[Appalachias fracking boom has failed to deliver on promises of
jobs and benefits to local economies, according to a new study. The
analysis concluded that about 90 percent of the wealth created from
shale gas extraction leaves local communities.]
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APPALACHIA’S FRACKING BOOM HAS DONE LITTLE FOR LOCAL ECONOMIES:
STUDY  
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Kristina Marusic
February 12, 2021
Environmental Health News
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_ Appalachia's fracking boom has failed to deliver on promises of
jobs and benefits to local economies, according to a new study. The
analysis concluded that about 90 percent of the wealth created from
shale gas extraction leaves local communities. _

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The study
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published February 12, 2021 by the Ohio River Valley Institute, a
nonprofit think tank, revealed that while economic output in
Appalachian fracking counties grew by 60 percent from 2008-2019, the
counties' share of the nation's personal income, jobs, and population
levels all declined. The analysis concluded that about 90 percent of
the wealth created from shale gas extraction leaves local communities.

The study looked at the 22 counties in Ohio, Pennsylvania, and West
Virginia that produce more than 90 percent of the region's natural
gas. In 2008, those counties were responsible for $2.46 of every
$1,000 of national economic output. By 2019, the counties were
generating $3.31 of every $1,000 generated nationally—an increase
more than triple the rate of national growth. But over the same
period, those counties' share of the nation's personal income fell by
6.3 percent, their share of jobs fell by 7.5 percent, and their share
of the nation's population fell by 9.7 percent.

"This report documents that many Marcellus and Utica region fracking
gas counties typically have lost both population and jobs from 2008 to
2019," John Hanger, former Pennsylvania secretary of Environmental
Protection and policy director to Governor Tom Wolf, said in a
statement. "This report explodes in a fireball of numbers the claims
that the gas industry would bring prosperity to Pennsylvania, Ohio or
West Virginia. These are stubborn facts that indicate gas drilling has
done the opposite in most of the top drilling counties."

Among the three states the report looked at, Pennsylvania's showed the
best prosperity measures: GDP growth in Pennsylvanian fracking
counties was two and a half times as high as the national level and
four times as high as the state's. Personal income growth was slightly
lower than the national average, but slightly better than the state
average.

But jobs growth in Pennsylvania's fracking counties was less than half
the national rate and about the same as the state as a whole.

Some Pennsylvania counties performed better than others—Washington
County fared the best, with a personal income growth rate that
slightly exceeded national growth, and job growth equal to the
national rate. Tioga and Wyoming counties also exceeded the state
average, but not the national average for personal income growth. But
five of the other seven Pennsylvania counties either gained very few
jobs or experienced a loss.

Negative cash flows and health harms
According to the Ohio River Valley Institute's analysis, only about 10
percent of the wealth created from shale gas extraction stays local.
But despite 90 percent of that wealth leaving the region, oil and gas
companies have also struggled to stay afloat: More than 250
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oil and gas producers have filed for bankruptcy since 2015, and the
industry shed more than 100,000 jobs
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in 2020 alone.

The process of extracting oil and natural gas from the Earth by
drilling deep wells and injecting liquid at high pressure is expensive
and many fracking companies go into a tremendous amount of debt
getting started. Due to oversupply and consistently low prices for
natural gas over the last 10 years, many have yet to pay those debts
back.

"These companies are producing gas, but they still haven't figured out
how to make this profitable business—they've had negative cash flows
year in and year out," Kathy Kipple, a financial analyst at the
Institute for Energy Economics and Financial Analysis and instructor
at Bard College, said during a recent Ohio River Valley Institute
forum. "There has been no business case for fracking."

Meanwhile, evidence that fracking harms communities nearby continues
to mount. As of August 2020, there were 2,015 studies
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indicating harm or potential harm from fracking, according to a
literature review conducted by the health advocacy groups Physicians
for Social Responsibility and Concerned Health Professionals of New
York. The health impacts range from headaches, nosebleeds, and asthma
exacerbations to anxiety, depression and increased risk of birth
defects and premature births.

Hanger said during the same forum that policymakers have had blind
spots when it comes to the oil and gas industry.

"This is a story I've heard over and over in my 30 years of being
involved with policy-making—it starts with good people who are
desperate for economic development, very well intentioned, and looking
to create jobs," he said. "But unfortunately that kind of motivated
thinking often ignores stubborn facts."

The death of the petrochemical dream?
A few years into the fracking boom, once it became clear that it would
be difficult to turn a profit through natural gas extraction,
companies began looking for ways to salvage their investments.

Ethane, a byproduct of fracking, is used to manufacture plastics, so
many oil and gas companies looked to building plastics manufacturing
plants that would create new demand for ethane.

Gas extracted from Appalachia is particularly high in ethane, so the
dream of an Appalachian petrochemical hub emerged, with at least five
companies proposing to build petrochemical facilities, underground
storage hubs, and hundreds of miles of pipelines in Pennsylvania,
Ohio, Kentucky, and West Virginia. Each site was estimated to create
demand for ethane from 1,000 new fracked
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wells each year.

In 2017, a report
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the American Chemistry Council projected that by 2025, this
Appalachian petrochemical buildout would create over 100,000
jobs—roughly 25,000 directly employed by these and other plastic
manufacturing facilities and an additional 75,000 indirect jobs like
contracted delivery drivers, construction workers, and retail workers.
It also projected $500 million in state and local tax revenues from
the industry.

But now those plans are falling apart.

Of the proposed projects, only one is actually underway: The Shell
ethane cracker in Beaver County, Pennsylvania, about 33 miles
northwest of Pittsburgh. That facility was supposed to be operational
by 2020, but construction was slowed due to COVID-19 and is still in
process. The rest of those projects are on hold indefinitely.

Two major things changed shortly after the American Chemistry Council
published its 2017 report: In 2018, China stopped taking U.S. plastic
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to recycle, and a powerful group of companies that sell products in
plastic packaging, including Nestle, Unilever, and Colgate-Palmolive,
announced plans to drastically cut their use of virgin plastics by
2025 (a pledge that has since been formalized through the U.S.
Plastics Pact [[link removed]]).

"Those two things were a huge stop," Anne Keller, a former
Wood-Mackenzie petrochemical analyst and industry consultant, said
during the forum. "They challenged growth assumptions not just about
the U.S. or China, but the entire market."

The price of plastics fell (down from about
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pound in 2012 when these petrochemical proposals were being launched
to about 40 cents per pound in 2020) and some financial analysts now
say it's unlikely that petrochemical development will save the
fracking industry—or the local economy.

"The financials do not support the contention that petrochemical
development will help," said Kathy Hipple, finance professor at Bard
College and former financial analyst at the Institute of Energy
Economics and Financial Analysis (IEEFA). She noted that building
petrochemical facilities costs billions of dollars and takes a long
time, so companies have to gamble on what the future of the market
will look like by the time such a project is complete—and at
present, that future doesn't look promising.

"At this point I don't believe Shell will hit their financial targets
or produce the kind of economic benefits that were initially promised
to the state," she said. "I think that's why other companies have not
rushed in."

Hipple added that resistance from local communities increasingly shows
up in oil and gas financial reports and disclosures.

"More and more we're seeing from earnings calls and financial reports
that local opposition has become a material risk factor," she said,
adding that when it comes to foreign companies looking to get in on a
petrochemical buildout, understanding the patchwork of local state and
federal regulations is complicated enough without the addition of
lawsuits from community groups challenging every step in the
permitting process.

"For those in the community wondering if their efforts are bearing
fruit," she said, "I believe they are."

Investor flight
Some economists remain confident
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that the price of oil has always been volatile, and that markets will
return to normal in the long-term. But Hipple noted that investors
have begun to turn away from fossil fuels and virgin plastics,
pointing to coal as an example.

"Coal companies have lost 90 percent of their market value even though
coal production has only declined 1.5 or 2 percent," she explained.
"The market is forward looking...and investors know that industry will
not continue to buy virgin plastics."

Hanger added while consumers have benefitted from the low cost of
natural gas, many investors lost money in shale gas development, and
are instead looking to what the European oil and gas companies are
doing next.

"If you look at the majors in the European oil and gas industry like
BP and Total and Equinor, they're all moving into clean tech of one
sort or another, making investments in electric charging networks,
offshore wind, and solar," he said.

"This is not the Sierra Club," he added, "it's oil and gas companies.
To double down or triple down on the shale gas vision or oil and gas
industry isn't even being done by industry at this point...Public
money should be synergistic with private investment money. Legislators
and economic development folks should follow their lead."

Hipple agreed. "It's difficult to sit on a natural resource and not
think it's a ticket to economic development," she said, "but it's
important to step back and take a cold hard look at economic facts.
When you've got 11 years of negative cash flows in the fracking
industry...it's not producing jobs, and benefits are not accruing to
local communities, it's really time to step back, take a cold-hearted
look, and see what the market is telling us."

"Simply put," she said, "the natural gas industry has not delivered
the promised benefits for producers, investors—or local
communities."

_Kristina Marusic covers environmental health and justice issues in
Pittsburgh and Western Pennsylvania. She has received recognition or
awards from the Society of Environmental Journalists, the Association
of Health Care Journalists, the Society of Professional Journalists,
the National Institute of Health Care Management, the Press Club of
Western Pennsylvania, the Carnegie Science Center, and the
Pittsburgh-based Group Against Smog and Pollution (GASP) for her
reporting on these topics. Prior to joining EHN, Kristina covered
issues related to environmental and social justice as a freelancer for
a wide range of digital media outlets including Slate, Vice, Women's
Health, MTV News, The Advocate, CNN, and Bustle. She is also the
co-president and co-founder of the Pittsburgh chapter of the
Association of LGBTQ Journalists. She lives in Pittsburgh, where she
spends much of her free time kayaking the city's iconic three rivers,
consuming coffee and eating adventurously. Reach her at
[email protected]_
 

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