Two States, Two Approaches to Shale Gas Development

Mark Green
Posted July 28, 2011

As the Wall Street Journal pointed out in an editorial this week, Pennsylvania and New York are writing distinctly different chapters in a tale of shale natural gas development:

"Politicians wringing their hands over how to create more jobs might study the shale boom along the New York and Pennsylvania border. It's a case study in one state embracing economic opportunity, while the other has let environmental politics trump development."

Two states, two approaches to the natural gas-rich Marcellus shale formation that lies under portions of both. Pennsylvania:

• More than 2,000 wells drilled since 2008.
• $2.8 million in direct economic benefits from natural gas company spending on wages, payments on capital and taxes - per well - according to a Manhattan Institute study from earlier this year.
• $1.2 million in indirect (business-to-business) benefits and $1.5 million in induced (business-to-consumer and consumer-to-business) impacts, per well.
• $2 million in federal, state and local taxes paid - again, per well.
• $11.2 billion in regional economic impact in 2010, according to recent Penn State research.

Then there's New York, where if you ask about the kinds of shale gas benefits that have been realized in Pennsylvania the past few years, you'll hear the sound of crickets.

Unfortunately for New Yorkers, the only thing to be said is what might come to pass if their leaders ended the state's moratorium on hydraulic fracturing, the method used to capture gas trapped in shale rock, and let development proceed at Pennsylvania's pace. The Journal:

"The Manhattan Institute study shows that a quick end to the moratorium would generate more than $11.4 billion in economic output from 2011 to 2020, 15,000 to 18,000 new jobs, and $1.4 billion in new state and local tax revenue. These are conservative estimates based on a limited area of drilling. If drilling were allowed in the New York City watershed--which Governor Andrew Cuomo is so far rejecting--as well as in the state's Utica shale formation, the economic gains would be five times larger."

As the Journal notes (see also Jazz Shaw's post on Hot Air), environmental politics has been preventing a shale gas bonanza in New York. Though the state is in the process of lifting its fracking moratorium, it's unclear which areas will stay off limits to development. Indeed, the politics of fear may yet keep the state from the full positive impact of its natural gas resources. Here's what the Penn State study said about that:

"Those environmental problems that have arisen in connection with hydraulic fracturing in no way call into question the soundness of that procedure. ... Our findings suggest that the current shale gas drilling moratorium imposes a significant and needless burden on the New York State economy. In short, the economic benefits of developing shale gas resources in New York State are enormous and could be growing, while the environmental costs of doing so are small and could be diminishing if the moratorium is lifted and if proper policies are put into place."

The choice is between economic opportunity and opportunity squandered - to say nothing of the abundant, affordable, clean-burning natural gas that could be recovered. New York is behind its neighbor in capitalizing on its own resources. How long will New York wait?