caravan camps while maintaining their permanent residence in a different state (Jacquet, 2011;Christopherson and Rightor, 2012). Workers effectively act as if they were commuting over long distances for as long as they are needed to fulfil the job. ...
Thesis
This thesis examines the role of social interactions in economic geography from several different angles. It draws on and dialogues with literatures in related fields such as spatial and urban economics, regional science, economic sociology, and innovation economics, to explore how the geographical and social spaces are interlinked. The thesis comprises an introduction and three essays, all focused on the United States. The first essay considers the notion of social capital from a territorial perspective and investigates the role of manufacturing decline in its accumulation. It documents a positive relationship between the two, but also highlights significant challenges in the stability and interpretation of this result. The essay thus questions how well the notion of social capital lends itself to measurement and empirical analysis. The second essay uses a direct and broad measure of the social connectedness of regions to examine its role in transferring knowledge across the entire US geography. It uncovers a small yet significant and robust effect of social connection on knowledge flows as proxied by patent citations. The effect matters above and beyond the pre-existing geography of production and the professional networks of inventors. The third and final essay uses US social connectedness data to investigate how plausibly exogenous surges in the local demand for jobs in the oil and gas industry during the ‘fracking boom’ can affect the economy of spatially distant but socially proximate places. Findings support a role for social interaction in the diffusion of local economic shocks. This effect is likely explained by the relocation of transient workers within the industry, providing new aggregate evidence in support of the literature on job information networks. The overriding contribution of this thesis is to underscore with new empirical evidence the importance of social interactions in the spatial distribution of economic activity, not just locally but also over large scale geographies.
... Neoliberal discourses on unconventional energy development describe it as a clean transitional energy source that is 'supportive of environmental integrity and productivity ' (de Rijke 2013, p.15) and a boon to national energy security and economic development (Christopherson and Rightor 2012;Finewood and Stroup 2012). Studies have shown that this framing overlooks broader environmental and social impacts of the industry, for example fugitive methane emissions (Broderick et al. 2011;Stamford and Azapagic 2014) and regional resource consumption, which can create social conflict with other users (Fischer 2016;Kondash and Vengosh 2015) and along the supply chain (Finewood and Stroup 2012;Pearson 2013). ...
... Currently there is only a limited body of research on responses to fracking development, including anti-fracking protests, which has grown alongside the fracking industry. Most of this is focused on the US, and areas of scholarly interest are energy policy and regulation (Cotton 2017;Dodge and Metze 2017;Fisk 2016;Godzimirski 2016;Whitton et al. 2017), energy transition and neoliberalisation (Finewood and Stroup 2012;Loder 2016;Malin 2013;Mercer et al. 2014), social, environmental and economic impacts (Christopherson and Rightor 2012;Colborn et al. 2011;Lave and Lutz 2014;Rozell and Reaven 2012;Steinzor et al. 2013), public perceptions (Bomberg 2017;Thomas et al. 2017b;Williams et al. 2017) and the responses of anti-fracking movements (Kinniburgh 2015;Mazur 2014;Pearson 2013;Short and Szolucha 2017;Simonelli 2014;Wright 2013). In the UK most research is focused on public opinions and perceptions of fracking as well as the discursive framing of debates at a national scale (Bomberg 2017). ...
Thesis
Full-text available
This thesis is the first to focus on grassroots political opposition to fracking development in a city-region. It examines the political space opened by activists in Greater Manchester between 15th November 2013 and 12th April 2014, situating their political struggle in a broader urban terrain of protest. Data collection was conducted between 28th August 2013 and 20th October 2014. The thesis looks beyond simple interpretations of community opposition, toward theoretically grounded understandings of anti-fracking dissent. Paradoxically, in this case a local struggle emerged primarily from social movements unrelated to the development site itself, whose actors converged on the issue of stopping fracking in the cityregion and engaged disadvantaged communities neighbouring the exploratory well. Research illustrates how activists drew on the tactics and organisational practices of radical urban uprisings to open-up and sustain an anti-fracking camp outside the exploratory well for five months, and examines ways that their dissent challenged what was being contested, who could engage in the struggle and which grievances were recognised as legitimate. Understanding the complexities of the struggle contributes to existing research on the politics of contemporary urban environmental movements by examining how solidarity and an emancipatory politics can emerge from disparate groups that have seemingly discordant perspectives. This has practical as well as theoretical relevance, because the Greater Manchester anti-fracking movement successfully presented a united front against 'fracking', despite internal conflict between actors. Using ostensibly horizontal and less-obvious vertical organisational modes of practice to organise the anti-fracking movement, activists sustained a protest camp and limited access to the exploratory well while it was in operation, before leaving of their own volition. This means that analysis contributes to a politics of hope, offering lessons for similar struggles that emerge from disparate, autonomous groups.
... Much of the recent work on oil and gas booms has been aimed at estimating the benefits and cost of fracking (e.g. Christopherson and Rightor 2012;Hausman and Kellogg 2015), as well as documenting state revenues from oil and gas production (e.g. Newell and Raimi 2018). ...
Thesis
Full-text available
This dissertation investigates the effects of recent oil and gas booms on state revenues, tax burden, and cyclicality of state revenues. The diffusion of technological innovations in horizontal drilling and hydraulic fracturing, colloquially known as fracking, across states has enabled huge amounts of oil and natural gas to be extracted profitably from underground. The examination is pursued by way of panel data of 50 states during the period of 2000-2015 using aggregate data by drilling type. This research presents four distinct findings. First, there is suggestive evidence that revenues from oil and gas extraction have similar characteristics to intergovernmental grants. The regression analysis finds that state oil and gas revenues are complementary to existing state revenues, suggesting that oil and gas revenues have crowd-in effects on state revenues. Second, estimates from statistical analysis indicate that oil and gas development results in a slight increase in resident’s tax burden. The small increase in resident’s tax burden is contributed by part of oil and gas production consumed by residents of producing states. Third, consistent with the political climate on a booming industry, this study finds that the oil and gas industry would see an increase in its state tax liabilities once it experiences a boom. The regression results indicate that the growth rate of state tax revenues paid by the industry would be higher than that of the industry’s profitability. And finally, the revenue cyclicality of the energy states, regardless of whether they allow fracking or not, is not statistically different from that of non-energy states in the period of 2008-2015. This finding suggests that the resource boom does not affect the revenue cyclicality of the energy states. Several conclusions can be drawn from the results of this study. First, fracking has transformed traditionally non-oil and gas states into producing states that gain from increased oil and gas revenues. Nationwide, state oil and gas revenues would be lower than they actually are without revenues from fracking production. Second, this research provides a theoretical foundation to extend our knowledge of the flypaper effect associated with revenues from resource extraction. It also improves our understanding of state behavior in responding to increased revenues from extractive industry. Instead of reducing residents’ tax burden, the states treat oil and gas revenues simply to increase state revenues. This study also provides empirical evidence with regard to states’ ability to shift the cost of public service to a booming industry.
... The literature does document some interesting indirect evidence that can link to LDC. For instance, Christopherson and Rightor (2012) find that the availability of local hotel rooms is very important to workers in oil and gas fields. And, there is a significant increase in demand for local hotel rooms and hence the hike of local hotel room rates during shale booms. ...
Article
This study is set to quantify the impact of oil and gas production on the commuting pattern in the Permian Basin region. In particular, we focus on cross-county commuting that has shown a significant increase during the recent Permian Basin shale boom. Anecdotal evidence suggests that the increase is mainly driven by extended daily commuting and long-distance commuting (LDC) tied to the oil and gas industry. Our regression analysis integrating county-level commuting data and shale energy production data confirms that the impact is statistically significant. Using data from 67 counties in New Mexico and Texas between 2002 and 2017, we find that on average a one-million-BBLs increase in annual oil production leads to an increase of 100 inward commuters and an increase of 15 outward commuters. The net impact (inward – outward) is an increase of 85 commuters. By linking the empirical findings to the potential health, environmental, and socio-economic impacts of shale development with commuting being the channel of influence, further exploration suggests that the health and environmental impacts of extended daily commuting are much more significant compared to LDC. As far as the socio-economic aspect is concerned, both extended daily commuting and LDC can have significant impacts.
Article
Scholarship on boom‐busts cycles in resource extraction often assumes that affected resource‐rich communities are at best reactive, at worst helpless, in the face of the large, exogenous shocks this cycle visits upon them. Researchers infrequently examine what communities themselves can do to improve their economic prospects and residents' quality of life amidst booms and busts. In this review paper, we identify and synthesize work scattered across disparate academic and gray literature—in planning, law, community economic development, rural sociology, economics, and political science, among others—to holistically assess what we know about how communities can use local policymaking to manage impacts of booms and busts associated with unconventional oil and gas drilling (UOGD), often called “fracking.” We highlight examples of communities tackling this task using vertical and horizontal governance strategies and distill expert recommendations for how communities can build boom‐bust resiliency generally and in key areas impacted by UOGD. Los estudios sobre los ciclos de auge y caída en la extracción de recursos a menudo asumen que las comunidades ricas en recursos afectadas son, en el mejor de los casos, reactivas, y en el peor, indefensas, frente a los grandes impactos exógenos que este ciclo les ocasiona. Los investigadores examinan con poca frecuencia lo que las propias comunidades pueden hacer para mejorar sus perspectivas económicas y la calidad de vida de los residentes en medio de auges y caídas. En este documento de revisión, identificamos y sintetizamos el trabajo disperso en literatura académica y gris dispar, en planificación, derecho, desarrollo económico comunitario, sociología rural, economía y ciencias políticas, entre otros, para evaluar de manera integral lo que sabemos sobre cómo las comunidades pueden usar formulación de políticas locales para gestionar los impactos de los auges y caídas asociados con la perforación no convencional de petróleo y gas (UOGD), a menudo llamado "fracking". Destacamos ejemplos de comunidades que abordan esta tarea utilizando estrategias de gobernanza vertical y horizontal y destilamos recomendaciones de expertos sobre cómo las comunidades pueden desarrollar resiliencia en general y en áreas clave impactadas por UOGD. 关于资源开采方面的繁荣‐萧条周期的学术研究通常假设,受影响的资源丰富社区在面对该周期对其造成巨大的外部冲击时,其最好的情况是采取响应,而最坏的情况则是无能为力。研究人员很少分析社区自身在繁荣和萧条期间能做些什么来改善其经济前景和居民的生活质量。在本篇综述中,我们识别并综合了不同学术文献和灰色文献——包括规划、法律、社区经济发展、农村社会学、经济学和政治学等领域——以全面评估社区如何能使用地方政策决策来管理与“非常规石油天然气钻探”(UOGD,通常被称为“水力压裂”)相关的繁荣与萧条的影响。我们重点介绍了使用纵向和横向治理策略解决该任务的社区案例,并提炼了有关“社区如何在受UOGD影响的关键领域建立繁荣‐萧条复原力”的专家建议。
Article
The topic of shale gas mining has been hotly debated in South Africa. One unexplored issue is municipalities’ readiness to deal with potential disasters related to shale gas mining. In South Africa, municipalities vary greatly in their ability to function well; this is due to complex factors related to intergovernmental relations, funding systems, political leadership, and administrative competence. This paper reviews the planning documents of the 25 mainly rural municipalities in the Karoo region, to assess the prominence and effectiveness of disaster management planning. Municipalities will have to navigate a complex intergovernmental system with confusing legislative mandates. Many municipalities have insufficient trained staff, inadequate equipment and vehicles, poor command systems, divergent municipal by-laws, and weak civilian networks. Any investment in shale gas mining will have to be accompanied by a concerted effort by national government, as well as any future shale gas investor, to strengthen provincial and municipal disaster management systems.
Article
Planners tend to think and work at the scale of the neighborhood and city. We argue that a wider analytical lens focusing on extralocal economic forces—specifically, growing inequality between regions—is essential to understanding contemporary urban problems. The growth of interregional inequality is stimulating a national dialogue on place-based policies that would benefit substantially from planning expertise. We point to three ways that planning can, and should, shape this conversation: 1) by applying a truly place-based approach; 2) by advocating for a multiscalar lens in addressing spatial inequality; and 3) by advancing holistic models of development.
Article
We use the synthetic control method to determine the economic impact of the shale boom to Ohio, Pennsylvania, and West Virginia. Estimation results are mixed. The shale development decreased the poverty rate and increased the employment growth rate in Pennsylvania and West Virginia in the short run. Top oil and gas producing counties in West Virginia also experienced short‐term personal income growth due to fracking. However, most of the positive impacts disappeared a few years after the initial boom periods. The shale development did not bring significant economic benefits to Ohio. Further, shale drilling activities exert a potential long‐term negative effect on population growth in all three states.
Article
For decades, the governance regimes of the United States and many other nations have increasingly devolved authority from central federal governments to substantially weaker state and local governments and even private industry. This trend produces uneven results for affected spaces and modes of governance. At the same time, industries have been re‐regulated under neoliberalization to maximize corporate profitability. Conterminous to the trend of neoliberal deregulation is the global energy transition. The U.S. energy system has shifted away from coal toward natural gas and has become the world’s top producer of hydrocarbons due to the widespread deployment of drilling techniques that allow access to unconventional resources. We evaluate the ways that neoliberal governance structures can create uneven socio‐economic impacts from oil and gas development across U.S. states using a multi‐level modeling framework with random slopes and cross‐level interactions. We utilize a multi‐level state and county data set that covers 2000–2016 to examine different outcomes across scales and places. We find evidence that state political economies—reflected in the ideological composition of state legislatures as well as the political spending of the energy sector—condition the effects of oil and gas development on well‐being. These findings are discussed in reference to theories of neoliberalism, growth machine politics, energy boomtowns, and natural resource‐dependent communities.
Article
The shale gas is an unconventional supplementary energy to traditional fossil energy, and is stored in layered rocks with low permeability and porosity, which leads to the difficulty for exploration of shale gas. Therefore, using CO2 gas to displace shale gas has become an important topic. In this work, we use molecular simulations to study the displacement of shale gas by flue gas rather than CO2, in which flue gas is modeled as a binary mixture of CO2 and N2 and the shale model is represented by inorganic Illite and organic methylnaphthalene. CH4 is used as a shale gas model. Compared to the pure CO2, flue gas is easily available and the cost of displacement by flue gas would become lower. Results indicate that the pore size of shale is an important factor in the process of displacing shale gas and simultaneously sequestrating flue gas, while the flue gas N2-CO2 ratio shows a small effect on the process of CH4 displacement, because the high partial pressure of flue gas is the main driving force for displacement of shale gas. Moreover, the geological condition also has a significant effect on the process of CH4 displacement by flue gas. Therefore, we suggest that the burial depth of 1 km is suitable operation condition for shale gas displacement. It is expected that this work provides a useful guidance for exploitation of shale gas and sequestration of greenhouse gas.
Article
The impacts of energy price boom and bust are analyzed through the differential growth in employment and earnings between local labor markets with and without energy resources in Western Canada. The estimated differentials attributed to the boom-induced labor demand shocks show significant direct and indirect impacts on the earnings and employment within the energy extraction and other non-energy local sectors respectively. The local job multipliers indicate that job creation within the energy extraction sector leads to modest job creation within the non-energy local sectors during boom periods. For every ten energy extraction jobs created during a boom period, approximately three construction jobs, two retail jobs, and four and a half service jobs are created.
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