Guest viewpoint: economics and gas drilling

Jannette M. Barth, president of J.M. Barth & Associates, Inc., an economic research and consulting firm, gave a presentation in Newfield on June 3rd based on her paper entitled "The Economic Impact of Gas Drilling in the Marcellus Shale."  The talk was sponsored by PAUSE (People Against Unsafe Sources of Energy) and was attended by Tom Reynolds, who offers this commentary:

Getting the straight, untwisted facts concerning any aspect of fracking is very difficult.  However, the anti-fracking element seems particularly adept at emotional (rather than factual) presentations that are half-truths.  Since my background is finance, I was particularly interested in Jannette Barth’s study on the economic impact of gas drilling in the Marcellus Shale.  Both in her study and at anti-fracking meetings Barth states, “Studies used to support the claim that drilling will bring economic benefits to New York are either biased, dated, (or) seriously flawed.”

Then, she produces a study that is “biased, dated, and seriously flawed.”

  • Barth compares gas’s economic impact in NY’s top 10 gas-producing counties to neighboring NON-gas-producing counties. She unequivocally concludes that ‘gas counties’ are not doing better economically than neighboring counties. But gas jobs and payroll in “gas counties” make up less than 4/10s of 1% (.004) of the counties’ jobs & payroll.  Her conclusion can certainly be described as seriously flawed, based on the insignificant difference in gas-related jobs and payroll between the counties.   
  • Barth dismisses gas drilling’s economic multiplier of 1.4, i.e., every $1 of payroll has a $1.40 impact on the local economy.   She concludes that, “On economic impact alone, gas drilling should not necessarily be encouraged…it would appear to make more sense to encourage an alternative industry that would provide a greater economic impact…such as tourism.”  But Barth never actually gives an economic multiplier for tourism.  The highest I found was 1.67.
  • Barth ignores the fact that there has to be at least two parts to a multiplication operation, one being the base—in this case, the average salary to be multiplied.  Since Barth’s paper was published, the Ithaca Journal has published articles on two studies comparing average salaries.  Hospitality (tourism) has average salaries of about $20,000 while all industries other than agriculture were over $40,000.  To just equal the impact of gas, tourism would need an economic multiplier of 2.8! 
  • On rural environments, Barth states, “Unfortunately, it is difficult to assign precise monetary values to aesthetic benefits.”  Of course, it is difficult to value “aesthetics,” primarily because someone else usually owns it!  But the anti-gassers don’t want someone else’s property rights to interfere with their aesthetics.

Throughout, Barth uses possibilities in a way that can best be described as “it’s a fact that it’s a possibility.”  A few examples:

  • Barth states, “It is possible that local land owners who get rich from natural gas will move to Florida or other points south, taking their new found wealth with them.” She ignores the fact that it’s also possible they might not move!  And even if half moved, the half that stayed would be pumping NEW MONEY into the local and state economies. 
  • Barth also states that due to negative economic issues, “It is quite possible that…existing homeowners may be driven out.” That they might also stay, due to positive economic issues, is never mentioned.
  • “To some extent, gas drilling and other industries (tourism, sport fishing and hunting) may be mutually exclusive.”  Or maybe not?
  • “Far fewer retirees will choose to settle and second home owners would certainly be vastly reduced in numbers.”  Based on what study of occurrences that have not yet occurred?  

Towards the end of her paper, Barth quotes a study done by Headwater Economics, which compared western U.S. counties that focused on fossil fuel extraction as an economic development strategy to counties that did not focus on such industries.  Barth summarizes one of Headwater’s conclusions as, “While energy-focused counties race forward and then falter, non-energy peer counties continue to grow steadily.”

But other Headwater studies, not quoted by Barth, give a much more complete description of their research. For example, “Energy producing states outperformed their peers  fiscally at the start of the recession, but ultimately the decline in fossil fuel prices and reduced revenue exposed (them) to the impacts of the recession.”  Headwater also said, “Predominantly rural areas with high levels of drilling and limited economic diversity may be the most overwhelmed by the buildup phase of the energy boom, but also are the places that ultimately may see the greatest long term fiscal gain from energy development.”  Further, Headwater states, “The tax revenue from fossil fuel extraction is the longest lasting legacy of fossil fuel development…it continues to accrue.”  On green energy, Headwater praises, “Colorado made energy revenue funding available for regional clean energy initiatives…the funding helped launch an effort that has grown businesses and jobs and has funded clean energy infrastructure.” 

Lastly, one of the four studies that Barth trashes is one done at Penn State.  Of it she says, “An intelligent lawmaker should not take this study seriously.”  After having read her study, I would suggest that anyone with at least a room temperature IQ should not take her study seriously.


You can find many of our earlier posts on fracking listed here.  Tom's commentary on fracking from March is here. The text of Jannette Barth's paper is here.  The video of Jannette Barth's presentation in Newfield on June 3rd is here.  The video of the Q&A following her presentation is here—Tom spars (politely) with her from about the 26:30 mark to about the 33:10 mark.


In the shadow of Frackingstock


Not so epic?

I'm right in the shadow of the "epic" "Frackingstock" , which is taking place right across the Six Mile Creek valley from Redneck Mansion.  A great time for a compendium of stories from our Finger Lakes area colleagues...

There is lots of discussion about today's WSJ piece, The Facts about Fracking which responds to the anti-fracking hysteria with some common sense and perspective.  Read it all, and the comments.

The question for the rest of us is whether we are serious about domestic energy production. All forms of energy have risks and environmental costs, not least wind (noise and dead birds and bats) and solar (vast expanses of land). Yet renewables are nowhere close to supplying enough energy, even with large subsidies, to maintain America's standard of living. The shale gas and oil boom is the result of U.S. business innovation and risk-taking. If we let the fear of undocumented pollution kill this boom, we will deserve our fate as a second-class industrial power.

Lonely Conservative wonders why the public employee unions don't get behind fracking.

In Why They Oppose Fracking, South of 5 and 20 mines the comments to find what is really going on.

Strange bedfellows:  Our Assemblywoman Barbara Lifton and State Senator Jim Seward team up (read the comments) to throw bones to the anti-fracking zealots.

Marcellus protestors just don't get it.  Make them ban the use of natural gas where they ban drilling for it.

The truth--with a brogue


I. love. this. woman.

Ann McElhinney is the other half of the Phelim McAleer/Ann McElhinney team of journalist Davids up against the media Goliaths (see our earlier Gasland posts).  Via New Zeal:

Pushing back

The Unlikely Hospitalist, writing at The Lonely Conservative, says this has been a good week for supporters of fracking in the region:

First, the Manhattan Institute for Policy Research released a report entitled “The Economic Opportunities of Shale Gas Development”. The report highlights some incredible numbers highlighting the economic benefits that would take place if the renewed moratorium on drilling [in NYS] were lifted. You really have to read it to believe it. You will be left wondering, as I am, “What the hell is wrong with New York”....

And at Real Clear Markets:

To find a remedy for New York State's persistent fiscal problems, New Yorkers need only look down—far down.

Miles below the Empire State's mosaic of cities, suburbs, villages, lakes, farms, and highways lie vast reserves of natural gas, currently off-limits to producers. IF Albany were to permit development of these clean energy resources, it would spawn new jobs, a surge of economic activity--and more tax revenues.

Read the whole thing.  Many of the points in the RCM piece were also covered in a paper referenced in an earlier post here.

And the opposition may be starting to fracture:

We always talk about and hear how well organized the anti-Marcellus crowd is, but the Josh Fox rally in Harrisburg this week [Tuesday, June 7th] suggests that there may be a significant disconnect — even outright animosity — amongst their followers. The rally turned out about 150-200 protesters, but everything we’ve read coming out of the event  indicates that this band of die-hard back-to-earthers were among the most radical of the entire lot — folks who aren’t interested in any outcome or compromise that doesn’t involve the end of oil and gas development in America.

[....] it’s no secret that we often do not agree with the information distributed by groups like PennFuture, but lo and behold — this rally has shown that, at least on one issue, we stand in agreement. Seems both of us want to see natural gas developed safely in Pennsylvania. We, and PennFuture, both want to embrace the economic benefits the Marcellus Shale brings while protecting the environment in which we live. And like us, PennFuture is opposed to a moratorium that would bring to an end the one industry in our state that’s actually creating jobs. Because of this, PennFuture did not attend the anti-fracturing rally in Harrisburg on Tuesday....

Lastly, the information is starting to make it into the MSM.  From a June 6th USA Today editorial:

Little more than a decade ago, the United States was running so low on natural gas that companies were making plans to cover the shortfall with imports of liquefied natural gas. Today, though, the marine terminals built to dock huge LNG ships in Texas, Louisiana and Maryland are being converted to ship gas out, not just bring it in...[Fracking] has brought a surprising amount of new gas production from states as disparate as Texas, North Dakota and Pennsylvania — enough combined with conventional supplies to last perhaps 100 years at current consumption rates.

That's game-changing, wildly underdiscussed news....

In 1992, climatologist Chris Folland stated: “The data don’t matter… We’re not basing our recommendations on the data. We’re basing them on the climate models.” Anti-fracking arguments often seem to follow the same sort of reasoning: we know what the conclusion is, now let's try and find the data to support that conclusion.

But people are starting to wise up.

Local anesthetic needed...

...but novocaine isn't going to help local property owners with drilling-related pain.  Not everyone looking to sell up and leave the area is fleeing the prospect of flaming water faucets as you might be led to believe...some are just trying to recoup a lifetime's investment. 

Via The Lonely Conservative...Gaslandset to music:

Catchy, isn't it? But

...the creators “emphasize(s) that the video is not meant to be a substitute for ProPublica’s years of in-depth investigations. “While we hope that you enjoy the song….what we really want you to do is read about hydraulic fractured drilling, so you can truly understand ‘what the frack is going on.’

Precisely.  We'll get back to ProPublica shortly (don't you just love groups with noble-sounding Latin names?  Gives them a cachet of legitimacy).  In the meantime, I give you Phelim McAleer v. Josh Fox, director of Gasland (h/t Chrissy the Hyphenated):


Back to the Unlikely Hospitalist writes at The Lonely Conservative

...Pro Publica has very progressive roots. That is in spite of the information that can be taken from their website, which highlights their association to the Wall Street Journal, this investigative group was initially given millions of dollars from the Sandler Foundation. These are liberal progressive billionaires needing to dispense of their hard earned gains by financing their political interests. Pro Publica also received a two year contribution of $125,000 each year from the Open Society Foundations. Not surprisingly, I suppose, this leads you directly to If you find this a little hard to believe, google it, or just click the link above. The Open Society Foundation by the way, is a network of over 30 International Foundations, mostly funded by Soros, who has contributed more than $8 billion in this effort.

Yesterday, at Switchboard, the Natural Resources Defense Council staff blog (update: the NRDC's co-founder, John Bryson, was nominated yesterday to be Secretary of Commerce, replacing Gary Locke):

...there is recent news from New York State that mortgage lenders are denying applications where the property has a natural gas lease, including major lenders like GMAC, Wells Fargo, and Bank of America, and may even reject an application if a neighbor has a lease. I learned about this from the firm Toxics Targeting, which has a lot of documentation on this issue on its website, including a recent radio interview with NYS Assemblywoman Barbara Lifton.

Assemblywoman Lifton has met with mortgage bankers in her district and discusses their difficulty in selling locally originated mortgages into the secondary mortgage market. They've told her they are each turning down 6-10 mortgage applications per week. According to a presentation by Tompkins Trust Company, a New York State bank, the secondary mortgage market requires that nothing "interfere with the use and enjoyment of any present or proposed improvements or the balance of the mortgaged premises," or the property's marketability or value. The lender goes on to say that a mortgage may be possible if the property is sufficiently large to ensure that any natural gas activity could be 5 acres away from the homesite for conventional financing, or 10 acres for FHA. That leaves out of a lot of homebuyers and sellers, since there is a substantial risk that natural gas production on one's property could interfere with the use, enjoyment, value or marketability of a home....

...[Lifton] also reports that homeowners may lose their title insurance. According to the Tompkins Trust Company presentation, most New York State title insurance policies do not cover properties where there are structures more than 35 feet tall, storage of machinery, equipment or industrial supplies, or any commercial activity. So even if someone has cash to buy a house and doesn't need a mortgage, very few people would likely buy it without title insurance.

The blogger finishes up with

*For an explanation of forced pooling, I recommend a recent ProPublica article on the topic.

All righty then.

Is it just me or do I detect a slight odor of gleefulness about the Switchboard post, a sort of schadenfreude at the situation of property owners unsuccessfully trying to sell and recover their equity and of potential buyers unable to acquire what may be their dream home? I've maintained that all of this concern for the environment—the global warmingclimate change stuff, the fracking stuff, the sustainability stuff—is as much about control as anything else...about telling others how to live their lives, about how to use or dispose of their property and so on, because let's face it—some people just plain know better than the rest of us.

This is nothing less that an all-out attack on the concept of private property. Do many of us put up with it because we're deathly afraid of appearing to be politically incorrect? Yes. And this state of affairs has been a long time in the making; another name for political correctness is cultural Marxism...and it really will be the death of us if we don't snap out of it:


And on a related note: Remember this from a couple of weeks ago?

Once again, South of 5 and 20 highlights the utter hypocrisy of holding private industry to a standard that government can only dream of attaining...and all at taxpayer expense.

And I just liked "South's" tag: No Mo Cuomo.

The science is settled, Galileo edition

The geocentric world view that Galileo's inquisitors were still so fond of in 1632:

And, of course, that world view was completely wrong but it took the Catholic Church a very long time to admit its mistake.

Fast forward almost 380 years (almost as long as it took the Church to acknowledge its mistake)...this video, complete with an Annie Leonard-soundalike narrator, was shown during the first part of a two-part presentation on climate change and fracking at a local parish last night:

The climate change presenter stated baldly, "There is no debate about global warming. The only questions are how fast is the climate changing and how severe will that change be."

That's a complete lie.  Of course there's continuing debate, most especially since November 2009 when the "Climategate" scandal broke, and to suggest otherwise—or to state baldly, as in this instance—is disingenuous (and as someone on another blog observed recently "Disingenuous is a fancy word for lying.").  Many of us out here amongst the great unwashed know this:

And for an alternate, specifically Catholic point of view on the global warming hysteria (although the folks last night didn't seem to think that there is or ought to be an alternate view amongst Catholics);

And to back up the assertions in the video above, links to more than 150 files containing documents, John Holdren's Powerpoint presentation at Woods Hole in 2006, tax returns for organizations like Greenpeace and the Sierra Club, videos, charts, etc., may be found here.  The hard evidence to support a differing viewpoint on "climate change" and a different interpretation of the motives driving environmentalists certainly exists.

As for the fracking part of the presentation?  Well, we've blogged about the differing opinions on that topic before. Last night's presenter, in a "disingenuous" attempt to appear to be fair and balanced, did mention that an alternate interpretation of fracking had been published by a couple of faculty members at Penn State—but then sneeringly remarked that their work had been funded by the gas industry.  That of course, is way, way different from the work produced by pure-as-the-driven-snow Cornell professors on fracking—whose study was funded by the leftist Park Foundation.  Just sayin'.

And like manna from heaven, into my lap just fell this from Investor's Business Daily (via South of 5 and 20):

...The safety mantra was raised once again last Thursday when Energy Secretary Steven Chu announced the appointment of a seven-member panel to study hydraulic fracturing, commonly referred to as "fracking," and come up with new safety standards that address concerns raised by environmentalists.

....We believe the safety issue is a cover for the Obama administration's ideologically driven animus toward fossil fuels and its deliberate campaign to raise energy prices — and thereby to make its favored "green" alternatives look more competitive and attractive.

But there are never any ulterior motives as far as the "global warming," anti-fracking crowd is concerned. Everything is always for our own—and Gaia's—good. We're just too thick to see it.

Oh, yeah...and Galileo?

In March 2008 the head of the Pontifical Academy of Sciences, Nicola Cabibbo, announced a plan to honour Galileo by erecting a statue of him inside the Vatican walls. In December of the same year, during events to mark the 400th anniversary of Galileo's earliest telescopic observations, Pope Benedict XVI praised his contributions to astronomy. A month later, however, the head of the Pontifical Council for Culture, Gianfranco Ravasi, revealed that the plan to erect a statue of Galileo in the grounds of the Vatican had been suspended.

If the shoe fits

  • Amount of NYS pension fund invested in shale gas and fracking companies: more than $1B
  • Percentage increase in value of the fund's 4.2 million Schlumberger shares over the years: 104
  • Watching anti-fracking, tax-the-rich Barbara Lifton squirm when faced with the embarrassment of the state's public sector employee pensions earning big bucks off fracking investments: priceless

The Ithaca Journal story is here.

Assemblywoman Barbara Lifton, D-Ithaca, has been one of the fiercest critics of hydrofracking in the Legislature, but said she trusts the work of the Comptroller's Office.

"I assume they look at these decisions strictly as investments and keep the politics out of it," Lifton said.


While the companies' practices continue to come under intense scrutiny from environmental groups, telling the comptroller not to invest in an industry would be setting a dangerous precedent, said Sen. Thomas Libous, R-Binghamton.

"This issue has come up on a number of occasions, and not just as it pertains to fracking, but as it pertains to a whole host of things over the years," Libous said. "If the comptroller started separating things out into what people agreed or disagreed with, there would be nothing to invest in."

No! I'm shocked—shocked!—that anyone could draw such a conclusion.

The lone commenter as of this writing says that the state pension fund has less than one percent of its assets invested in gas companies.  True.  But can you imagine the outcry if the shoe were on the other foot and a Republican comptroller were investing state funds in fracking?

Fracking-free utopia

As Unlikely Hospitalist writes at The Lonely Conservative (a Syracuse-area blog)

Why are environmentalists so vehemently opposed to natural gas drilling?  In upstate New York these folks are a vocal, well organized, and well financed minority who seek to force their will on the populace.

Yesterday, however, a report entitled The Shale Gas Shock was released by the British Global Warming Policy Foundation. Highlights:

Shale gas was welcomed at first by environmentalists as a lower-carbon alternative to coal...However, as it became apparent that shale gas was a competitive threat to renewable energy as well as to coal, the green movement has turned against shale. Its criticism is fivefold:

The shale gas industry uses dangerous chemicals in the fracking process that might contaminate groundwater;

poorly cased wells allow gas to escape into underground aquifers;

waste water returning to the surface during production, contaminated with salt and radon, may pollute streams; 

the industry‘s use of water for fracking depletes a scarce resource;

the exploitation of shale gas damages amenity and landscape value.

How does this paper address these issues?  A quick summary:

  • The actual [slickwater] chemicals are used in many industrial and even domestic applications: polyacrylamide as a friction reducer, bromine, methanol and naphthalene as antimicrobials, hydrochloric acid and ethylene glycol as scale inhibitors, and butanol and ethylene glycol monobutyl ether as surfactants. At high dilution these are unlikely to pose a risk to human health in the event they reach groundwater (§45).
  • Groundwater contamination by fracking fluid is possible but unlikely if proper procedures are followed, and gas contamination of aquifers occurs naturally and has not usually been found to result from shale gas production (§s 46-52).
  • ...the Pennsylvania Department of Environmental Protection has tested the water in seven rivers to which treated waste water from gas wells is discharged and found not only no elevation in radioactivity but:

All samples were at or below background levels of radioactivity; and all samples showed levels below the federal drinking water standard for Radium 226 and 228. -- Pennsylvania Department of Environmental Protection, 7 March 2011 (§s 53-55)

  • A single shale gas well uses in total about the same amount of water as a golf course uses in three weeks (§ 56).
  • The concrete, forest clearance, and visual impact of more than 50 wind turbines with equivalent energy output is gigantic by comparison [with landscape and habitat impact resulting from shale gas extraction] (§s 57-59).

We've blogged about fracking a few times; this post in particular is relevant here.

It would seem that if environmentalists are really interested in lowering CO2 emissions, then they 

would do well to heed the advice of Voltaire and not make the best the enemy of the good. Rapid decarbonisation using renewables is not just expensive and environmentally damaging, it is impossible. However, switching as much power generation from coal to gas as possible, and as much transport fuel from oil to gas as possible, would produce rapid and dramatic reductions in carbon dioxide emissions.

But as we've also blogged about before, maybe those reductions in carbon dioxide emissions aren't really the point. Maybe arriving at a "sustainable" utopia is the point...but let's remember that utopia means not only "good place" but "no place."

Discomfort zone

Zoning laws can sometimes be used in backhanded ways, for instance, by tacking a noise ordinance on to the existing zoning code that would prohibit heavy, industrial noise like what would be emitted from gas drilling operations—and voilà! No fracking.

But even in its more mundane manifestations, zoning laws can have (perhaps) unintended, albeit foreseeable, consequences.

In an earlier post, we linked to a blog by a fellow Dryden resident who pointed out some potential problems with the proposed update to the town zoning ordinance.  At his blog, Economics, my dear Watson, Dr. Watson has unearthed some additional interesting information:

...A new article in the American Journal of Agricultural Economics by Liu and Lynch (an ungated version here) asks "Do Zoning Regulations Rob Rural Landowners' Equity."

They find that if you own agricultural land, there is no effect. On the surface, it appears that non-agricultural land loses 50% of its value, but at least half of that comes from being in an area that is considering down-zoning. Once you account for political decision making (endogeneity), down-zoning reduces non-agricultural land values by 20-28%...

Do read the whole thing.  Probably many people have had the uncomfortable feeling that this was so, but the journal article provides some empirical evidence to support what had previously been largely anecdotal.

NYS Education Department bars a knowledgeable employee from talking about fracking

Great piece that was the "Post of the Day," Scientific Dissent Is Not Patriotic - Hydrofracking Editionover at Legal Insurrection:

Recently I highlighted the thoughts of Taury Smith, New York state's official geologist and self described liberal democrat. In an article posted at the Times Union Mr. Smith argued that the "spin was on" with regard to hydraulic fracturing. He argued that years of research did not support the rhetoric being presented by the opponents of "hydrofracking." That the cited problems are exaggerated and overblown. That true environmentalists should be in strong support of the increased use of natural gas as it is overall much better for the environment than coal and oil.
He of course committed the cardinal sin of liberalism and thought for himself. Predictably this has put him in some hot water with environmentalists. The course of action is not to debate the facts, but instead smear the messenger. Within four days of the original article voices of opposition have their say....
[....] While character assassination is the predictable outcome for someone speaking out of turn, the tragic irony here is that Mr. Smith has been silenced by the New York State Department of Education. This is the department that oversees the New York State Museum geology unit that is now prohibiting Mr. Smith from speaking with reporters, or take calls on the matter....
Do read the whole thing.


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