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Review cuts confusion, bias from studies on shale jobs



Published: Mon, October 1, 2012 @ 12:06 a.m.

By Burton Speakman

bspeakman@vindy.com

YOUNGSTOWN

Studies vary widely on how many jobs oil and natural-gas drilling will bring to eastern Ohio and western Pennsylvania.

“It only takes a small assumption to create a result that is much higher or lower,” said Matthew Rousu, associate professor of economics at Susquehanna University in Selinsgrove, Pa., and creator of a website designed to evaluate such studies.

Confusion and bias among those economic reports led to the site’s creation. The Economic Impact Review will post and review economic impact studies.

Though the initial emphasis is on Marcellus Shale studies, the plan is to expand the reviews to other economic-impact reports.

The site is not funded by the oil and gas industry or by any environmental group, Rousu said.

The same types of studies on the same issues are being conducted in the Utica Shale, he said.

“We try to take an objective look at the studies and provide an objective critique,” Rousu said.

Rousu has reviewed a study that relates to Ohio and the Utica Shale. “The Cost of Fracking” was released by Environment Ohio and attempts to calculate the potential negative costs of hydraulic fracturing.

He said the study does a good job of attempting to list all costs associated with fracking, but the study also has flaws.

“I think the topic is important, and the authors do a good job trying to list any cost that could possibly be linked to fracking. They don’t attempt to estimate an ‘external cost per drilling well’ or an overall cost of fracking for society, however, which would be extremely useful,” Rousu said. “The authors seem too much like anti-drilling advocates often associating costs that are far-fetched, counting costs already paid by the drilling companies and seemingly reporting only the studies that help advance their cause.”

Roousu’s report compares to the industry response from Dan Alfaro, spokesman for Energy in Depth-Ohio, who said the Environment Ohio study deliberately misled the public on the facts of oil and natural- gas development.

One of the issues with all these studies is the multiplier they chose to use, Rousu said. The multiplier is determined based upon how many times each dollar invested is spent again within the state.

“For example, here in the middle of the state, the second time that investment is spent is much more likely to be here in Pennsylvania. That possibility goes down for sites that are 10 miles from either New York or Ohio,” Rousu said. “None of these studies take that into account, although that is a difficult thing to do.”

Someone with ties to industry or an environmental group could create a much larger or smaller economic result by simply altering the multiplier, he said.

A 2011 study by Kleinhenz & Associates, prepared for the Ohio Oil and Gas Energy Education Program, claimed drilling would create 200,000 jobs in Ohio by 2015.

This year, IHS, a company that compiles economic reports, stated that in 2010, Ohio had 31,462 jobs attributable to shale-gas production. According to the IHS study, that number is expected to increase to 41,366 by 2015 and 81,349 by 2035.

The IHS study also places the Marcellus Shale development as resulting in 56,884 jobs in Pennsylvania due to the shale boom. The study expects that figure to increase to 111,024 in 2015 and 270,058 by 2035.

In addition, a December 2011 study by Ohio State University professors Mark Partridge and Amanda L. Weinstein, both from the Department of Agricultural, Environmental and Development Economics, estimated that shale drilling would create 20,000 jobs.

The OSU study figured total gains by using other factors such as energy development typically leading to higher taxes, wages, land rents, and other costs associated with energy development that make other sectors less competitive.

“The boom/bust history of the energy economy is that drilling activity usually begins with a wave of drilling and construction in the initial phases, followed by a significant slowdown in jobs as the production phase requires a much smaller number of permanent employees,” according to the OSU study. “Indeed, Ohio has a long history of energy booms that illustrates that booms too often have few lasting effects.”

All these economic-development studies related to shale are significant. Each group conducting the study is putting a lot of time and effort into its findings, Rousu said.

“The results are mixed. None of them are all bad or all good,” he said.

Such economic-impact studies are challenging because a number of variables are used to make determinations that are inconsistent, said George Zeller, a Cleveland-based economist.

“For example, who could have predicted the crash in the natural-gas prices, which would probably make all [Utica Shale impact] estimates a little high?” he said.

Other factors such as shifts from natural gas to oil would be difficult to predict, Zeller said. Environmental issues such as another earthquake in Youngstown also could have an impact.

“It’s very difficult to make an accurate prediction,” he said.

For information about the reviews of Marcellus Shale economic-impact studies, go online to www.economicimpactreview.com.


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