Economic Impacts of Hydraulic Fracturing in the Marcellus Shale Region
Covering significant portions of northern Pennsylvania and southwestern New York, the Marcellus Shale is a geological formation rich in natural gas, estimated to harbor around 500 trillion cubic feet of this resource. This natural gas extraction has been facilitated by hydraulic fracturing, commonly known as fracking, a method employed especially in Pennsylvania, contributing to an economic boon in its counties above the shale.
The Divergent Paths of Pennsylvania and New York
While Pennsylvania has embraced hydraulic fracturing, permitting extensive gas extraction, New York has taken a markedly different approach. In 2010, New York implemented a moratorium on hydraulic fracturing and horizontal drilling. This decision was solidified in 2014 when Governor Andrew Cuomo’s administration enforced a total ban on these practices. This divergence creates a unique opportunity for analysis, particularly within the Twin Tiers—a region consisting of 14 counties that share geological similarities yet face contrasting regulatory landscapes.
The Twin Tiers Experiment
The Twin Tiers region exemplifies a natural experiment where the economic outcomes of the fracking ban in New York can be compared to those in Pennsylvania. New York’s counties serve as the treatment group, hindered by the ban, while the counties in Pennsylvania act as the control group, benefiting from natural gas extraction. This methodological framework allows for a precise assessment of the income and job losses attributable to the prohibition of hydraulic fracturing.
Research indicates that had New York allowed for the extraction of natural gas, the economic landscape would have improved significantly—an estimated loss of approximately $11,000 per capita translates to $27,000 per family in potential earnings.
The Shale Revolution
The shale revolution began in the late 1990s, ushering in advancements in extraction technology that made previously inaccessible oil and gas reserves commercially viable. The combination of horizontal drilling and hydraulic fracturing has propelled the United States toward self-sufficiency in energy production, with the Marcellus Shale at the forefront of this transformation.
Methodology of Extraction
Hydraulic fracturing involves injecting water and chemicals under high pressure into wellbores, fracturing the rock and liberating natural gas. Horizontal drilling further enhances access to these resources, facilitating a significant increase in natural gas production. By focusing specifically on the Marcellus Shale, this analysis explores how well these techniques have catalyzed economic growth in regions where they are permitted.
Geological and Economic Context
The Marcellus Shale stretches extensively across the Appalachian Basin, encompassing southern New York and northern Pennsylvania. Initial skepticism regarding its gas-producing potential faded after successful extraction efforts began in earnest around 2003. Since then, drilling activity has surged, leading to the construction of over 13,000 gas wells in Pennsylvania alone, which has fueled local economic growth.
Regional Economic Disparities
The contrasting policy approaches between Pennsylvania and New York highlight significant economic ramifications. While Pennsylvania’s counties above the Marcellus Shale have capitalized on fracking, New York’s ban has stifled potential economic developments, especially in rural areas. The economic landscape of these neighboring regions provides critical insights into the long-term implications of fracking bans.
Research Findings and Literature Overview
Extensive research demonstrates the substantial economic impacts of hydraulic fracturing, with studies showing significant job creation and income generation. For instance, research by Feyrer, Mansur, and Sacerdote emphasizes that increases in gas production yield lasting benefits on local economies, stimulating wage growth and business income throughout the surrounding areas.
In studies specific to the Marcellus Shale, such as those conducted by Timothy Considine and Robert Watson, the economic contributions of gas drilling in Pennsylvania have been quantified, revealing job creation and substantial economic boosts since the implementation of fracking technologies.
Quantitative Analysis
This report utilizes a difference-in-differences regression model focusing on GDP per capita as a central metric for gauging economic performance. The analysis highlights how New York’s ban has correlated with a decline in GDP per capita in the Twin Tiers compared to counties in Pennsylvania. The results indicate that New York’s Twin Tiers could have seen a significant economic uplift had the ban not been enacted.
Conclusion: Policy Implications
The evidence presented solidifies the notion that hydraulic fracturing can drive meaningful economic growth when embraced by policymakers. The stark contrast between Pennsylvania’s flourishing shale gas industry and New York’s economic stagnation serves as a crucial lesson. This report advocates for a re-evaluation of hydraulic fracturing bans in states with similar dynamics, encouraging a legislative shift toward supporting energy development in order to foster economic prosperity.
**Author Note:** Alexander Frei is a Senior Research Associate in the Center for Data Analysis at The Heritage Foundation, and Diana Furchtgott-Roth serves as Director of the Center for Energy, Climate, and Environment.
Further Insights
To delve deeper into the methodologies employed in this analysis, including the implications of hydraulic fracturing’s environmental impacts, refer to Appendix A and B. They offer a detailed examination of statistical methods and a balanced discussion of health and environmental concerns associated with fracking.
