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The economics of gas drilling

A study questions the benefits

By FRITZ MAYER

WESTERN UNITED STATES — Proponents of natural gas exploration often cite economic benefits to the region as a primary reason to support the industry. Indeed, in some areas where the environmental and health consequences of drilling are questioned, it is hard to find someone who will criticize the economic impacts of gas drilling. Such was the case when The River Reporter printed a story about gas drilling in White County, AR.

But a study put forward by the advocacy group Damascus Citizens for Sustainability (DSC) questions the economic benefits to communities that comes with gas drilling in terms of economic development.

The study, or series of reports, was performed by Headwaters Economics, a Montana-based nonprofit research group, and examined counties in the Western United States with an economic focus on oil and gas extraction and other forms of mining. It compared those counties to others of similar size (populations of 57,000 or less) that had broader-based economies.

In a summary about the prospects of using oil, gas or coal as a strategy for growth, the study reported that counties that used that strategy “under-performed” other similar counties in several important areas that impact the economy, including the incomes of workers in non-energy jobs, economic diversity and the education level of the population.

The study, which was made public in the fall of 2008, can be found at headwaterseconomics.org/energy/.

The study gives specific examples of how gas extraction is currently affecting two counties on Colorado’s West Slope. It says, “On the positive side, energy development on the West Slope has created new economic opportunities, reduced unemployment, spurred rapid in-migration, and raised wages for many workers. On the negative, fast growth has exacerbated inflation, housing, and commuting pressures; contributed to a growing wage and wealth gap; and made it more difficult for other industries to thrive.”

The notion that large-scale extraction crowds out other types of industries in a region matches anecdotal reports from White County, AR and other areas that report that when drilling entered a rural region in a big way, agricultural activity decreased substantially.

Finally, the study said the same counties that focused on energy lost population, even as jobs in the energy industry increased. The authors write, “One possible explanation may be the rising cost of living… As new jobs are created in the fields of oil, natural gas, and coal mining, workers move in, the cost of labor rises, and with a limited supply of housing, the cost of housing rises along with it. Non-energy workers, unable to compete for housing and a higher cost of living, leave.”

TRR photo by Fritz Mayer
Will the agricultural industry, whose byproduct is pastoral scenes like this one of hay wagons on Route 17B in Bethel, NY, really be supported with a natural gas rush? (Click for larger version)