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Study Spells Out Pluses, Minuses of Shale Drilling
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YOUNGSTOWN, Ohio -- A case study released Thursday shows that while oil and gas exploration in the Marcellus and Utica shale plays has led to economic benefits for the region, it's also brought new challenges to rural communities in Ohio, Pennsylvania and West Virginia.
The Multi-State Shale Research Collaborative -- composed of six think tanks across five states -- studied four counties where shale development is most active: Carroll County, Ohio; Greene and Tioga counties in Pennsylvania; and Wetzel County in West Virginia.
The counties share similar characteristics. Each is experiencing heavy shale development and is among the largest oil and gas producers in their respective states, all are small and rural, and each is generally poorer in comparison to the statewide levels.
These counties have also reported similar effects of the shale industry since it started in earnest in 2005, the study finds. Each reported a large influx of out-of-state workers, heavier truck traffic, the lack of local land-use regulations when drilling began, that companies have operated largely independently of local government oversight, and an overall growth in oil and gas drilling jobs.
"We set out to take a comprehensive assessment of the benefit, but also the cost and impact," said Sharon Ward, director of the Pennsylvania Budget and Policy Center during a conference call with reporters.
The study examined the impact of employment, crime, income to the counties, housing, road use and traffic volume, and taxation, she said. The study did not take into consideration the environmental impact, although the director noted that was among the common concerns in three of the four counties sampled.
Regardless, each county reported its own sets of benefits and challenges associated with shale development, the study shows.
In Carroll, Greene, and Tioga counties, oil and gas exploration brought economic benefits such as more jobs but imposed higher costs associated with emergency services, road damages, social services, increased rents and a shortage of affordable housing.
Greene County in southwestern Pennsylvania witnessed the most job growth, recording a 40.2% increase in private-sector employment between 2005 and 2012. However, the county also witnessed an increase in crime, traffic accidents, concerns about water contamination, and a rise in high school dropout rates as students left school to pursue higher-paying jobs in the industry.
In Carroll County, wealth generated from signing bonuses and royalty payments to landowners have led to a surge in retail sales of new vehicles, farm equipment, tools and contracting services. Also, employees of oil and gas companies have purchased local services, eat at local restaurants, and purchase some supplies from local vendors.
As such, sales-tax receipts in the county increased 31% from 2011 and 2012. Retail trade for building materials and garden equipment rose 28% over the same period, the Carroll County study shows. Rental units across the county are filled, as is the Days Inn hotel in Carrollton, driving a shortage of available housing and higher rents.
But, "there are costs to the community associated with shale development," reports Amanda Woodrum of Policy Matters Ohio, a member of the collaborative.
She reports that far fewer jobs were created by the oil and gas industry than originally forecast. While unemployment in the county stands at 8.3%, down from recession levels of 14%, it's still well off the pre-recession number of 5.8% in July 2007.
"A lot of these jobs have gone to out-of-state workers," Woodrum says. This influx has led to housing shortages and higher rental rates.
These soaring rents have made it difficult for local low-income families to secure affordable housing in the county, Woodrum says.
Other downsides are a rise in traffic accidents, excessive wear and tear on roads, and health and environmental concerns related to hydraulic fracturing and waste disposal, she said.
Wetzel County, because of its long history in mining and the multitude of shallow gas wells in the county, found that it was better prepared to handle the shale development when it hit.
The county produces 17% of West Virginia's shale gas, but did not report a population boom or a constriction of the housing market as in Carroll County, the study shows. Total property tax revenue in the county has tripled since 2005.
In contrast, Tioga County in northwestern Pennsylvania was a community "unprepared for the sudden overwhelming presence of the industry, with few tools to manage, let alone plan for, growth and change," the study shows.
Employment and the overall economy in the county improved with the arrival of the oil and gas industry, but these benefits proved temporary, the study shows. Once energy companies moved rigs from this part of Pennsylvania to more lucrative shale plays in southwestern Pennsylvania, southeastern Ohio and North Dakota, businesses closed, employment declined, "and the boom ended."
Copyright 2014 The Business Journal, Youngstown, Ohio.
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