Estimating Marcellus Shale’s Economic Impact

A new study from Penn State’s Marcellus Shale Education & Training Center estimates that natural gas drilling in Marcellus Shale created 24,000 jobs in Pennsylvania and added $3.1 billion to the state economy in 2009.

Both the Pittsburgh Tribune-Review and the Post-Gazette focus on the fact that this estimate of jobs created was lower than a previous study (though by one author’s comments “still big numbers”). Yet it is important to note this study remains an estimate based on a number of assumptions. Lacking concrete data, researchers approximated: how many workers have official residence in other states, how many landowners recieving royalty payments live in other states, how much these individuals spent in Pennsylvania vs. other states, and what the multiplier effect is (i.e., each dollar spent by drilling companies generated $1.80 in economic output).

But some of the information used to craft this estimate provides new information on drilling in Pennsylvania’s Marcellus Shale region, including:

• 51 percent of land in Marcellus counties is owned by residents within the counties, 25 percent by residents in other parts of Pennsylvania, 7.7 percent by folks living out of state, and 17 percent by government.
• One-third of existing businesses in local counties reported sales increases, vs. only three percent reporting declines.
• 18 percent of local governments reported revenue increases, and 26 percent indicated increased costs (on a survey sent to the authors, not based on a review of financial data).
• Landowners saved or invested 55 percent of their leasing payments, and 66 percent of their royalty payments.

The authors note that landowners saving and investment their royalty payments diminishes the economic output for 2009. However, savings and investment have positive long-term economic benefits, not to mention benefits for the landowners, and should be considered an additional boom to Pennsylvania not fully quantified by this study.

While the new study offers some interesting information, by the authors’ own summary, it represents a “preliminary, short-run view of the economic impacts of Marcellus Shale.”