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Food & Water Watch Report on Shale Gas Job Claims

Food & Water Watch Report on Shale Gas Job Claims

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Published by: jendlouhy on Nov 15, 2011
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The oil and gas industry, industry-funded academicsand ideological think tanks have promoted shale gasdevelopment — through the controversial process of hydraulic fracturing, or fracking — as a sure-
re jobcreator during di
icult economic times. Food & WaterWatch closely examined a recent report touting the job-creation potential of shale gas development andfound numerous inaccuracies and methodological
aws. Even after correcting for these problems,questions remain about the validity of using economicforecasting models to predict the economic impacts of expanded shale gas development.
The purported economic bene
ts of shale gas devel-opment have served as a primary justi
cation foropening up large parts of New York State to fracking.In a 2011 report, the Public Policy Institute of New York State (PPINYS) claimed that, by 2018, thedevelopment of 500 new shale gas wells each yearin the
ve counties of Allegany, Broome, Chemung,Steuben and Tioga could sustain 62,620 new jobs inNew York, relative to the case of no shale gas develop-ment. Another 500 new wells would need to be drilledand fracked every year to sustain these jobs.Of these 62,620 jobs, PPINYS claimed that 15,500would be “direct jobs” created from direct spendingby shale gas companies. Only a small fraction of thedirect jobs would actually be in the gas industry;most would be direct jobs in di
erent industriesdue to shale gas company spending. The remaining47,120 jobs would be “indirect jobs” and “induced jobs”created through the economic spillover e
ects fromdirect job creation; that is, through a multiplier e
ect.However, after identifying and correcting thenumerous inaccuracies and methodological
aws thatled to this rosy projection, Food & Water Watch deter-mined that the economic forecasting model PPINYSrelied on only supports a claim of 6,656 New York jobsby 2018, under the PPINYS scenario of drilling andfracking 500 new shale gas wells that year. Yet thiscorrected estimate — a little over one-tenth of theoriginal PPINYS claim — still does not account forany of the negative impacts that shale gas develop-ment would have on other economic sectors, such asagriculture and tourism.The explanation for how PPINYS arrived at such a rosyprojection of the economic bene
ts of allowing shale gasdevelopment in New York consists of two parts:
The PPINYS report misused a
nding in aPennsylvania State University study to concludethat direct spending by shale gas companies inNew York could lead to 15,500 direct jobs:
The Penn State study undercounted thenumber of wells drilled in Pennsylvania, andthus overestimated the number of direct jobsper well;
The Penn State study exaggerated the portionof gas company spending that stayed inPennsylvania, and thus overstated direct jobcreation;
The Penn State study included payments tolandowners as spending that creates direct jobs,but these payments only create induced jobs,through landowners re-spending their income;
PPINYS failed to mention that many of thehigh-paying gas industry jobs created would goto transient, out-of-state workers with shale gasindustry experience, not to New Yorkers; and
PPINYS misused the Penn State study resultsby not accounting for economies of scale andgains in productivity, which will lower thespending necessary to develop future shale gaswells.Correcting for these
ve points reduces thePPINYS projection of direct jobs
from 15,500down to 3,469
created by 2018, assuming 500new wells drilled and fracked each year.

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