A Tale of Two Drillings

posted at 2:02 pm on July 26, 2011 by Jazz Shaw
[ Politics ]   

The Wall Street Journal has a recent piece describing a tale which hits pretty close to home (in my case, nearly literally) on the subject of natural gas drilling. (Hat tip to Energy Tomorrow) For those not aware, the Marcellus Shale natural gas formation is a huge play in the northeast, with the majority of the resources found under central Pennsylvania and upstate New York. As the WSJ details, the two states chose very different paths when dealing with the possibilities.

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.

The Marcellus shale formation—65 million acres running through Ohio, West Virginia, western Pennsylvania and southern New York—offers one of the biggest natural gas opportunities. Former Pennsylvania Governor Ed Rendell, a Democrat, recognized that potential and set up a regulatory framework to encourage and monitor natural gas drilling, a strategy continued by Republican Tom Corbett…

Then there’s New York. The state holds as much as 20% of the estimated Marcellus shale reserves, but green activists have raised fears about the drilling technique known as hydraulic fracturing and convinced politicians to enact what is effectively a moratorium.

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.

This latest study demonstrates that, in Pennsylvania, they produced 81 billion cubic feet of natural gas in 2009, up from from five billion in 2007. This resulted in $2.8 million in direct economic benefits and $1.2 million in indirect benefits. Not to mention the insignificant matter of 72,000 jobs between the fourth quarter of 2009 and the first quarter of 2011. And these are good paying jobs, averaging $73,000 per year as compared to $46,000 on average for all other industries combined.

The sad part of this story is that, right across the border from some of the northernmost farmers reaping the benefits of these wells, they can see their neighbors in New York losing their farms and moving out of the state. New York’s new governor, Andrew Cuomo, has put in place a push to end the moratorium, much to his credit. Unfortunately the environmental groups and the courts still hold a lot of power and will likely be able to hold this effort up for many months, if not years, in the courts.

This is a good case study for the Obama administration to take a look at. We have similar situations playing out over other natural gas plays around the nation – particularly in the west – as well as the emerging potential of oil sands and other formations. But as long as government at every level allows activist groups to shut down productivity for one of the cleanest burning energy sources we have, the door remains shut to yet another immediate path to economic recovery and job creation.

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