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Copyright November 2011 by Food & Water Watch. All rights reserved. This publication can be viewed or downloaded at www.foodandwaterwatch.org.
How New York State Exaggerated Potential Job Creation from Shale Gas Development
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 New Yorks shale gas job projection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Shale gas development would bring few opportunities to current residents . . . . . . . . . . . . . . . . . . . . . . . 7 Additional failures of New Yorks analysis of socioeconomic impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Executive Summary
High-volume hydraulic fracturing, or fracking, combined with new drilling techniques, has made it costeffective for the oil and gas industry to extract natural gas from underground rock formations called shales.1 However, the costs of the practice to public health, public infrastructure and the environment, conflicting against the oil and gas industrys promises of wealth for landowners and jobs for rural communities, make modern shale gas development controversial.
New York State, much of which sits atop the Marcellus Shale and the Utica Shale, is at the center of this public controversy. The Cuomo administration is currently considering regulations that would allow widespread drilling and fracking for shale gas in New York. The regulations being considered are based on the states 1,537-page environmental impact analysis, which included a socioeconomic impact analysis with job and revenue projections for several di erent shale gas development scenarios in the state.2 Food & Water Watch closely examined New Yorks socioeconomic impact analysis and found that it does the people of New York a disservice. The New York analysis concluded that an average shale gas development scenario would bring 53,969 jobs, but only in the ne print of a footnote of the widely read factsheet is it mentioned that this is a 30-year projection.3 Moreover, Food & Water Watch found that the analysis: Based on the New York analysis, Food & Water Watch estimates that in the rst year of the average shale gas development scenario, current New York residents can expect only 195 new oil and gas industry job opportunities. This would grow steadily to over 600 new jobs for current New York residents in the tenth year of development, but after this tenth year, there would be next-to-no new jobs for established New York residents. For perspective, the U.S. Bureau of Labor Statistics estimated that 755,892 New Yorkers were unemployed in August of 2011,4 and thus the impact of 195 new oil and gas industry jobs would be about one-fortieth of 1 percent (i.e., 0.026 percent). This is far from the number of jobs that New York residents have been led to expect from shale gas development. Such minimal economic bene ts do not justify the near-term and long-term public costs that would accompany drilling and fracking for shale gas.
of-state workers, or by workers with shale gas industry experience who relocate to New York permanently; fracking under the average scenario that would result in more than 20,000 wells being drilled in just three counties of the state (Broome, Chemung and Tioga); ing and fracking would have on employment in other industries, such as tourism and agriculture; shale gas wells will produce for 30 years; and economic spillover e ect of gas industry jobs.
overestimates production jobs by assuming that misapplies an economic multiplier to estimate the
Introduction
The oil and gas industry,5 industry-funded academics6 and ideological think tanks7 have promoted shale gas development as a sure- re job creator in di icult economic times. Proponents of shale gas development have bene ted from media8 and U.S. government9 reports in which the supposed economic bene ts have gone unquestioned. Food & Water Watch recently analyzed one industry-backed job projection and found that it overstated shale gas job creation potential in New York by a factor of 10, or about 900 percent.10 New Yorks job projection follows a similar methodology and su ers from similar aws. A topline claim in the New York socioeconomic impact analysis is that 53,969 jobs could be created assuming an average scenario of shale gas development.11 But this is a 30-year projection.12 It assumes that a total of 42,126 shale gas wells would be developed over 30 years, including 21,067 in just the three counties of Broome, Chemung and Tioga.13 Close examination of this job projection shows that allowing for such extensive shale gas development in New York would actually have a minimal impact on employment in the near term, primarily because most jobs would go to employees from out-of-state. Shale gas development would not provide the broadbased economic growth that New York now needs and that the industry has promised they could deliver. Instead, shale gas development would primarily bene t the oil and gas industry while bringing signi cant costs to public health, public infrastructure, and the environment.
ment (SGEIS).15 Under New Yorks average development scenario,A the analysis concluded that 53,969 jobs would be created from drilling and fracking 42,126 shale gas wells over 30 years, compared to the baseline of no shale gas development.16
from the Independent Oil & Gas Association of New York (IOGA-NY). The NYSDEC SGEIS only reports the low and average development scenarios.
How New York State Exaggerated Potential Job Creation from Shale Gas Development November 2011
Table 1. Annual Job Creation from Shale Gas Development Under New Yorks Average Development Scenario
Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 # of new wells drilled and fracked 165 330 496 661 826 991 1156 1322 1487 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 0 # of producing wells (cumulative) 165 496 991 1652 2478 3469 4626 5947 7434 9086 10738 12390 14042 15694 17346 18998 20650 22302 23954 25606 27258 28910 30562 32214 33866 35518 37170 38822 40474 42126 41961 New preproduction phase jobs 1759 1771 1757 1771 1759 1759 1771 1756 1771 1760 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -17634 New production phase jobs 28 56 84 113 140 169 196 225 253 281 280 281 281 281 281 281 281 280 281 281 281 281 281 280 281 281 281 281 281 280 -28
Note: The reason for the variability in the number of new pre-production jobs during the rst 10 years is unexplained in the E&E Inc. report. Source: Ecology and Environment Inc. 2011, Table 4-7 for new jobs projected, pages 4-2 and 4-3 for wells drilled and fracked per year
The New York job projection assumes that for the rst 10 years there is constant growth in the number of new wells developed each year, from 165 new wells in the rst year to 1,652 new wells in the tenth year.22 (See Table 1.) Development is then assumed to level o for years 11 through 30 at 1,652 new wells a year.23 This means there would not be any new pre-production phase jobs after year 10. Production jobs, in contrast, would accumulate as more wells are brought into production. The New York job projection assumes that a shale gas well will produce for 30 years, so in year 31 the rst shale gas wells would be retired under the development scenario. However, while production jobs would accumulate, the pre-production phase of shale gas development requires many times more workers per well than the production phase.24 The New York analysis, relying on the 2009 MSETC study, estimated that the pre-production phase requires the equivalentB of about 10.7 full-time workers per well.C25 In contrast, again based on the MSETC study, the New York analysis assumed that the production phase requires the equivalent of 0.17 fulltime workers per well, or about one full-time worker to manage the production of six active wells.26 These estimates of the full-time equivalent (FTE) workforce needed per well, combined with the number of new wells developed and the number of producing wells, allowed New York to project the number of preproduction and production jobs each year under each development scenario. (See Table 1 for annual job creation under the average development scenario.)
workers working 2,080 hours per year. Hundreds of different workers may work on a given well at a given time, but in many cases only for a few days.
C
The New York analysis assumes that 10 percent of shale gas wells
in New York would be vertical, and 90 percent horizontal. New York adopted a Marcellus Shale Education & Training Center (MSETC) estimate of 11.53 full-time workers per horizontal well in Pennsylvania, then assumed that the 10 percent of wells that would be vertical were about 70 percent less intensive to drill. To arrive at an adjusted estimate of full-time workers per well, the calculation is 0.90*11.53 + 0.10*(11.53*0.2777) = 10.7.
How New York State Exaggerated Potential Job Creation from Shale Gas Development November 2011
Table 2. Minimal Job Creation for Current Residents of New York Under the Average Development Scenario
Year # of new wells drilled and fracked New pre-production phase jobs (total) New pre-production jobs for transient workers New pre-production jobs for permanent workers New pre-production jobs to current NY residents
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
165 330 496 661 826 991 1156 1322 1487 1652 1652 1652 1652 1652 1652 1652 165 2 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 1652 0
1759 1771 1757 1771 1759 1759 1771 1756 1771 1760 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -17634
1370 1,305 1,212 1,134 1,030 930 833 715 614 496 -523 -526 -524 -518 -510 -497 -483 -465 -445 -423 -401 -377 -353 -329 -306 -282 -259 -239 -217 -199
389 466 545 637 729 829 938 1041 1157 1264 523 526 524 518 510 497 483 465 445 423 401 377 353 329 306 282 259 239 217 199
194.5 233 272.5 318.5 364.5 414.5 469 520.5 578.5 632 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Note: Instead of distinguishing between in-state and out-of-state workers, the New York analysis chose to describe pre-production phase workers as either transient or permanent. Although adopted in this table, this is inappropriate terminology since many out-of-state workers are permanent hires who move from site to site, while some in-state workers, such as in construction, may be temporary and/or transient workers. Source: Ecology and Environment Inc. 2011, Table 4-27. Estimate of new pre-production phase jobs to current residents based on the assumption that half of new permanent pre-production phase jobs go to workers who have moved to New York for shale gas development jobs. 6
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To illustrate this e ect, Food & Water Watch assumed that half of the new permanent jobs directly associated with the pre-production phase of shale gas development were taken by employees who had moved to New York State for such work. Under this assumption, pre-production phase employment of current New York residents would only grow in the rst 10 years, with 195 new jobs available in the rst year increasing to 632 new jobs available in the tenth year. After year 10, based on the New York analysis, the only new permanent pre-production phase hires would be from the transitioning of the transient workforce. For perspective, the U.S. Bureau of Labor Statistics estimated that 755,892 New Yorkers were unemployed in August 2011.36 Using this gure, the impact of 195 new oil and gas industry jobs would be about one-fortieth of 1 percent (i.e., 0.026 percent). This is far from the number of jobs New York residents have been led to expect.
How New York State Exaggerated Potential Job Creation from Shale Gas Development November 2011
But the fact that tourism and agriculture exist as industries in Chautauqua and Cattaraugus counties is not a serious argument. It is quite possible that tourism would have been greater in these counties were it not for the past and current gas drilling. Moreover, modern shale gas development is far more intensive than conventional natural gas development: much longer boreholes drilled, much more fracking uid used, much more wastewater created and much more heavyduty truck tra ic.45 The cumulative impacts that such development would have on other parts of rural economies may be di icult to quantify, but they must not be dismissed.
Thirty years of shale gas production per well is optimistic, meaning production jobs are likely overstated
In projecting production phase jobs, the New York analysis assumed that each new well produces shale gas for 30 years, and further assumed that the estimate of 0.17 FTE production phase workers per well would hold for all 30 years.46 But this estimate, taken from the 2009 MSETC report, is based on only a few years of shale gas production in Pennsylvania.47 This introduces signi cant uncertainty into New Yorks production phase job projection. New York assumes that production of a typical horizontal well will fall by 75 percent from year 1 to year 4, and by 90 percent by year 15.48 But if production falls more rapidly than expected, then there would be fewer production phase jobs over the long term. Indeed, the U.S. Securities and Exchange Commission is investigating whether shale gas companies have overstated the productivity of shale gas wells.49 Rapidly changing estimates of the amount of recoverable shale gas also raise questions about future well productivity,50 suggesting that the amount of gas that can be recovered from a given location of the shale may vary signi cantly from well to well.
Negative impacts on employment in agriculture and tourism from shale gas development are dismissed with a spurious argument
Although the New York analysis acknowledges that shale gas development could have negative impacts on employment in other industries, these potential negative impacts are not included in the job projections.43 Instead, the New York analysis dismisses the signi cance of such negative impacts with the simple argument that Cattaraugus and Chautauqua Counties still have healthy tourism sectors despite having more than 3,900 active natural gas wells in the region.44
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development in the state. Yet the New York oil and gas industry multiplier is derived from conventional oil and gas development. Shale gas development, being a fundamentally new industry for the state, would likely have less of a regional multiplier e ect because of extensive out-of-state sourcing. Finally, the New York analysis implicitly assumed that all of the pre-production and production phase jobs were in the oil and gas industry when it used the oil and gas industry multiplier. But, according to the MSETC report, shale gas development challenges the traditional notion of oil and gas industry jobs, and jobs would go to a wide array of subcontractors.55 Because the employment multiplier for the oil and gas industry is larger than it is for most other industries, New York overestimated the number of indirect jobs by using only the oil and gas industry multiplier.56 These aws re ect the fact that New York projected indirect job impacts using input-output models despite the explicit warning in the 2011 MSETC study, which stated, Since the analysis focuses on the speci c jobs required for drilling and production without regard to formal industry sectors, it would be illogical to apply workforce or economic multipliers to it, which typically are based upon speci c industry sectors (emphasis added).57 The New York analysis ignored this logic and produced an exaggerated projection of the job creation potential of shale gas development.
How New York State Exaggerated Potential Job Creation from Shale Gas Development November 2011
Conclusion
The New York socioeconomic impact analysis, conducted by E&E Inc., fails to provide an accurate projection of the potential bene ts of opening up the state to drilling and fracking for shale gas. By exaggerating the potential bene ts, New York has failed to serve the public interest. In reality, current residents of New York can only expect intensive shale gas development to create several hundred new shale gas industry jobs for each of the rst 10 years, followed by far fewer production jobs created for the next 20 years. Speci cally, Food & Water Watch estimates that in the rst year of average shale gas development, current New York residents can expect only 195 new oil and gas industry job opportunities. For perspective, the U.S. Bureau of Labor Statistics estimated that 755,892 New Yorkers were unemployed in August 2011,58 and thus the impact of 195 new oil and gas industry jobs would be about one-fortieth of 1 percent (i.e., 0.026 percent). This is far from the 53,969 jobs that New York residents have been led to expect from opening up their state to shale gas development. The reality that allowing shale gas development is likely to only create several hundred new jobs annually for current residents of New York puts the risks of drilling and fracking for shale gas in proper perspective. Decision makers in New York should see that such minimal job gains do not justify the certain costs to public health, public infrastructure, and the environment that come with shale gas development.
Endnotes
1 2 U.S. Department of Energy, Office of Fossil Energy. Modern Shale Gas Development in the United States: A Primer. April 2009 at ES-3. New York State Department of Environmental Conservation. Revised draft supplemental generic environmental impact statement on the oil, gas and solution mining regulatory program: well permit issuance for horizontal drilling and high-volume hydraulic fracturing to develop the Marcellus Shale and other low-permeability gas reservoirs. September 7, 2011. New York State Department of Environmental Conservation. Fact sheet: economic impacts of high-volume hydraulic fracturing in New York State. September 2011 U.S. Bureau of Labor Statistics. Local area unemployment statistics, New York. November 17, 2011. Wood MacKenzie. American Petroleum Institute. U.S. Supply Forecast and Potential Jobs and Economic Impacts (2012-2030). September 7, 2011 at 12 and 28. Considine, Timothy J. et al. The Pennsylvania Marcellus natural gas industry: status, economic impact and future potential. Pennsylvania State University, Department of Energy and Mineral Engineering. July 20, 2011 at ii, v, 31 to 32; Considine, Timothy J. et al. The Economic Impacts of the Pennsylvania Marcellus Shale Natural Gas Play: An Update. Pennsylvania State University, Department of Energy and Mineral Engineering. May 24, 2010 at ii, 18 and 19. Public Policy Institute of New York State (PPINYS). Drilling for Jobs: What the Marcellus Shale Could Mean for New York. July 2011 at 17 to 18. Gold, Russell and Ryan Dezember. Its official: Age of Shale has arrived. The Wall Street Journal. October 18, 2011; Hargreaves, Steve. Gas boom mints instant millionaires. CNN Money. November 2, 2010. U.S. Department of Energy, Shale Gas Subcommittee of the Secretary of Energy Advisory Board (SEAB). The SEAB Shale Gas Production Subcommittee: Ninety-Day Report. August 11, 2011 at 7.
4 5
10 Food & Water Watch. Exposing the oil and gas industrys false jobs promise for shale gas development: how methodological flaws grossly exaggerate job projections. November 2011. 11 New York State Department of Environmental Conservation. September 2011. 12 Ibid. 13 New York State Department of Environmental Conservation. September 7, 2011 at 6-209 and 6-218. 14 Ibid. at 6-207. 15 Ecology and Environment, Inc. Economic assessment report for the supplemental generic environmental impact statement on New York States oil, gas, and solution mining regulatory program. Prepared for New York State Department of Environmental Conservation. August 2011 at 4-1 through 4-138; New York State Department of Environmental Conservation. September 7, 2011 at 6-207 through 6-263. 16 New York State Department of Environmental Conservation. September 7, 2011 at 6-209 and 6-213. 17 Ibid. at 6-213.
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18 Ibid. at 6-211 and 6-212; Marcellus Shale Education & Training Center. Marcellus Shale Workforce Needs Assessment. June 2009 at 19. 19 Marcellus Shale Education & Training Center. June 2009 at 11. 20 Ibid. at 33 to 34. 21 Ibid. at 19. 22 Ecology and Environment, Inc. August 2011 at 4-3; New York State Department of Environmental Conservation. September 7, 2011 at 6-209. 23 Ecology and Environment, Inc. August 2011 at 4-3; New York State Department of Environmental Conservation. September 7, 2011 at 6-209. 24 New York State Department of Environmental Conservation. September 7, 2011 at 6-211 and 6-212; Marcellus Shale Education & Training Center. June 2009 at 19. 25 New York State Department of Environmental Conservation. September 7, 2011 at 6-208, 6-211 and 6-212; Marcellus Shale Education & Training Center. June 2009 at 13 and 19. 26 New York State Department of Environmental Conservation. September 7, 2011 at 6-212; Marcellus Shale Education & Training Center. June 2009 at 19. 27 National Marine Fisheries Service, Southeast Regional Office. 2009 New York State Department of Environmental Conservation. September 7, 2011 at 6-213. 28 Ibid. at 6-213. 29 Ibid. at 6-224. 30 Ibid. at 6-213. 31 Ecology and Environment, Inc. August 2011 at 4-60 and 4-61. 32 Marcellus Shale Education and Training Center. Pennsylvania Marcellus Shale Workforce Needs Assessment. June 2011 at 8. 33 Ibid. 34 Marcellus Shale Education and Training Center. June 2011 at 20. 35 Ecology and Environment, Inc. August 2011 at 4-63 and 4-64; New York State Department of Environmental Conservation. September 7, 2011 at 6-233 and 6-234. 36 U.S. Bureau of Labor Statistics. November 17, 2011. 37 Ecology and Environment, Inc. August 2011 at 4-59 to 4-64. 38 Considine, et al. July 20, 2011 at iv. 39 New York State Department of Environmental Conservation. September 7, 2011 at 2-35, 2-37, 6-210, 6-217 and 6-218. 40 Ibid. at 6-217 41 Ibid. at 6-218. 42 Ibid. at 6-218. 43 Ibid. at 6-230 and 6-231. 44 Ibid. at 6-231 45 Ibid. at ES -13, 5-11, 6-15, 6-65, 6-301 and 7-129. 46 Ibid. at 6-212 47 Marcellus Shale Education & Training Center. June 2009 at 19. 48 New York State Department of Environmental Conservation. September 7, 2011 at 6-259.
49 Fowler, Tom. SEC subpoenas records on shale gas production. Houston Chronicle. August 9, 2011; Hargreaves, Steve. A warning for shale gas investors. CNN Money. August 3, 2011. 50 U.S. Geological Survey. (Press release). USGS Releases New Assessment of Gas Resources in the Marcellus Shale, Appalachian Basin. August 23, 2011; U.S. Energy Information Administration. Review of Emerging Resources: U.S. Shale Gas and Shale Oil Plays. July 2011 at 5 to 7. 51 New York State Department of Environmental Conservation. September 7, 2011 at 6-213 to 6-215. 52 Ibid. at 6-224. 53 Barth, Jannette M. J.M. Barth & Associates, Inc. Unanswered Questions About the Economic Impact of Drilling in the Marcellus Shale: Dont Jump to Conclusions. March 22, 2010 at 1. 54 New York State Department of Environmental Conservation. September 7, 2011 at 6-233 and 6-234. 55 Marcellus Shale Education & Training Center. June 2011 at 20. 56 Bureau of Economic Analysis, Regional Input-Output Modeling System (RIMS) II Multipliers (2008/2008), Table 2.5. Total multipliers for output, earnings, employment, and value added by industry aggregation New York State (type I). 57 Marcellus Shale Education & Training Center. June 2011 at 30. 58 U.S. Bureau of Labor Statistics. November 17, 2011.
How New York State Exaggerated Potential Job Creation from Shale Gas Development November 2011
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