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Six-State Study Finds Industry Supporters Exaggerated Jobs Impact of Shale Drilling

7:50 am in Uncategorized by ThirdandState

By Chris Lilienthal, Third and State

Drilling in the six states that span the Marcellus and Utica Shale formations has produced far fewer new jobs than the industry and its supporters claim. In fact, in Pennsylvania, shale-related employment accounted for less than half a percent of total nonfarm employment in 2012 (as the figure to the right shows).

These findings come from a new report released today by the Multi-State Shale Research Collaborative — a group of research organizations, including the Keystone Research Center and Pennsylvania Budget and Policy Center, tracking the impacts of shale drilling.

As Frank Mauro, Executive Director of the Fiscal Policy Institute in New York and one of the authors of the report put it: “Industry supporters have exaggerated the jobs impact in order to minimize or avoid altogether taxation, regulation, and even careful examination of shale drilling.”

The Marcellus and Utica shale formations span six states: New York, Ohio, Pennsylvania, West Virginia, Maryland, and Virginia.

To be clear, shale drilling has created jobs, particularly in Pennsylvania and West Virginia, and cushioned some drilling-intensive areas in these states from the worst effects of the Great Recession and the weak recovery. The number of actual shale jobs created, however, is far below industry claims. Shale employment remains a small share of overall employment and has made little difference in job growth in any of the six states studied.

Natural gas development in these states from 2000 to 2008 was largely fueled by high commodity prices. As prices have declined more recently, gas drilling activity has slowed while development of higher-priced oil has accelerated.

Recent trends are consistent with the boom and bust pattern that has characterized extractive industries for decades. It also points to the need for state and local policymakers to collaborate to enact policies that serve the public interest.

You can check out the full report and press release here. We’ll be back here next week with more findings from the report.

More Fun With Shale Jobs Numbers in Pennsylvania

6:28 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Last week, the Marcellus Shale Coalition trumpeted a new claim on the shale drilling industry’s positive impact on Pennsylvania jobs:

Raymond James analysts crunched the numbers, and between 2005 and 2012 almost 90 percent of the job growth in Pennsylvania at that time came from oil and gas jobs … That’s the highest percentage of any state, according to analysts Pavel Molchanov and J. Marshall Adkins, who based the math off data from the Bureau of Labor Statistics.

As meaningless statistics go, this is one of the more meaningless.
front page of the super mister
Here’s why: Since 2005, many states, including Pennsylvania, have created few jobs overall. Pennsylvania averaged 5,704,000 jobs in the 12 months of 2005 versus 5,746,000 for the 12 months ending August 2013 — a 42,000 increase. Given this small increase in the overall number of jobs, it doesn’t take a lot of shale jobs to account for a high percentage of this increase. In other words, 90% sounds like a lot (leaving aside whether the 90% claim is even accurate), but 90% of a small number is, well, a small number.

This leads to two other points. First, why didn’t Raymond James pick 2006? In Pennsylvania, the 12-month job average in 2006 was 5,755,000 — MORE than the most recent 12-month average number of 5,746,000 jobs. Since 2006, Pennsylvania has had no positive job growth, which might lead one to say the Marcellus Shale created infinity percent of the total growth in jobs in Pennsylvania since that year. In fact, with no overall job growth, drilling would have created infinity percent of the total job growth even if it had created just one positive job.

These 2006 calculations help answer why Raymond James started its analysis in 2005: 2005 is far enough back for overall job growth in virtually every state to be positive but small. Starting in 2006 would make the shale shares of overall job growth nonsensical in many states, including Pennsylvania (since overall growth was negative). And going back to 2003 or 2004 would increase overall job growth relative to shale job growth, and begin to convey the reality that shale is a small part of the overall economy. Nice job of cherry picking the period of analysis to fuel a preconceived narrative, Raymond James.

The second point is that Pennsylvania’s high ranking for share of jobs coming from shale since 2005 stems partly from the state’s poor recent jobs performance. If Pennsylvania’s job growth since 2010 had kept pace with national job growth over the same period, we would have roughly another 100,000 jobs today. A higher number for overall job growth since 2010 — and hence since 2005 — would make the modest number of Marcellus Shale jobs created since 2005 substantially lower than 90%.

So in a strange way the Raymond James/Marcellus Shale Coalition claim about shale job growth since 2005 is partly a celebration of Pennsylvania’s disappointing overall job growth since 2010. Does the Marcellus Shale Coalition really mean to draw attention to this?
Read the rest of this entry →

Ed Rendell’s Frack Attack

2:22 pm in Uncategorized by ThirdandState

By Sharon Ward, Third and State

Former Governor Ed Rendell got into some hot water last week with an op-ed in the New York Daily News touting the economic benefits of hydrofracking. ProPublica quickly outed the Governor for his ties to the drilling industry, and Rendell owned up to the fact that he is a consultant to Element Partners, which has investments in the gas industry. The Daily News has added a note to its web site disclosing the financial arrangement.

Rendell’s piece touts the industry’s economic benefits, repeating the claims of an IHS/U.S. Chamber of Commerce analysis that the Pennsylvania Budget and Policy Center critiqued back in December for overstating the employment and tax benefits of shale.

The natural gas industry in Pennsylvania is like a new baby: it’s tiny but gets all the attention. Through a coordinated and well-financed public relations effort (remember My Range Resources?) and a legion of lobbyists, the industry has given an impression of its importance that just doesn’t square with the facts.

In 2012, the natural gas industry provided one-half of one percent of all jobs in Pennsylvania. The IHS report claims the industry contributed $900 million in state and local corporate tax revenue, one-third of all corporate taxes collected by the state in 2012, but the Department of Revenue puts the number at less than one-fifth of that amount (see Table 2).

Don Gilliland of The Patriot-News made a similar point in a column after a Chamber of Commerce event in Harrisburg in July, announcing a multi-million dollar “Shale Works for Us” public relations campaign. Gilliland ripped into the industry for stating — in a promotional effort the sponsors claimed was designed to “get out the facts” — that shale created 140,000 jobs in 2010 alone, while the Pennsylvania Department of Labor and Industry reported just 23,618 shale jobs since 2008. (The Chamber numbers came from the infamous “Penn State” study that Penn State subsequently disowned — see here and here).

So why does this matter? The industry cleverly uses this economic promise to beat back regulation or any other attempt to limit or manage natural gas development. Gilliland cleverly gets the chamber spokeswoman Karen Harbert on record about its strategy, to use its PR effort to “ensure no hindrance or regulatory barriers” to natural gas drillers.

Rendell urges New York Governor Andrew Cuomo to seize the opportunity that gas drilling provides, but Cuomo should use Pennsylvania as a cautionary tale rather than a guide. The economic benefits of gas development in Pennsylvania have been routinely overstated, while its costs have been minimized or ignored. The hype has only served to undermine reasonable environmental and land use restrictions necessary to blunt the short-term impacts and limit long-term harm.

News Flash! Marcellus Shale Coalition Takes on Pennsylvania Charities

10:57 am in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

No Fracking Signs at a protest

Image: CREDO.Fracking / Flickr

Thanks to Citizens United, we are all the beneficiaries of unlimited corporate money in our elections — witness the onslaught of TV ads interrupting our ballgames and the fall lineup of TV shows.

In a new twist, the very groups that agitated to spend unlimited funds to promote their point of view are now critical of others who challenge them. What brings this to mind is an Associated Press story this morning that the Marcellus Shale Coalition is not happy about the funding priorities of the Heinz Endowments and William Penn Foundation.

Citizens groups and nonprofits around the nation are asking questions about environmental and health impacts of natural gas hydraulic fracturing, or fracking, and Pennsylvania charities are funding much of the debate.

Foundations from Philadelphia to Pittsburgh have provided more than $19 million for gas-drilling-related grants since 2009, according to an Associated Press review of charity data. The money has paid for scientific studies, films, radio programs, websites and even trout fishing groups that monitor water quality.

That’s led to expressions of gratitude from those who say state and federal governments aren’t doing enough on the issue but also protests from some in the gas-drilling industry, who claim there’s bias in the campaigns…

But the Marcellus Shale Coalition, a leading industry group, criticized what it sees as a “record of bankrolling organizations and institutions opposed to the safe development of job-creating American natural gas.”

(Full disclosure: the Keystone Research Center receives funding from the William Penn Foundation and Heinz Endowments.)

What the groups, and their funders, are critical of is the unsafe development of natural gas. Since Pennsylvania’s official Marcellus policy is drill baby drill, somebody has to do the due diligence, so thank your local charity.

A related story provides heartening news that public debate can smoke out research that is simply advancing the perspective of the group that paid for the study.

A natural-gas driller’s group has canceled a Pennsylvania State University study of hydraulic fracturing after some faculty members balked at the project that had drawn criticism for being slanted toward industry.

The Marcellus Shale Coalition, which paid more than $146,000 for three previous studies, ended this year’s report after work had started, said Kathryn Klaber, coalition president.

The earlier studies were co-written by former Penn State professor Tim Considine, an economist now at the University of Wyoming who has produced research on economic and energy issues under contract to trade associations. The first study, in 2009, initially failed to disclose its industry funding and was used by lawmakers to kill a state tax on gas drillers. It was characterized as advocacy for producers by groups such as the nonprofit Pennsylvania Budget and Policy Center in Harrisburg…

The Marcellus Shale Coalition, a Pittsburgh-based drillers group, paid Penn State for the three economic-impact studies beginning in 2009, according to John Hanold, senior associate director of Penn State’s Office of Sponsored Programs…

Subsequent studies by other researchers have found that gas drilling created fewer than half the jobs projected by Considine in 2009.

The public needs reliable data to understand what drilling does and what it doesn’t do — information that the industry just won’t provide. Rational, independent studies funded by an unbiased government or private foundations, are in this post-Citizens United environment the antidote to unlimited, year-round campaign commercials, like the ones offered by our friends in the gas industry.

Fact Checking PA Governor Corbett’s Jobs Record…and Some Unsolicited Advice

2:07 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Governor Tom Corbett’s administration has a new summary of Pennsylvania’s recent job performance. Today’s news that Pennsylvania’s unemployment rate is as high as the national unemployment rate underscores, however, that the state’s recent jobs record is not  good. Let’s take a closer look.

PA vs. U.S.: The Corbett jobs summary notes that Pennsylvania’s unemployment rate is below the national rate — and it was when the summary was first released. This was not a new trend: the Pennsylvania rate was a point or a point-and-a-half below the national rate for most of the four years before Governor Corbett took office. A year ago, the gap between the Pennsylvania and U.S. unemployment rate was still statistically significant. (See Table A.) But the gap between the two rates — the “Pennsylvania advantage” — has been shrinking steadily since 2010 until the Pennsylvania rate finally climbed to the U.S. level in August 2012, both equaling 8.1%.

Private-sector Job Growth: While the administration touts private-sector job growth in 2011, the numbers reflect a national trend, rather than a unique Pennsylvania story.

The U.S. economy has had 30 consecutive months of private-sector job growth. In fact, Pennsylvania’s rank for the percent growth in private-sector job growth has fallen from 8th in 2010 to 36th in the 12 months ending in July 2012. One of the reasons that Pennsylvania’s private-sector job-growth ranking is down is the deeper cuts in public employment in Pennsylvania compared to other states. Deep cuts to Pennsylvania public schools and colleges led to a loss of 14,000 education jobs alone in 2011.

These layoffs impact the classroom and Main Street too. Unemployed teachers, like unemployed factory workers, don’t have money to spend, which affects the broader economy.

Manufacturing Job Growth: Manufacturing jobs growth improved in 2011, but again reflects national trends. In fact, Pennsylvania’s manufacturing job growth since early 2010 is slightly below half the national increase. (See The State of Working Pennsylvania 2012.)

New Hires in Marcellus Shale: Not this one again. The administration is touting natural gas industry growth by citing the number of new hires. As we’ve explained repeatedly, new hires are not new jobs (most new hires replace people who quit or are fired). In fact, the number of new hires is basically a meaningless number. Statewide there were 580,400 new hires during the 2nd quarter in Pennsylvania, while total non-farm employment rose between the 1st and 2nd quarter by less than 300 jobs. In other words, the only reason to cite new hires is to make the job gain seem substantially larger than it really is.

The gas industry has led to some job growth in Pennsylvania, just not on the scale claimed by the industry. Between the 4th quarter of 2008 and the 4th quarter of 2011, employment in the core Marcellus Shale industries grew by 18,000. That gain was largely wiped out by the loss of 14,000 education jobs in just one year. Even using the most generous estimates, employment in the Marcellus Shale in direct and ancillary industries in the 4th quarter of 2011 (as published by the Pennsylvania Department of Labor and industry) was 238,400 – about 4.2% of total state employment.

Here’s the unsolicited advice: Twenty months into Governor Corbett’s first term, there is still time for the Governor to pursue policies that will improve Pennsylvania’s job performance. There are multiple options that have strong bipartisan and business support. For example, investing in transportation infrastructure as recommended by the Governor’s own transportation commission.

In manufacturing and workforce development, the administration is also saying some of the right things. But talk is cheap: we need actual investment in skills and innovation if our job performance is going to improve relative to other states and the nation.

Pennsylvania’s Natural Gas Tax Giveaway Exceeds $500 Million Mark

8:33 am in Uncategorized by ThirdandState

By Michael Wood, Third and State

The state’s Department of Environmental Production (DEP) recently published a biannual report on Marcellus Shale production in Pennsylvania. (Most states require monthly reporting, but that is a different story.) In the data, we can now see how much the state has really given away by refusing to put a robust gas extraction tax in place — and the sum is staggering.

From July 2009 to June 2012, over $8 billion worth of natural gas was extracted from Pennsylvania’s share of the Marcellus Shale. The Commonwealth would have collected more than $500 million had we had West Virginia’s natural gas tax in place. Instead, we got $0.

The recent DEP report was incomplete, as the Associated Press highlighted. Production from Chesapeake Energy (likely the state’s largest gas producer) wasn’t included nor disclosed as being missing in the initial release. Add in the production from Chesapeake over the last six months, and the lost tax revenue figure would be even bigger.

You may remember the Pennsylvania Budget and Policy Center’s “drilling tax ticker,” which tallied up the lost revenue to the state from not having a meaningful drilling tax in place. Those figures were based on conservative estimates of per-well Marcellus Shale production. We now have real production data (well, all drillers but Chesapeake) to analyze — giving us more accurate estimates.

Gas producers will pay an annual drilling impact fee beginning September 1, 2012, but the proceeds from the fee are expected to be lower than a modest drilling tax would bring in — even at today’s low natural gas prices.
Click to enlarge

How could this foregone $500 million over the last three years been used?

  • Rehire 3,000 teachers;
  • Save General Assistance for 68,000 needy Pennsylvanians;
  • Restore funding for parks and environmental protection; or
  • Help the state meet growing pension obligations.

Pennsylvania continues to lose out on this one-time resource and may possibly be turning our natural bounty into a resource curse. These new data give us an idea of how much we are giving away.

High CEO Pay Comes Under Fire from Shareholders

10:54 am in Uncategorized by ThirdandState

By Michael Wood, Third and State

In the news today, a couple of instances of CEOs being taken to task by shareholders over excessive pay.

Citigroup Centre in London. Photo by Harshil Shah.

USA Today reports that at Citigroup, 55% of shareholders rejected or abstained from rubberstamping a $25 million payday for their CEO Vikrom Pandit. The vote is only advisory, unfortunely, but is still described as being “historic” for Wall Street firms in the aftermath of the recession. The report notes:

Wall Street’s massive compensation packages have raised the ire of shareholders for years, especially when they appear to have little relation to the performance of specific executives. …

“Citigroup is one of most egregious example of disconnect between incentives of top management and value creation of shareholders,” said Mike Mayo, bank analyst at brokerage firm CLSA and author of the book “Exile on Wall Street.”

“The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up.”

Closer to home, the Pittsburgh Post-Gazette has a story this morning about discontent at Pittsburgh-based EQT’s annual shareholder meeting. Again, executive compensation seems to be at the heart of this dispute — as well as unease about natural gas production.

Even though the Buffett Rule failed to get a vote in the U.S. Senate earlier this week, it seems that income inequality is on the minds of many Americans right now — as it should be. (In case you missed it, check out the Keystone Research Center and Pennsylvania Budget and Policy Center’s fact sheet on the Buffett Rule and what it means to Pennsylvania.)

 

PA Must Reads: Soup Kitchens & Self Sufficiency Programs Under Pressure & Marcellus Public Health Issues

10:11 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

The Erie Times-News reports this morning that Governor Tom Corbett’s decision to implement an asset test for food assistance in Pennsylvania is expected to drive more people to seek help in already overburdened soup kitchens.

In other news this morning, it has fallen to charitable foundations to fund programs to help identify the public health impacts of Marcellus Shale development.

When Sister Mary Miller took over Emmaus Ministries in 1980, she dreamed of one day being able to close the agency’s soup kitchen, hoping the need would no longer be there.

In 1980, the kitchen served about 100 people a day.

Today, the facility … serves close to 200 people daily, feeding a city racked by a skyrocketing poverty crisis.

The soup kitchen’s numbers are likely to rise even more in the coming months, Miller believes, when major changes in the state’s food-stamp program will eliminate some area residents from those eligible to receive the government benefits.

On May 1, the Pennsylvania Department of Public Welfare will reinstate asset testing for people seeking to qualify for food stamps, known as the Supplemental Nutrition Assistance Program…

Critics of the asset test, like Miller, insist the move will hurt thousands of people who are already struggling, penalize those who save money, and burden food pantries, soup kitchens and social-service agencies that are already overwhelmed.

“To think, I once hoped there would be a time where we wouldn’t need the soup kitchen,” the Erie Benedictine nun and director of Emmaus said. “Now, with this, the door of the soup kitchen will only have to become wider.”

Read the rest of this entry →

Pa. Marcellus Shale Fee Among the Lowest in the Nation

8:42 am in Uncategorized by ThirdandState

Low Low Prices! (photo: barkdog/flickr)

Low Low Prices! (photo: barkdog/flickr)

A blog post by Michael Wood, originally published at Third and State.

Lost amidst our work this week on Governor Corbett’s 2012-13 budget was the state Legislature’s passage of a Marcellus Shale package that will give Pennsylvania one of the lowest drilling tax or fee rates in the nation. The bill is now awaiting the Governor’s signatures.

As The New York Times wrote this week:

Critics, among them some municipalities and environmental groups, said the bill was a capitulation to the energy industry and would all but eliminate their ability to decide where gas development could happen. The measure would limit it in densely populated urban areas but not in suburban spaces, critics said. They also said the environmental and safety standards, like the requirement that wells be at least 500 feet from any house, were weak.

The Times also cited our estimates that “at the current price of natural gas, the fee would amount to an effective tax rate of 2.6 percent, far less than the 5.4 percent in Texas.”

The fee sets a 15-year rate schedule for Marcellus wells that rises and falls based on the price of natural gas and inflation. The Associated Press made the point, again citing our work, that this is much lower than drillers pay in other states:

At the current price of gas, the 15-year fee total would be $240,000 per well, not counting inflation, according to a summary distributed to House Democrats. The maximum per-well fee a company would pay is $355,000, if gas stays above $6, while the minimum would be $190,000, if gas stays below $2.25, again not including inflation

But the fee at any price would be well below the average lifetime per-well tax paid in other natural gas states, including $993,700 in West Virginia, $878,500 in Texas and $555,700 in Arkansas, according to the Harrisburg-based Pennsylvania Budget and Policy Center …

As far as distribution of the revenue, The Philadelphia Inquirer explains: Read the rest of this entry →

PA Must Reads: Hard Times, Unemployment Insurance and Marcellus Arm Twisting

10:18 am in Uncategorized by ThirdandState

(photo: wisaflcio/flickr)

(photo: wisaflcio/flickr)

A blog post by Mark Price, originally published at Third and State.

Although the economy is recovering, it is important to remember that unemployment remains high and that means many households are struggling to make ends meet. WITF this morning reports on non-food aid from a Central Pennsylvania charity.

NPR’s Morning Edition had a very good story on the national controversy surrounding food assistance.

Meanwhile, the Allentown Morning Call reports that a bill required to enable 17,000 Pennsylvania workers to qualify for federally-funded unemployment insurance has cleared an important hurdle.

The state House has advanced Legislation that would restart the flow of extended unemployment benefits for 17,000 jobless Pennsylvanians. A final vote, which would send it to Gov. Tom Corbett’s desk, is expected Wednesday …

… the bill was quickly moved to third, and final consideration, with Speaker Sam Smith’s announcement that all amendments to the bill had been pulled. …

Some House Republicans, with the backing of business leaders, had sought to tie approval of the bill to shoring up the long-term solvency of a system that owes $3 billion to Washington — courtesy of historic levels of unemployment.

The Philadelphia Inquirer reports on hard ball politics aimed at boosting support for a weak Marcellus Shale drilling fee. Read the rest of this entry →