New York's Fracking Ban Suffocates New Yorkers

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Upstate New York is in economic crisis. And New York's moratorium on hydrofracturing, or "fracking," is impeding recovery.

In New York City, private sector wages grew by 4 percent in real terms between 2000 and 2011. But in New York State's Southern Tier, in counties such as Broome, Chemung, and Tioga, wages declined by one percent.

Over the past decade, employment in New York City has grown by 9 percent. But in Binghamton and its surrounding suburbs, in Broome County, employment has declined by 11 percent over the same period. Elmira, in Chemung County, has seen a decline of 8 percent.

These counties in the Southern Tier are among the 28 New York counties sitting above the Marcellus Shale, a vast subterranean expanse of rock shared by Pennsylvania and New York that is estimated to contain up to 489 trillion cubic feet of natural gas.

Pennsylvania has allowed companies to use fracking to extract natural gas. Usually, this method is combined with horizontal drilling (in which the drill turns off the vertical to extend horizontally through the rock formation, allowing more of it to be tapped). Today, many Pennsylvania counties are bustling with this "unconventional drilling."

Although New York once allowed hydraulic fracturing and horizontal drilling, the state placed a moratorium on the technique in 2010. This year, the state government will either end that moratorium or make it permanent. While New York ponders, drilling companies hold their pre-2010 leases on land, uncertain whether they will ever be able to use the resources beneath.

Opponents of fracking say that it pollutes the water and harms agriculture. A group of New York City chefs, called Chefs for the Marcellus, opposes fracking. "You shop at the farmer's market and eat at farm-to-table restaurants - but what if all that was threatened by fracking?" the group asks. No matter that the chefs are based in New York City, where jobs are plentiful enough to sustain expensive restaurants.

No hard evidence of damage from fracking has been found, even by the Environmental Protection Agency. Residents of Pennsylvania and Ohio continue to buy local produce without ill-effects.

In an analysis of data from Pennsylvania, I show that counties with hydrofractured gas wells have performed better in terms of income growth and employment than those which have no wells. The more wells a county contains, the better it performed. The study is available here.

The number of horizontal, hydraulically fractured wells drilled in each of the 67 Pennsylvania counties from 2002 to 2011 is publicly available at the Pennsylvania Department of Environmental Protection website. Numbers of such wells were low until 2007, when unconventional well drilling began in earnest in Pennsylvania.

Between 2007 and 2011, per capita income rose by 19 percent in Pennsylvania counties with more than 200 wells, by 14 percent in counties with between 20 and 200 wells, and by 12 percent in counties with fewer than 20 wells. In counties without any hydrofracking wells, income went up only by 8 percent. It is important to note, too, that counties with the lowest per capita incomes experienced the most rapid growth.

During the recession of 2007 through 2009, employment was declining throughout America. Where there was no drilling, the number of jobs shrank in each county by an average of 3.27 percent. Counties with fewer than 20 unconventional wells improved only marginally on this number, losing 3.23 percent of jobs on average.

However, those counties with between 20 and 200 wells lost on average less than one percent of their jobs. The most striking value is the growth of employment in counties with more than 200 wells, which added jobs at an average rate of 8 percent. None of the 6 counties with more than 200 unconventional wells failed to add jobs in the 2007-2011 period, despite the recession and tepid recovery.

In Pennsylvania, nearly 5,000 hydrofractured wells have been dug since 2002. If New York lifts its moratorium, companies will be drilling the same type of wells to exploit the same subterranean source of gas. Pennsylvania's experience is a good guide to what would happen in New York.

Shale gas drilling startup expenditures make the first hydraulically fractured wells especially lucrative for a local economy. A New York county that allowed the drilling of a mere 20 wells could, in a four-year period, see per capita income rise 3 percent more than it would have if no wells had been drilled. If all New York counties above the Marcellus Shale were to pursue this course, they could collectively have $4.2 billion more in income just in the last year of that four-year period. If each county drilled 400 wells, which some Pennsylvania counties have done in a similar timeframe, all 28 counties could raise incomes by over $8 billion, or 6 percent. Tax revenues would increase with incomes.
In addition, new natural gas production spurred by hydraulic fracturing would attract more manufacturing back to the state.

Energy intensive companies are expanding in order to take advantage of low-cost natural gas. Shell is considering building a multibillion dollar petrochemical plant in Pennsylvania.

Since 2009, the German chemical company BASF has invested more than $5.7 billion into North America, including a formic acid plant under construction in Louisiana. BASF officials say that energy prices in America are lower than in Europe, where fracking is discouraged.

Other European countries planning to invest in America due to low energy prices include Austrian steelmaker Voestalpine (an iron-ore processing plant in Texas), South Africa-bases Sasol (a natural gas to diesel conversion plant in Louisiana) and France's Vallourec (steel production in Ohio).

Upstate New York needs help. There's no reason that Pennsylvania should suck up all the oil-and all the economic development.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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