EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 EconomicImpactsofMarcellus ShaleinPennsylvania: EmploymentandIncomein2009 August2011 www.msetc.org MarcellusShaleEducation&TrainingCenter(MSETC)isacollaborationof PennsylvaniaCollegeofTechnologyandPennStateExtension 2011PennStateExtensionandPennCollegewww.msetc.org1
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 EconomicImpactsofMarcellusShalein Pennsylvania:EmploymentandIncomein 2009 TimothyW.Kelsey(PennState),MartinShields(ColoradoState),JamesR.Ladlee(PennState),and MelissaWard(PennState),incooperationwithTracyL.Brundage(PennCollege),JeffreyF.Lorson (PennCollege),LarryL.Michael(PennCollege),andThomasB.Murphy(PennState) TheauthorswanttothankreviewersKathrynJ.Brasier(PennState),StevenC.Deller(Universityof Wisconsin),DavidL.Kay(CornellUniversity),ThomasKnapp(PennState),andStephenSmith(Penn State)fortheirvaluablecommentsandsuggestionstoimprovethereport.Thefindingsandconclusions inthisstudyaresolelythoseoftheauthors. 2011PennStateExtensionandPennCollegewww.msetc.org2
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 AbouttheAuthors: TimothyW.Kelsey,Ph.D.,isProfessorofAgriculturalEconomicsatThePennsylvaniaStateUniversity, andstateprogramleader,economicandcommunitydevelopment,pennstatecooperativeextension. MartinShields,Ph.D.,isProfessorofEconomicsatColoradoStateUniversity. JamesR.LadleeisCountyExtensionDirector,ClintonCounty,PennStateCooperativeExtension,and DirectorofSpecialInitiatives,MarcellusShaleEducation&TrainingCenter. MelissaWardisagraduatestudentintheDepartmentofAgriculturalEconomicsandRuralSociology, ThePennsylvaniaStateUniversity. MarcellusShaleEducation&TrainingCenter(MSETC)isacollaborationof PennsylvaniaCollegeofTechnologyandPennStateExtension 2011PennStateExtensionandPennCollegewww.msetc.org3
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 EconomicImpactsofMarcellusShaleinPennsylvania: EmploymentandIncomein2009 Abstract ThisstudyexamineshowseveralkeyunexploredaspectsofMarcellusShalenaturalgasdevelopmentin PennsylvaniawillaffecttheoveralleconomicimpactoccurringintheCommonwealth.Whereleasing androyaltydollarsareactuallygoing,andhowtheyarebeingspent,hasnotbeenexaminedinprevious economicstudies.theeconomicimpactwillbeverydifferentdependinguponhowmanydollarsgoto Pennsylvaniahouseholds,tothestategovernment,andtonon residents.inaddition,howmanyof thosedollarsareimmediatelyspentbyrecipients,andhowmanydollarsaresaved,similarlywillaffect theeconomicimpacts,aswilltheproportionofwagesbeingpaidtonon Pennsylvaniaworkers. Thestudyincludessurveysoflandowners,localbusinesses,andlocalgovernmentofficials,andaGIS analysisoflandownershippatternsrelatedtopennsylvaniaresidents,non residents,andthe Commonwealth.Wecombinedthisinformationwithindustryspendingdatatoestimatethe distributionofnaturalgascompanyspending,bothspatiallyandtemporally.thesenumberswerethen enteredintoaninput outputmodelofthepennsylvaniaeconomygeneratedwiththeeconomicimpact toolimplansowecouldestimatethemultipliereffects. Accordingtoouranalysis,approximately51percentofthelandinMarcelluscountiesisownedby residentswithinthecounty,25percentisownedbysomeonelivingelsewhereinpennsylvania,and7.7 percentisownedbypeoplelivingoutsideofpennsylvania.theremaining17percentisownedbythe publicsector,primarilythecommonwealth.thesurveyof1,000landownerswithinathousandfeetof activemarcelluswellsinbradfordandtiogacounties(501replies,foraresponserateof50.1percent) suggeststhatlandownerssaveorinvestabout55percentofthetotalleasingdollarsintheyearthey receivesuchpayments,ratherthanspendingthemimmediately.theyalsosaveorinvestabout66 percentofalltheroyaltydollarstheyreceive.thismeansasignificantportionofleasingandroyalty dollarsarenotspentinpennsylvaniaintheyearthosedollarsarereceived,reducingtheirpotential economicimpactintheyearthecompaniespaymineralrightownersforleasesandroyalties. Weestimatedtheeconomicimpactofthesedollarsundertwoalternativescenariosofout of state ownership(7.7percentand15.4percent),butsuspectthatbothmayunderestimatetheamountof leasingandroyaltydollarsimmediatelyleavingpennsylvaniabecausemineralrightownershippatterns donotcorresponddirectlywithlandownershippatterns.manyoftheserightsweresevered generationsagoandhavesubsequentlybeenpasseddownthroughfamilies,splinteringintomultiple ownershipacrosschildrenandgrandchildren,manyofwhomlikelynolongerliveinpennsylvania. Wesurveyed1,000randomlyselectedbusinessesinbothBradfordandWashingtoncounties(foratotal of2,000businesses)toidentifytheimpactstheyareexperiencingfrommarcellusshaledevelopment (619replies,foraresponserateof31percent).Questionswereaskedaboutpossiblenegativeand 2011PennStateExtensionandPennCollegewww.msetc.org4
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 positiveimpacts.thesurveyresponsesindicatedpositiveeconomicimpactsareoccurringbroadly acrosstheeconomyinthecommunitieswheredrillingisveryactivelyoccurring.aboutone thirdofall thebusinessesinbradfordcounty,forexample,reportedthattheirsaleshadincreasedduetonatural gasdevelopment,andonly3percentreportedsaleshaddeclined.businessesacrosstheeconomy reportedpositiveeffects,thoughhotels,construction,transportation,eatinganddrinkingplaces, wholesaletrade,andfinancialservicebusinessesweremostlikelytoreporthighersales. Wealsosurveyedall494municipalgovernmentsinthe12Pennsylvaniacountieswiththemost MarcellusShaleactivity(293replies,foraresponserateof59percent).Onehundredthirty oneofthe governmentssaidthatmarcellusdevelopmentactivitywasoccurringintheirjurisdiction.therewas littlepatterntotheiranswersinrelationtotheamountofdrillingactivityoccurringwithintheir jurisdiction.only18percentofthegovernmentsexperiencingmarcellusdevelopmentactivitysaidtheir taxrevenueshadincreased,whichindicatesthatmostlocalgovernmentsbeingaffectedarenotseeing moretaxrevenueasaresult.incomparison,26percentofthelocalgovernmentsindicatedthattheir costshadincreased,particularlyrelatedtoroadexpenses.thisconfirmsthatconsideringboth revenuesandcostsiscriticalforhavingacompleteunderstandingoftheimpactsofmarcellusshale. Thesefindingsfromlocalofficialscontrastwithprioreconomicstudieswhichpredictedthattherewould belargelocaltaximpacts,butwhichdidnotverifywhatisactuallyoccurring. Weusedtheeconomicinput outputmodelimplantolookattheeconomy wideimpacts,modifyingthe informationwithresultsfromthegisanalysisandsurveys.weuseddetailedpublishednaturalgas companyspendinginformationinpennsylvaniafrom2008,scalingitupto2009usingotherpublished dataabouthowspendingchangedbetweenthetwoyears.wemodifiedpayrollspending,usingdata fromarecentmarcellusworkforcestudywhichindicatedthatabout37percentofthemarcellus workforcearenon Pennsylvaniaresidents.Weestimatedtwoalternativescenariosaboutthepayroll goingtonon Pennsylvanians,recognizingthatworkersfromoutofstatesendsomeoftheirincomeback totheirhomestatecommunity;thisincludedassumingthatnon Pennsylvaniaworkersspend50 percentoftheirmarcellus earningsinsidepennsylvania,andalternatively,thattheyspend75percentof theirearningshere.wealsoaccountedforhowtheirspendinglikelydiffersfromtypicalresident workers. OurfindingssuggestthattheeconomicimpactofMarcellusShaleinPennsylvaniaduring2009ranged between23,385and23,884jobs,and$3.1and$3.2billioninthatyear.thisincludedabout$1.2billion inlaborincomeandalmost$1.9billioninvalueaddedtothepennsylvaniaeconomy.inaddition,there willbeadditionaleconomicimpactsof2009marcellusshaleactivityinfutureyearsasmineralright ownersspendtheleasingandroyaltyincometheyreceivedin2009butsavedforlateruse.theseare largeeconomicimpacts,especiallysincemuchofthisimpactisoccurringinrelativelysmallcounties. WedidnotestimatetaximpactsofMarcellusShaleactivitybecausewewerenotcomfortablewiththe reliabilityofimplan staxanalysis. Theseresultsareabouthalfthesizeofthoseestimatedinpreviouseconomicimpactstudiesof Marcellus,butthisisnotsurprisingbecausewehadmoredetailedinformationaboutleasingandroyalty income.ourfindingsareconsistentwithseveralotherrecentemploymentstudiesofmarcellusshale 2011PennStateExtensionandPennCollegewww.msetc.org5
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 whichfocusedonindustryspending.ourresultsconfirmthatwhereleasingandroyaltydollarsare goinghasasignificanteffectontheestimatedoveralleconomicimpactsofmarcellusshale development.becauseonlyabouthalfofthelandinatypicalmarcelluscountyisownedbyresidents ofthatcounty,itwouldsuggestthatalargeportionoftheeconomicbenefitsimmediatelyleavesthe communitiesbeingimpactedbydrilling. WedidnottrytoquantifymanyimportantbutevenmoredifficulttomeasurecostsofMarcellusShale development,suchaseffectsontheenvironmentandhealth.wehopethatfutureeconomicstudies canconsidersuchcostsasbetterinformationbecomesavailableabouttheincidenceandextentofsuch impacts.inaddition,wedidnotaddressthedistributionofbenefitsandcosts,eventhoughtheequity ofhowthesearedistributedunderliesmuchofthecurrentpolicydebateaboutmarcellusshale.the longrunimplicationsofmarcellusshaledevelopmentareasofyetstillunknown.jobsandincomein theshortrunareimportant,butmanywouldarguethatotherfactorsareequally(ifnotmore) important,suchascleanwater,healthyforestsandotherecosystems,cleanair,andgoodpublichealth. Inadditiontoaffectingqualityoflife,theseareimportantresourcesforthefutureofPennsylvania communities,includingfutureeconomicopportunities,socialandphysicalinfrastructure,wellfunctioninglocalgovernmentandinstitutions,andcommunitywell being.webelieveourresultsmust beviewedasapreliminary,short runviewoftheeconomicimpactsofmarcellusshaleandbeplacedin abroadercontextoftheseotherimportantconcerns. 2011PennStateExtensionandPennCollegewww.msetc.org6
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 TableofContents Abstract...4 I. Introduction...10 II. WhatAffectstheEconomicImpactsofMarcellusShale?...10 A. Timing,Scale,andPace...11 1. TimingandLeasing/RoyaltyIncome...12 2. TimingandWorkforce...12 3. OtherTimingIssues...13 B. Leakage...13 1. LeakageandLeasing/RoyaltyIncome...14 2.LeakageofEmployeeWagesandSalaries...15 3.LeakageofBusinessActivity...15 III.StudyMethods...16 A.CompanySpending...16 1.GeneralSpending...16 2.Workforce...17 B.LeasingandRoyalties...18 1.GISAnalysisofOwnership...18 2.SurveyofLandowners...21 i.wheretheownerslive...21 ii.dollarsreceivedforleasing...21 iii.useofleasingandroyaltydollars...22 3.AllocationofLeasingandRoyaltyDollarsintheStudy...23 C.LocalBusinessEffects...24 1.BusinessImpacts...25 2.ChangesbyBusinessType...25 D.LocalGovernmentEffects...26 2011PennStateExtensionandPennCollegewww.msetc.org7
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 IV.EconomicImpactResults...30 A.CompanySpendingandPayroll...31 B.LeasingandRoyalties...32 1.PennsylvaniaGovernment...32 2.PennsylvaniaHouseholds...33 C.OverallEconomicImpact...34 1.TotalImpact...34 2.Multiplier...35 3.EconomicImpactonaPerWellBasis...35 V.Discussion/Implications...36 A.LimitationsofOurStudy...38 B.WhatNoOneKnows(ButShouldbeKnown)...39 1.Costs...39 2.WhoIsBenefitingandWhoIsBearingtheCosts...40 3.Long RunImplications...40 4.WhatIsActuallyOccurring...41 VI.Conclusions...42 VII.References...44 VIII.Appendices...46 Appendix1.MarcellusNaturalGasIndustrySpendingResults...46 Appendix2.MarcellusNaturalGasIndustryPayrollImpacts:Scenario1...49 Appendix3.MarcellusNaturalGasIndustryPayrollImpacts:Scenario2...52 Appendix4.RoyaltyPaymentstoPrivateMineralRightOwners...55 Appendix5.PaymentstoPrivateMineralRightOwners...58 Appendix6.MethodologyandDefinitions...61 2011PennStateExtensionandPennCollegewww.msetc.org8
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 TableofTables Table1.NaturalGasCompanySpendinginPennsylvania,2009...17 Table2.PercentofAcresinMarcellusCounties,byOwnershipType...20 Table3.MineralRightOwners UseofLeasingDollars...22 Table4.ChangesinBusinessActivity...25 Table5.ChangesinBusinessActivitybyBusinessType...26 Table6.MunicipalRevenuesandLevelofDrillingActivity...28 Table7.MunicipalServicesandLevelofDrillingActivity...29 Table8.MunicipalExpendituresandLevelofDrillingActivity...30 Table9.EconomicImpactofNaturalGasCompanyNon PayrollSpending,2009...31 Table10.EconomicImpactofNaturalGasCompanyPayroll,2009...31 Table11.EconomicImpactofLeaseandRoyaltyPaymentstoStateGovernment,2009...32 Table12.EconomicImpactofLeaseandRoyaltyPaymentstoPennsylvaniaHouseholds,2009...33 Table13.SummaryofEconomicImpactsandTotalEconomicImpact,2009...34 Table14.TotalEconomicImpactbyWell,2009...35 2011PennStateExtensionandPennCollegewww.msetc.org9
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 I. Introduction ThepotentialoftheMarcellusShaleregiontobecomeamajornationalsourcefornaturalgashas generatedsignificantinterestinpennsylvaniaoverthepastseveralyears.countiesacrossthemarcellus ShaleregionoftheCommonwealthhaveexperiencedsignificanteconomicactivityasnaturalgas companieshavebeguntoexploreandthenactivelydeveloptheresource.thepaceofdevelopment variesacrosstheregion,withsomecounties,suchasbradford,tioga,susquehanna,washington,and Greene,becomingamajorfocusforgasdrillingactivity.Othercounties,suchasLycoming,are becomingmajorhubsforthecompaniesworkingonmarcellus,whileothershaveseensignificant pipelineconstructionrequiredtogetthegastomarket.drillingactivityisexpandinginthe Commonwealth,growingfrom27wellsin2007,to1,445wellsin2010(DEP). Travelthroughthesecountiesandanecdotesfromresidentsandothersindicatethatthedevelopment ofmarcellusshaleisbringingmajorchange,includingmanynewdollarstomineralrightownerstolease theirresourcefordevelopmentandsubsequentroyaltydollarstothemoncewellsbecomeactive. Additionally,manycommunitiesareseeingnewsalesandexpandedactivityforexistingbusinesses workingwiththegascompaniesorprovidingservicestotheirworkers,newjobswithinthecommunity forbothresidentsandnon residents,andmuchmorelocalspending.inadditiontotheseincomeand jobeffects,therearenon monetaryeffects,suchassignificantincreasesintruckandothertraffic,road damage,andnewroads,wellpads,andpipelinescuttingthroughforestandfarmland,withpotential health,environment,social,andotherimpacts. PublicdebateoverMarcellusShaledevelopmentseemsincreasinglypolarizedbetweenthosewho believeitisgoodforpennsylvaniaandotherswhobelievethatitisnot.becausedevelopmentisstillin itsearlystages,muchisnotknownabouttheshort orlong runeffects,soitiscriticalthatwhatis occurringbestudiedtohelppolicymakers,communities,andcitizensunderstanditsfullimplications. Thisstudyusesthewell knownandwidely usedeconomicimpactmodelimplanandresultsfrom surveysoflandowners,localbusinesses,andmunicipalgovernments,pairedwithgisanalysisofland ownershippatterns,tobetterunderstandthecurrentjobandincomeimpactsofmarcellusshale development.economicanalysisisusefultohelpunderstandwhatinfluencestheimpactofchange,and inmanywaysthisismoreimportantthantheactualjobandincomeestimatesthateconomicmodeling creates.thisstudyexploreshowseveralkeyandunexploredaspectsofnaturalgasdevelopmentin Pennsylvaniawillaffecttheoveralleconomicimpacts. II. WhatAffectstheEconomicImpactsofMarcellusShale? DevelopmentoftheMarcellusShaleregionwillaffectPennsylvania seconomythroughseveralprimary means,including(1)leasingandroyaltyincomepaidtomineralrightowners;(2)purchasingofservices andequipment,andemploymentbythecompaniesdirectlyinvolvedinthedevelopmentofthegasplay (e.g.thosebusinessesthatfind,extract,andprocessthegas);(3)employmentandpurchasesby 2011PennStateExtensionandPennCollegewww.msetc.org10
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 companiesthatmaymovetopennsylvaniabecauseofthesupplyofnaturalgas(e.g.thosebusinesses thatwanttousethegas);and(4)effectsofgasdevelopmentonbusinesses,communities,and residentsthataffecttheircompetitivenessandqualityoflife,suchaslossofqualifiedemployeestogas industryjobs,increasesinlocalgovernmentcosts,changesinenvironmentalorwaterquality,health effects,andotherimpactsofproduction. Currentlyavailableinformationonlyallowseconomiststoexaminetheeconomicimpactsofleasingand royaltyincomeandofgascompanyspending,somostpreviouseconomicstudiesofmarcellusshale(as doesthisstudy)havefocusedonjustthesetwodriversofeconomicchange.thelatterimpactsmight belargeinthelongrun,whichiswhymanylocalandregionaleconomicdevelopmentgroupsare beginningtofocusonencouraginggrowthofbusinessesthatusenaturalgas,andmanyenvironmental agenciesandorganizationsarefocusingonbetterunderstandingtheenvironmentalimplicationsofgas development.eventhoughthelatterimpactshavenotbeenmodeled,theyareimportanttokeepin mindandshouldbethesubjectofadditionaleconomicstudies. SeveralkeyelementswillaffecttheeconomicimpactofMarcellus,suchasthetimingofdevelopment, includingitsscaleandpace.theseelementsareimportantforthefullrangeofimpacts,andstrongly influencethesubsetofimpactsfocusedoninthisstudy.inaddition,howmanyofthedollarsremainin thecommunityversusimmediatelyleave(whateconomistcall leakage )alsoplaysacriticalrolein influencingthemagnitudeoftheeconomicimpacts.eachwillbediscussedinturn. A. Timing,Scale,andPace Itiscriticaltorecognizethattheeconomicimpactswillchangethroughoutthedevelopmentofthe MarcellusShaleplay,mostparticularlyrelatedtoleasingandroyaltyincome,andworkforce.In addition,naturalgasdevelopmentbyitsnaturehasalimitedtimespanbecauseitisanon renewable resource.expertsdon tagreeonhowmanyyearsmarcellusshaledrillingwilloccurinpennsylvania,but manyestimatesare20yearsormore.othershalesunderpennsylvaniahavethepotentialofextending naturalgasdrillingactivity,sonaturalgasdevelopmentcouldbealongerprocess,butatsomepointthe gaswillbegoneorotherwisewillnolongerbecommerciallyviable.manyfactorswillinfluencepace andscale,includingthehealthoftheeconomyasawhole,theproductivityofshalewells,technological changeandinnovation,foreignpolicy,domesticenergypolicy,andtherelativepricesofdifferentfuels. 2011PennStateExtensionandPennCollegewww.msetc.org11
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 1. TimingandLeasing/RoyaltyIncome Intheearlyyearsofagasplay,alargeshareofspendingbygascompaniesisforleasepaymentsto mineralrightownerstoacquiretherighttoexploreanddevelopwells.leasingdollarsaremostly upfront,earlyinthedevelopmentoftheplayascompaniescompetetogaincontroloftheresource.as wellsaredrilledandcomeon line,themineralrightownersreceiveroyaltypaymentsinsofarastheir wellsareproductive.pennsylvanialawspecifiesthatmineralrightownersmustreceiveatleastone eighthofthevalueofproduction,butsomeownershavenegotiatedforhigherroyaltyvalues.the majorityoftheseroyaltydollarsgotomineralrightownersinthefirstfewyearsofawell sactivelife, becauseproductionfromindividualmarcelluswellsdropsveryquicklybeforelevelingofftoaslowbut steadydecline.thismeansthatthemajorityofalltheroyaltydollarswillbepaidtomineralright ownersduringtheactivedrillingphaseofthemarcellusshaleplayandwilldeclinequicklyoncedrilling ends. Thetimingoftheuseofthoseleasingandroyaltydollarsbymineralrightownershasimportant implicationsfortheeconomicimpactsfrommarcellusshaledevelopment.priorstudiesofthe economicimpactsofmarcellusshaleinpennsylvaniahaveassumedthatsuchownersspendleasingand royaltydollarsonthesamegoodsandservices,andinthesameproportion,astheyspendtheircurrent income.thisisaparticularlystronganduntestedassumptionbecauseitimpliesthatmostofthose dollarsimmediatelybegincirculatingthroughtheeconomy.bycomparison,anecdotesfromindividuals receivingthosedollarsandfromlocalbankerssuggestthatmineralrightownersarespendingmore moneyondifferentkindsofgoodsandsavingmuchofthemoneythey rereceivingforlateryears.this isgoodfromalong runeconomicdevelopmentperspective,sinceitmeansthattheeconomicimpacts ofmarcellusshaledevelopmentwillbespreadoveralongertimewithinacommunity,ratherthan occurringonlyinthoseyearswhereleasingandroyaltydollarsarereceived,potentiallysmoothingthe boom/bustcycle.italsomaymeanthereismorecapitalwithinthecommunity,spurringmorelocal investment,withlong runbenefits.butsuchsavingsresultinalowercurrenteconomicimpact,soitis importanttoaccountforthemasaccuratelyaspossibleineconomicimpactstudies. 2. TimingandWorkforce Laborrequirementsaresignificantlydifferentduringthedrillingphaseofgasdevelopmentthaninthe subsequentproductionphase,whichoccursonceallwellshavebeendrilled.brundageetal(2010),for example,foundthateachwetgaswellinsouthwestpennsylvaniarequirestheequivalentof13.1full timejobs,spreadacrossalmost150occupationsand420individuals,duringtheyearwhendrillingand wellcompletionoccuronthewellsite,butonly0.18fulltimejobequivalentsduringeachofthatwell s subsequentproducingyears.laborrequirements(andthereforemostoftheemployment based economicdevelopment)arehighestduringtheactivedrillingyearsandlargelyaredrivenbythenumber ofwellsdrilledperyear.thispaceofdrillinghasimportantconsequencesforotherimpactsofgas development,includingtheneedforworkerhousing,thenumberoftrucksontheroad,other 2011PennStateExtensionandPennCollegewww.msetc.org12
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 infrastructurerequirements,thequantityofwaterusedandneedingtobedisposedof,andother environmentaleffects. 3. OtherTimingIssues TheeconomicimpactofMarcellusShaledevelopmentwithinanindividualcommunitywilldependupon thescaleandpaceofactivitywithinthatcommunity,notnecessarilythedurationofdrillingactivity statewide.eventhoughsomeestimatethatitmaytake20ormoreyearstodrillalltheplanned MarcellusShalewells,thedrillingphaseinanyonecommunitylikelywillbeshorter,asthecrews completeworkinoneareabeforemovingontoanother.whethertheworkerslivewithinthe communitieswherethedrillingisoccurringsimilarlyisimportant,becausetheresidenceoftheworkers determineswhichmunicipalityandschooldistrictreceivetheirearnedincometaxandwherethe workersandtheirfamilieswilltendtospendmuchoftheirearnings. Afastpaceofdevelopment,withahighnumberofwellsdrilledinasingleyear,meansthedrilling activitywithinacommunitywillbeconcludedmorequicklythanifthedrillingactivityoccursovera longertimeframe.becausethelaborrequirementsperwellarerelativelyconstant,afasterpacemeans moreworkersareneededperyear,withmoretrucktraffic,higherhousingandotherlocalinfrastructure needs,andgreaterdifficultyforthecommunitytoeasilyaccommodatethescaleofactivity.aslower paceofdevelopmentthusgenerallywillbelessdisruptiveandwillextendthebenefitsoveralonger periodoftime,thoughitmayaffectcompanycostsandthereforelandownerreturns. B. Leakage Whenconsideringtheeconomicimpactsofanactivity,suchasdevelopmentofMarcellusShale,itis importanttotrackwherethedollarsareactuallygoing.moneyimmediatelyleavingthecommunity, suchaspurchasesfrombusinessesoutsideoftheregion,haslesslocalimpactthanmoneyspentatlocal businesses.thespatialdistributionofthenewdollarsfrommarcellusshaleactivitythuscanbeas importantasthetotalnumberofdollarsinvolved.leakageisparticularlyanissuewithleasingand royaltydollars,andwithworkerpayroll. 2011PennStateExtensionandPennCollegewww.msetc.org13
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 1. LeakageandLeasing/RoyaltyIncome Whoactuallyreceivesleasingandroyaltydollars,andhowthosedollarsarespent,hasanimportant influenceontheeconomicimpactsofgasdevelopment.notallmineralrightownerslivewithinthe communitywheretheyowntherights,sotheleasingandroyaltydollarstheyreceiveimmediatelyleave thecommunity.althoughthisisverysignificantforcounty leveleconomicimpactanalysis,froma statewideeconomicimpactperspective(whichistheframeworkforthisstudy),itdoesnotmatter whetherthemineralrightownerlivesinthecountywheretheyowntheirparcel,providedtheylive elsewhereinthecommonwealth,sincemostofthosedollarswillcirculatesomewhereinthe Pennsylvaniaeconomy.LeasingandroyaltypaymentstoownerswholiveoutsideofPennsylvania,in contrast,havelittlelocalorstateimpactsincethosedollarsimmediatelyleavethecommonwealth. Howthedollarsarespentalsohasimportantimplicationsfortheeconomicimpacts.Giventhe relativelylargesizeofsomeofthechecksmineralrightownersarereceiving,itisexpectedthatmany householdswilltreatlump sumpaymentsdifferentlythanregularincome.anecdotesfromareaswith substantialmarcellusactivitysuggestthatmanylandownersarespendingmoreonconsumerdurables, orsavingorinvestingthedollars.forexample,newtractors,vehicles,andfourwheelersarebeing purchased,manyhousesandbarnsarebeingrepaired,andmineralrightownersareotherwiseusingthe dollarsinspecialways. TheCommonwealthofPennsylvaniaitselfownsasignificantshareofthemineralrightsbeingleased, suchasonstateforestandstategameland.leasingandroyaltydollarsfortheselandsgotothe Commonwealth,immediatelyleavingthecommunitieswheredrillingisoccurring.Theeconomicimpact ofthesedollarsisdifferentthantheimpactofpaymentsgoingtoprivateindividualsbecausethestate spendsthosedollarsverydifferentlythandoindividualhouseholds.somelocalgovernmentsandschool districtslikewisehaveleasedtheirmineralrights,andtheiruseofthosedollarssimilarlydiffersfrom householdspending. PrioreconomicimpactstudiesofMarcellusShaleinPennsylvaniahavenotaddressedthedistributionof leasingandroyaltyincome,norhowthosedollarsarespent,butinsteadhaveassumedthatallthe dollarsaccruetopennsylvaniahouseholdsandarespentlikenormalincome.thishasthepotentialof significantlyaffectingoverallresults,since69percentoftotalindustryspendingin2008wasleasingand royaltypayments(considine,etal.2009)andabout38percentoftotalspendingin2009(considineet al.2010),andthusthesedollarsareaverylargedriveroftheoveralleconomicimpact. Severalstudiesofgasdevelopmentinotherstateshaveattemptedtoconsidertheinfluenceofsavings. InastudyoftheHaynesvilleShaleinLouisiana,Scott(2009)assumedonly5percentofleasingand royaltypaymentswerespentintheyearreceived.intheirstudyofwestvirginia,thenationalenergy TechnologyLab(2010)insteadestimatedhowmuchwassavedbyassumingthatpeoplesavedleasing androyaltydollarsinthesameproportionastheydoregularincome.nostudiestodatehavebased theirestimatesontheobservedoractualbehaviorofleaseandroyaltyrecipients,animportant limitationwhichthisstudybeginstoremedy. 2011PennStateExtensionandPennCollegewww.msetc.org14
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 2.LeakageofEmployeeWagesandSalaries Lossofeconomicimpactalsooccurstotheextentthatworkersreceivingwages,salaries,andother compensationspendtheirincomesoutsideofthecommunity aneventualitythatismuchmorelikelyif theyliveelsewhere.wagestotransientworkerstypicallydohavesomelocaleconomicimpact,since suchworkersspendpartoftheirincomeintheareawheretheyaretemporarilyliving(suchasrent, hotelorcampgroundfees,food,entertainment,andotherbasiclivingexpenses).butsincetheir permanentresidenceiselsewhere,alargershareoftheirearningsimmediatelyleavethecommunity thandowagesgoingtolocalworkers. Theproportionofnaturalgasworkerswhoarefromoutofstatehasbeenasourceofcontroversyand sensitivityinsomeregionsofpennsylvania,inpartbecauselittleconcreteinformationhasbeen availableabouttheresidenceofsuchworkers.thereislittledoubtthatmanyworkersinhighly specializedfields,suchasdirectionaldrillers,perforators,andwellcompletionsupervisors,currentlyare fromoutsidethecommonwealth.relativelyfewpennsylvanianshavetheskillsortrainingto immediatelyfillsuchpositions,anduntillocaltrainingprogramsrampupandpennsylvaniansgetonthe jobexperiencetodothesejobssafely,suchjobslikelywillremainlargelyheldbynon residents.at thesametime,however,thereisalsolittledoubtthatasubstantialnumberofthenewjobsinthegas industryaregoingtopennsylvanians.manyofthejobsareinoccupationsalreadyexistingwithin Pennsylvania,suchasconstruction,commercialdrivers,anddieselmechanics,soPennsylvanianshave theskillsandexperienceforthesenewjobopenings. Identifyingtheportionofgas relatedworkerswhoarepennsylvaniaresidentsisimportantfroman economicimpactperspective,sinceitaffectshowmanywageandsalarydollarsremainwithinthe Commonwealth.Aswithleasingandroyaltydollars,fromastatewideeconomicimpactperspectiveit doesn tmatterwhetherworkers permanentresidenceisinthecountywheretheyworkoriftheir permanentresidenceiselsewhereinpennsylvania,sincethosedollarswillcirculatesomewherein Pennsylvania.Workersretaininganout of statepermanentresidencetypicallywillspendtheirincome differently,withalargershareimmediatelyleavingthecommonwealth. 3.LeakageofBusinessActivity WhetherthebusinessesprovidingservicestothenaturalgasindustryarelocatedinPennsylvaniaor outsidethecommonwealthhassimilareffectsontheeconomicimpactofsuchspending.moreofthe dollarsgoingtolocalbusinessestypicallywillre circulatewithinthepennsylvaniaeconomythanwill dollarsgoingtofirmslocatedoutsideofthecommonwealth.locallyownedbusinessesmeanthe profitsaremorelikelytoremaininthecommunity.locationofthebusinessalsomayaffectthe compositionoftheworkforce,particularlythesharethatarelong termresidents. 2011PennStateExtensionandPennCollegewww.msetc.org15
III. EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 StudyMethods Thiseconomicimpactstudyusedseveralmeanstoestimatetheemploymentandincomeimpactsof MarcellusShaledevelopment.Wereliedupontheeconomicinput outputmodelimplanasthemain toolofanalysis,modifyingtheinformationwithresultsfromseveralsurveysthatweconducted. IMPLANisamongthemostcommonlyusedeconomicimpactmodels,andhasbeenfrequentlyusedto estimatethejobandincomeeffectsofnaturalgasdevelopment(centerforbusinessandeconomic Research,2008;Considine,Watson,andBlumsack,2010;Considine,Watson,Entler,andSparks,2009; NationalEnergyTechnologyLab,2010;PennsylvaniaEconomyLeague,2008;ScottandAssociates, 2009).Yetthereareclearcautionstoitsuseandinterpretationfornaturalgasdevelopment(Kay,2011; Kinnaman,2011). Ourstudyincludedsurveysoflandowners,localbusinesses,andlocalgovernmentofficialstobetter understandhowtheyareusingdollarsandtheimpactstheyareseeing.weusedgeographic InformationSystem(GIS)datatoanalyzelandownershippatternsrelatedtoPennsylvaniaresidents, non residents,andthecommonwealth.wecombinedthisinformationwithindustryspendingdatato estimatethedistributionofnaturalgascompanyspending,bothspatiallyandtemporally.these numberswerethenenteredintotheinput outputmodelimplantoestimatethemultipliereffects. A.CompanySpending 1.GeneralSpending Weattemptedtogatherinformationfromthemajorgascompaniesabouttheireconomicactivity,but noneultimatelyprovidedsuchinformationforuseinthisstudy.wethusrelieduponpublished companyspendinginformation,ascollectedandreportedbyconsidine,watsonandblumsack(2009 and2010).weadjustedthespendingimpactstoreflect2009activitylevels,usingthe2008proportions shownintable1oftheir EmergingGiant reportandappliedtothe2009totalspendingfromthe "Update"report. Considineetal.reportedthattheir2010surveywascompletedbytwelvecompanies,whocollectively accountedforabout74percentoftotalwellsstartedduring2009.sincetheirresponsesaccountedfor suchalargepercentageofdrillingactivity,theeffectofnon responsebiasislikelytobelow.theyused theseresponsestoestimatetotalindustryspendingthatyear.toprovideasecondaryverification source,weusedpennsylvaniadepartmentofenvironmentalprotectiondataonthenumberofwells drilledin2009toestimatetheperwellcostthattheirdataimpliesandfoundthatitwasapproximately $3.6millionperwell.Thisisconsistentwiththe$3to$4millionperwellcostthatcompanies independentlyhavereportedinpublicpresentationsandpersonalconversations. 2011PennStateExtensionandPennCollegewww.msetc.org16
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Table1.NaturalGasCompanySpendinginPennsylvania,2009 LeaseandBonus $1,728,765,000 Exploration $243,831,000 Upstream:DrillingandCompletion $1,700,435,000 Midstream:PipelineandProcessing $695,801,000 Royalties $54,683,000 Other $111,787,000 Source:Considine,WatsonandBlumsack,2010 WeusedIMPLAN smodeledindustryproductionfunctionofpurchasingrelationshipsbetweenbusiness sectors,whicharelargelybaseduponthelevelofgasdrillingactivityinpennsylvaniapriortomarcellus. Theselikelyunderrepresentthenumberandtypeofsupportingbusinessesthathaveeitherexpandedor movedintothecommonwealthduetomarcellusactivity.asaresult,ourestimatesoftheeconomic impactsofgeneralspendingbythenaturalgascompaniesmayoverestimatetheamountofbusiness spendingleavingpennsylvania. 2. Workforce Wagesandsalariespaidtonaturalgascompanyandsubcontractoremployeeshaveadditionaleconomic impactsbecausetheseworkersspendtheirearningsonfood,housing,recreation,andotherhousehold needs.thesizeofthesemultipliereffects,however,dependsuponwherethoseworkerslive,andthus wheretheyspendthosedollars.thisdistinctioniscriticaltounderstandingthedegreeofeconomic impactproducedbythedevelopmentoftheregion.ifnaturalgascompanyemployeesmaintaintheir primaryresidenceinthecommunitywherethedrillingisoccurring,orelsewhereinpennsylvania, workerswillbespendingasignificantamountoftheirwagesandsalarieswithinthecommonwealth, resultinginadditionaleconomicimpactasthosedollarscirculatethroughtheeconomy.iftheworkers arenon Pennsylvaniaresidents,someoftheirearningswillimmediatelyleavetheCommonwealthas theysendwagesback home tofamily. Forthisstudy,theproportionofresidentandnon residentworkerswassetusingdatafromamarcellus ShaleEducation&TrainingCenteronlinesurveyofgascompaniesconductedin2010aspartofa workforceneedsassessment(brundageetal,2011).theresponsesindicatedthat62.7percentofthe workersarepennsylvaniaresidentsand37.3percentarenon residents.thispercentagelikelyslightly overestimatestheactualpercentageofpennsylvaniaworkersin2009,andthusourresultslikelyslightly overestimatetheeconomicimpactofpayrollspending. Totalcompanypayrollspendingin2009wasestimatedbytakingthe$66milliontotalpayrollin2008 reportedbyconsidineetal(2009)andadjustingitupwardsby40percent,basedupontheir2010report thatcompanies totalgasexpendituresincreasedbyabout40percentbetween2008and2009.this totalpayroll,includingbenefitsandtaxes,wasdividedbetweenpennsylvaniaandnon Pennsylvania 2011PennStateExtensionandPennCollegewww.msetc.org17
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 laborusingtheproportionsfromtheonlinesurvey.thepayrollgoingtopennsylvaniaworkerswas addedtoimplanasnewtax adjustedhouseholdincome.becausespendingpatternsdifferby householdincome,weassumedworkerstypicallywereinthemedianfamilyoffourincomecategory (whichisabout$72,000ayear). 1 Wegeneratedtwoscenariosaboutpayrollgoingtonon Pennsylvanians,inrecognitionthatworkers fromoutofstatesendsomeoftheirincomebacktotheirhomestatecommunity.weranthemodel undertheassumptionthatnon Pennsylvaniaworkersspend50percentoftheirMarcellus earnings insidepennsylvania,andalternativelythattheyspend75percentoftheirearningshere.becausenonresidentworkerslikelyhavedifferentlocalspendingpatternsthantypicalresidentworkers,we estimatedtheimpactsoftheirspendingusingalowerincomecategoryintheimplanmodelmore typicalofrentinghouseholds. B.LeasingandRoyalties Notallleasingandroyaltydollarsareimmediatelyspentinthelocalorstateeconomy,sincesomeofthe dollarsgotonon Pennsylvaniaresidents(andthusimmediatelyleavethestate),andmineralright ownerstypicallysaveatleastaportionofsuchdollarsforuseinlateryears.inaddition,howdollarsare spenthasimportantimplicationsforthateconomicimpact.thecommonwealthofpennsylvaniaitselfis asignificantmineralrightowner,andthusisreceivingsignificantleasingandroyaltydollars.itsuseof thesedollarsdiffersfromhouseholds,soithasitsowneconomicimpactwhichmustbeanalyzed separately WeusedGISanalysisandasurveyofhouseholdsreceivingleasingandroyaltyincometoestimatehow manyleasingandroyaltydollarswenttopennsylvaniahouseholds,howmanywenttothe Commonwealth,andhowhouseholdsspentthosefunds.Eachofthesewillbeexplainedinturn. 1.GISAnalysisofOwnership InPennsylvania,asinmostotherstates,surfacelandownersdonotnecessarilyownthemineralrights undertheirland.surfaceandmineralrightscanbesevered,andbeowned(andsold)separatelyfrom eachother.thisisrelativelycommoninareasofpennsylvaniawhichhistoricallyhaveexperiencedcoal miningandnaturalgasorpetroleumdevelopment.manyoftheserightswereseveredgenerationsago 1 Perthesuggestionofanoutsidereviewer,weconductedsensitivityanalysisonthe incometype of householdthatreceivestheroyaltypayments.were rantheanalysisprovidingidenticalincomeshocks toimplanhouseholdincomecohortsimmediatelybelow($35,000 $50,000)andabove($75,000 $100,000)themediancohort.Theresultingdifferencesintotalemploymentimpactswereverysmall (lessthan10jobs)comparedtotheresultswhenweusedthemedianincomecategory. 2011PennStateExtensionandPennCollegewww.msetc.org18
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 whenresourcedevelopmentfirstbeganthere.mineralrightscanbeownedbycompanies(suchascoal companies)orbyprivateindividuals. Wecouldfindnopubliclyavailabledocumentationthattracksownershipofmineralrights,otherthan onadeed by deedbasis.wetalkedwithseveralcountytaxassessors,andtheyconfirmedthatthey wereunawareofanyresourcethatprovidesclearinformationaboutwhoownsmineralrights.indeed, thisiswhynaturalgascompaniesareconductingintensivedeedresearchoneachparceltheywantto lease.thereisnoeasywaytoidentifywhatpercentageofmineralrightsareownedbythe Commonwealth,bycompanies,andbyprivateindividuals(muchlesswhatpercentageofthese individualsareresidentsofthecounty,residentselsewhereinpennsylvania,orliveoutside Pennsylvania). Unlikemineralrights,allcountygovernmentsmaintainactiverecordsofsurfaceownership,compiledso itispossibletoclearlyandeasilyidentifyownersofparcelsandtoidentifyaggregatepatternsof ownership.gisdataonlandownershipisavailableineachcountywithinthemarcellusregion,which allowedustocalculatethepercentageoflandownedbythestateandbytheprivatesector.forsixof theprimarymarcelluscounties(bradford,fayette,greene,lycoming,tioga,andwashingtoncounties, whichcollectivelyaccountedfor68percentofallpennsylvaniamarcellusshalewellsdrilledfrom2007 throughfall2010),availabledatafromtheconservationbiologyinstitute sunitedstatesprotected Areasshapefileallowedustofurthersplitprivateownershippatternsintothepercentageofland ownedbyresidentsofeachcounty,ownedbyresidentselsewhereinpennsylvania,andownedby peoplelivinginotherstates.weweightedthisinformationbyacreagetocalculateanaverage proportionalbreakdownofprivateownershippatternsandassumedthattheseproportionsappliedin othercounties(seetable2). 2011PennStateExtensionandPennCollegewww.msetc.org19
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Table2.PercentofAcresinMarcellusCounties,byOwnershipType Percent Public Percent Private Percent Private, Ownedin County Percent Private, Owned Elsewhere inpa Percent Private, OwnedOutof State CalculationsBasedUponGISAnalysis Allcountieswith Marcellus 17% 83% Bradford 8% 92% 60% 22% 10% Fayette 13% 87% 64% 14% 9% Greene 4% 96%* 55% 31% 9% Lycoming 33% 67% 14% 49% 4% Tioga 25% 75%* 47% 19% 8% Washington 4% 96%* 80% 9% 7% PrivateOwnershipEstimatesbasedupontheGISAnalysis Weighted estimateforall countieswith Marcellus* 50.6% 24.7% 7.7% *Numbersdonotaddtothe PercentPrivate ownershipduetoroundingerror Weassumedthatleasingandroyaltydollarsaredistributedacrosslandownersbaseduponthese ownershippercentages,eventhoughtheproductivityofindividualwellswillvary,andactuallease valuesandroyaltypercentagesvarybaseduponwhenmineralrightownerssignedandhowwellthey wereabletonegotiate.thisshouldnotmakeadifferencefortheoverallimpactsofhousehold spending,butitdoesmeanthatthestudylikelyoverestimatestheamountofdollarsgoingtosuch householdsandunderestimatestheamountgoingtothestate,sincethecommonwealthhasbeenable tonegotiatebetterleasingtermsthanmanymineralrightowners. 2011PennStateExtensionandPennCollegewww.msetc.org20
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 2.SurveyofLandowners Howleasingandroyaltydollarsarebeingspentwasestimatedthroughahouseholdsurveywesentto 1,000landownerslocatedwithinonethousandfeetofactiveMarcelluswellsinPennsylvania sbradford andtiogacounties.inbothcounties,mostlandownersdoowntheirmineralrights,makingitpossible touselandownershiprecordstocontactmineralrightowners.weidentifiedthelandownersusinggis propertyrecordsanddrewa1,000footradiuscirclearoundactivewellsinthetwocountiesusingthe wells longitudeandlatitudeinformationlistedinpennsylvaniadepartmentofenvironmentalprotection reports.onethousandlandownerswererandomlyselectedfromthislist,andtheyweresentpaper surveysinthefallof2010.thesampleincluded516landownersfrombradfordcountyand484from TiogaCounty.Twofollowupremindersweresenttonon responders. Surveyswerereceivedbackfrom501landowners,foraresponserateof50.1percent.Surveyswere returnedfrom23peoplewhosaidtheiroilandgasrightshadnotbeenleasedfornaturalgasdrillingin themarcellusshale;theiranswersweredroppedfromtheanalysis.thefinalbreakdownofresponses was254frombradfordcounty,and224fromtiogacounty. i.wheretheownerslive About71percentoftheBradfordCountylandwasownedbyrespondentswhoseprimaryresidencewas inthatcounty,and65percentofthetiogacountylandwasownedbyrespondentswhoseprimary residencewasinthatcounty.about6percentoftherespondentsreportedthattheirprimaryresidence wasoutsideofpennsylvania,withthemostcommonstatesbeingnewjersey(10respondents),new York(6respondents),andFlorida(5respondents).Thepercentageoflocallandownersdiffersfromthe county widegisanalysisoflandownership,butitisn tclearifthedifferenceisduetoresponsebias (e.g.bradfordandtiogacountyresidentsweremorelikelytorespondtothesurveythanwereowners livingoutsidethecounty),iftheownershippatternsaroundtheactivewellsinthosecountiesarenot representativeofpatternsacrosseachcounty,orifnon countyresidentstendtoownlargerparcels thanlocalresidents. ii.dollarsreceivedforleasing Theamountofleasingdollarsreceivedperacrevarieddramaticallyamongstlandowners,rangingfrom $1peracreto$5,750peracre.Equalpercentagesoflandownersreportedreceivingeitherlessthan$50 peracreorfrom$1,000to$3,000peracre(about30percent,respectively).thesepercentagesare aboutequalacrossbothbradfordandtiogacounties.themajorityofthelessthan$50peracreleases weresignedin2006,whilethemajorityofthe$1,000to$3,000peracreleasesweresignedin2008. About70percentoftheleasesreceivingover$3,000peracreweresignedin2009. 2011PennStateExtensionandPennCollegewww.msetc.org21
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 iii.useofleasingandroyaltydollars Fourhundredandtwelveoftherespondentshadleasedtheirlandfornaturalgasdrilling(ratherthana priorownerhavingdoneso).thevastmajorityreceivedtheirleasepaymentasaone timepayment, withonly15percentreceivingthepaymentsplitovermultipleyears.ofthoselandownersleasingtheir rights,161respondentshadreceivedroyaltyincome,withthevastmajorityreceivingroyalties(73 percent)reportingtheyreceived$25,000orlesssofar.abouttenpercentofrespondentsreported receiving$100,000ormoreinroyalties,andfour(2percent)saidtheyhadreceived$250,000ormorein royalties.manyoftheparcelswhichhadbeenleasedbypriorownershadbeenleaseddecades previously. Whenweightedbytheamountofdollarseachlandownerwaspaid,about55percentofthetotalleasing dollarsweresavedintheyeartheywerereceived(seetable3),ratherthanbeingimmediatelyspent. About66percentofalltheroyaltydollarsweresimilarlysavedforthefuture.Othercommonuses includedpayingstateandfederaltaxes(17percentofleasingdollars),purchasingvehicles(9percentof leasingdollars),andrealestate(5percentofleasingdollars).otherthanthestateandfederaltaxes, thesearenottypicalconsumerspending,indicatingthathouseholdsreceivingleaseandroyaltydollars areusingthesedollarsdifferentlythannormalincome. Table3.MineralRightOwners UseofLeasingDollars Sectors TotalSpent % ConsumerGoods $4,738 0.2% Food $229 0.01% Farming $103,191 4.36% MotorVehicles $213,658 9.02% HealthServicesandInsurance $38,977 1.65% Investments,Savings,&Finances $1,307,501 55.19% NewBuildingConstruction/Home Improvements $41,561 1.75% RealEstate $122,100 5.15% Taxes $415,130 17.52% Vacations,Travel,&Entertainment $8,430 0.36% Other $113,387 4.79% Total $2,368,902 100.00% N=42 Thespendingon farming reflectsthatmuchoftheleasingandroyaltydollarsaregoingtofarmers, whichisnotsurprisinggiventhatfarmersownasignificantproportionofpennsylvania sland.such spendingisconsistentwithanecdotesandwrittencommentsinthesurveythatmanyfarmersareusing Marcellusdollarstobuynewtractors,fixbarns,andbuildnewstructures. 2011PennStateExtensionandPennCollegewww.msetc.org22
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Weestimatedtheimpactsofhouseholdspendingbyincreasinghouseholdexpendituresusingthe categoriesidentifiedintable3.wesubsequentlyaggregatedtheimplansectorsrepresentingeachof thebroaderspendingcategories.weapplieddefaultimplanmarginstotheconsumergoods,food, automotive,andhealthservicescategory.forfarmspending,withinimplanweseparatedouthard expenses(machineryandbuildings)fromoperatingexpensesandcalculatedtheratioofmachineryand buildingexpensestooperatingexpenses,whichwasabout2:1.wethenusedthisratiotoallocatefarm spendingbetweenthesetwocategoriesoffarminvestments. Fromaneconomicimpactperspective,spendingon realestate primarilyinvolvessimplyshifting existingassetsbetweenownersratherthancreatingneweconomicvalue.thecommissionspaidto realtors,financingcosts,deedsearches,andothercostsassociatedwithbuyingandsellingrealestate dohaveaneconomicimpact,however,sincethesearepaymentsforservices.forthisstudy,we assumedthat10percentofthespendingonrealestatewentforsuchcommissionsandactivities,and theremaining90percentwassimplyatransferofexistingassetsbetweenowners.improvementsto realestate,suchasnewbuildingconstructionandhomeimprovements,alsohaveaneconomicimpact, sincethesearespendingtocreateassets,butthiswasaseparatecategoryinthesurveyandwas includeddirectlyintheanalysis. 3.AllocationofLeasingandRoyaltyDollarsintheStudy WeallocatedleasingandroyaltydollarswithinthestudybasedupontheGISandsurveyanalysis.For thepurposesofthisstudy,weassumedthatmineralrightownershippatternsareidenticaltoland ownershippatterns,butwebelievethatthislikelyoverestimatestheamountofleasingandroyalty dollarsgoingtopennsylvaniansandthustheeconomicimpactofsuchdollars.manyoftheserights wereseveredgenerationsagoandhavesubsequentlybeenpasseddownthroughfamilies,splintering intomultipleownershipacrosschildrenandgrandchildren.giventherelativelyhighamountof outmigrationfrompennsylvaniaoverthepastdecades,itisexpectedthatmanyofthecurrentmineral rightownersdonotliveinthecommonwealth. Becauseoftheuncertaintyabouthowmineralrightownershipvariesfromsurfacerightownership,we estimatedtwoscenariosabouttheimpactsofleasingandroyaltypaymentsonprivatepropertyowners. ThefirstscenariousedtheGISanalysisaboutout of statelandownershiptoassumethat7.7percentof allleasingandroyaltypaymentsgotonon Pennsylvaniaresidents(asinTable2),whilethesecond scenarioassumedthat15.4percentofallthosepaymentsgoout of state. TheGISanalysisindicatedthatseventeenpercentoflandinPennsylvaniacountieswithMarcellusis ownedbythepublicsector,whichprimarilyisthecommonwealth.intheanalysis,wethusallocated17 percentofallleasingandroyaltydollarsdirectlytothestate.weassumedthatthesedollarswent directlyintothegeneralfundandwerespentthesamewayasothergeneralfundmonies.this assumptionoverestimatesthecurrenteconomicimpactoftheleasingandroyaltydollarsthe CommonwealthisreceivingbecausemanyofthosedollarsareinsteadgoingintotheOilandGasFund, 2011PennStateExtensionandPennCollegewww.msetc.org23
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 orsimilarsavingsfundsmanagedbythepennsylvaniagamecommissionorotheragencies,andthus werenotspentin2009. Weestimatedtheimpactofleasingdollarsbyincreasinghouseholdexpendituresinthespending categoriesidentifiedfromthehouseholdsurvey.incometherespondentssaidtheypaidintaxeswas allocatedbetweenfederalandstatetaxesbasedupontheratioofindividualfederalincometaxespaid bypennsylvanians(internalrevenueservice)andpersonalincometaxcollectionsreportedbythe PennsylvaniaDepartmentofRevenue.MostlocalmunicipalitiesandschooldistrictsinPennsylvanialevy anearnedincometax,butsinceleasingdollarsarenotsubjecttothattax,wedidnotincludeitinthe ratio.accordingtothesecalculations,about18percentoftotalpersonalincometaxespaidin PennsylvaniawenttotheCommonwealthwiththeremaindergoingtotheFederalgovernment.We dividedstatetaxpaymentsbetweennon educationstategovernmentspendingandeducationstate spendingusingtheactualproportionsofgeneralfundspendingin2009 2010(63percentand37 percent,respectively)(commonwealthofpennsylvania,2009).becausethespendingdetailfromthe landownersurveydoesnotmatchupwellwithaggregatedimplanspendingcategories,thescenario hadtoberuninimplan sdisaggregatedmodel,whoselevelofdetailisdifficulttoincludeinareport. Wethusonlypresentthetotaleffectsratherthanallthedetail. Surveyrespondentsindicatedthattheysavedabout66percentoftheroyaltydollarstheyreceived. Savingsgenerateaminoramountofneweconomicactivityforthefinancialfirmshandlingthefunds,so inouranalysisweassumedthatsavingswouldgenerateservicefeesof1.5percent,generatingnew activitywithinthefinancialservicessector.forty tworespondentscompletedthequestionaboutthe percentageofroyaltyincometheyspentintheyeartheyreceivedthosedollars,butonly10completed thedetailedquestionsaboutwheretheyactuallyspentthose34percentofroyaltydollars.duetothis relativelysmallnumberofresponses,weestimatedtheimpactoftheroyaltydollarsrespondentsspent in2009byincreasinghouseholdincomeinthemedianincomehouseholdspendingcategoryfor Pennsylvania. C.LocalBusinessEffects IMPLANestimatesthesecondaryeconomicimpactsacrossalleconomicsectorsbyextrapolatingfrom economicrelationshipswithinthemodel.asameansofverifyingwhethersuchsecondaryimpactsare occurring,aspartofthisstudywesurveyed1,000businessesinbothbradfordandwashingtoncounties (foratotalof2,000businesses).businesseswererandomlyselectedusingacommerciallyavailablelist ofactivebusinesseshavinganofficeorlocationphysicallywithinthecounty.bradfordcountywas selectedbecauseithasexperiencedthemostmarcellusdrillingactivityofanypennsylvaniacounty throughtheendof2010,with482wellsdrilledsince2008(and355ofthesein2010).washington CountywasselectedbecauseithasexperiencedthethirdhighestamountofMarcellusdrillingactivity andthemostofanycountyinsouthwestpennsylvania.thecountyhashad305marcelluswellsdrilled since2008,with135in2010.becauseofthesignificantpopulationsizedifferencebetweenthetwo counties(60,384residentsinbradfordcountyin2009,accordingtotheu.s.census,comparedto 2011PennStateExtensionandPennCollegewww.msetc.org24
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 200,505inWashingtoncounty),weexpectedthatbusinessimpactswouldbemorevisibleinBradford CountythaninWashingtonCounty. ThepapersurveywasmailedtobusinessownersorlocalbranchmanagersduringOctober2010,and twofollow upremindersweresenttonon responders.surveyswerereceivedbackfrom619 businesses,foraresponserateof31percent.thisincluded360responsesfrombradfordcountyand 259fromWashingtonCounty.Surveyswerereturnedfrom82peoplewhosaidtheydidnotownor managethebusiness;theiranswersweredroppedfromtheanalysis.theoverallresponseswere generallyconsistentwiththeactualbusinesscompositionofeachcounty seconomy,sotheyare representativeofactualconditions. 1.BusinessImpacts One thirdofallthebradfordcountybusinessessaidthattheirsaleshaveincreasedduetodrilling activity,andonly3percentreportedthatsaleshaddeclined.about23percentofthewashington Countybusinessesreportedincreasedsales,andonly2percentreporteddecreasedsales.(SeeTable4) Table4.ChangesinBusinessActivity Haveyourbusinessactivitieschangeddueto naturalgasdrilling? Haveyourannualsaleschangedduetonaturalgas drilling? Percent(number)responding yes Allresponses Bradford Washington County County 17%(89) 22%(70) 9%(19) 31%(160) 35%(108) 25%(52) Salesincreased 28%(147) 32%(100) 23%(47) Salesdecreased 3%(13) 3%(8) 2%(5) 2.ChangesbyBusinessType Notsurprisingly,theresponsesvariedbytypeofbusiness(seeTable5).Eightypercentofthehotelsand campgroundsinbradfordcountyreportedthattheirbusinessactivityhaschangedduetonaturalgas drilling,and100percentreportedhighersales.construction(35percent),transportation(30percent), eatinganddrinkingplaces(29percent),andwholesaletradeandfinancialservicesfirms(both28 percent)inbradfordcountysimilarlyweremorelikelytoreportchangesinbusinessactivitythanwere otherbusinesstypes.halfofthefinancialbusinessesinbradfordcountyreportedhighersalesdueto naturalgasactivity,asdid44percentofretailtrade,38percentofeatinganddrinkingplaces,and33 percentofwholesaletradeandbusinessservicesestablishments. 2011PennStateExtensionandPennCollegewww.msetc.org25
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Table5.ChangesinBusinessActivitybyBusinessType Haveyourbusiness activitieschangeddueto naturalgasdrilling? Percent(number)saying yes Bradford Washington County County Haveyourannualsales increasedduetonatural gasdrilling? Percent(number)saying yes Bradford Washington County County BusinessType Agriculture,Forestry,Fishing 9%(2) 0% 9%(2) 23%(3) Mining 50%(1) 0% Construction 35%(8) 16%(3) 27%(6) 15%(3) Manufacturing 11%(3) 8%(1) 25%(7) 33%(4) Transportation,Communications, 30%(3) 0% 22%(2) 0% Utilities WholesaleTrade 28%(5) 20%(2) 33%(6) 50%(5) RetailTrade 25%(13) 8%(3) 44%(23) 28%(11) Financial,Insurance,RealEstate 28%(7) 10%(1) 50%(12) 40%(4) BusinessServices 20%(10) 6%(3) 33%(16) 16%(8) ProfessionalServices 15%(9) 9%(4) 23%(13) 16%(7) EatingandDrinkingPlaces 29%(6) 0% 38%(8) 33%(1) HotelsandCampgrounds 80%(4) 50%(1) 100%(5) 50%(1) Thedifferencesbetweenthetwocountiessuggestthateconomicimpactsaremuchmorevisiblein smallerthaninlargercommunities.businessesinbradfordcountytypicallyweremorelikelytoreport impactsassociatedwithmarcellusactivitythanwerebusinessesinwashingtoncounty.thoughwedid notattempttoplacedollarvaluesonthesesurveyresponses,theresultsconfirmindependentlyfrom IMPLANthatmanylocalbusinesses,irrespectiveofsector,areexperiencingsalesincreasesdueto Marcellusactivity.Naturalgascompany,worker,andmineralrightownerspendingrelatedtoMarcellus ShaleisbroadlyaffectinglocaleconomiesinPennsylvania. D.LocalGovernmentEffects IMPLANcanestimatetheimpactofeconomicactivityonstateandlocaltaxcollections,andthis sometimesisreportedwitheconomicanalysis.yetwithinacademiccircles,theassumptionsand methodimplanusestomakethesetaxestimatesisrecognizedaspotentiallyoverlystrong,particularly relatedtoindirectandinducedeffects,sosomeanalystschoosetonotuseorreportthisinformation. Becauseoftheseconcerns,welikewisedidnotestimatestateorlocaltaximplicationsaspartofthis study. Asanalternative,wesurveyedmunicipalgovernmentsinPennsylvaniacountieswithMarcellus Shaleactivitytoaskthemdirectlyhowtheirtaxrevenuesarebeingaffectedbygasdevelopment.We 2011PennStateExtensionandPennCollegewww.msetc.org26
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 alsoaskedthemhowtheirservicesandcostshavechanged,becausenewtaxrevenuesmustbe comparedtonewcoststomorecompletelyunderstandtheimpactonlocalgovernments. Thesurveyincludedalltownships,boroughs,andcitiesinBradford,Clinton,Fayette,Greene,Lycoming, Somerset,Sullivan,Susquehanna,Tioga,Washington,Westmoreland,andWyomingcounties,which totaled494jurisdictions(seemap1).atthetimeofthestudy,thesecountiesaccountedfor76percent ofallthemarcellusshalewellsthathaddrilledinpennsylvaniafrom2008untilfall2010.apapersurvey wassenttothechairofthetownshipsupervisorsorboroughorcitycouncilpresidentineach municipalityduringfall2010,andafollowuppostcardandsubsequentletterweresenttononrespondents.responseswerereceivedfrom293ofthesemunicipalgovernmentsforanoverall responserateof59percent. Map1.MunicipalGovernmentSurveyCounties Ofthe293responses,131reportedthatMarcellusdevelopmentactivityisoccurringwithintheir jurisdiction.suchactivityincludeddrilling,butcanincludepipelineconstruction,majortrucktraffic, pipeyardsorotherstagingareas,workerhousing,orothermarcellus relatedactivity.ofthese municipalitiesdirectlyexperiencingdevelopmentactivities,about75percentsaidthatmarcellusshale developmenthadnotaffectedtheirtaxornon taxrevenue.about18percentsaidthatrevenueshad increased,andonereportedrevenueshaddecreasedduetomarcellusdevelopment.another6percent didnotknowhowrevenueshadchanged. Thelevelofdrillingactivitydoesnotseemcloselyrelatedtowhetheramunicipalityreportedhigher revenues(seetable6).thereweredifferencesbetweenmunicipalitiesbaseduponthenumberofwells beingdrilled,butduetotherelativelysmallnumbersinsomecategories,thesedifferencesarenot significantandshouldbeviewedwithcaution.ofthe23municipalitiesreportinghigherrevenues,only5 2011PennStateExtensionandPennCollegewww.msetc.org27
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 saidtheirearnedincometaxcollectionshadincreased,5reportedhigherrealpropertytaxcollections, and3reportedthelocalservicestaxhadincreased.anadditionalfivereportedhigherpermitfee collections. Table6.MunicipalRevenuesandLevelofDrillingActivity HasdevelopmentordrillingofMarcellusShaleaffectedthetaxornontaxrevenuesyourmunicipalityreceives?Percent(number)responding DrillingActivityin Municipality Nochange Revenues IncreasedOverall Revenues Decreased Overall Don tknow Nowells 82%(18) 18%(4) 1 10wells 74%(57) 18%(14) 8%(6) 11 25wells 77%(10) 8%(1) 8%(1) 8%(1) 26 50wells 40%(2) 60%(3) 51 75wells 100%(1) Over75wells 100%(1) Thenumberofmunicipalitiesreportinghigherearnedincomeandlocalservicestaxcollectionsseems unusuallylow,sincehigheremploymentinthesetownshipstodrillthewellsshouldincreasethe numberofworkersandresidentsowingbothtaxes.thelowresponsesmaybeoccurringforseveral reasons,includinghowtaxesarepaidwhenemployeesworkinmultiplemunicipalities,thatnotall municipalitieslevythesetaxes,orproblemswithwithholdingandsubmittingthetaxes.theycouldalso occurifthelocalofficials perceptionswereinaccurate. Statelawspecifiesthattaxpayersworkinginmultiplemunicipalitiesonlypaythesetwotaxesinone municipality,ratherthanineachmunicipalitywheretheywork.earnedincometaxispaidtothe municipalitywherethetaxpayerlives,regardlessofwheretheywork,unlesstheyworkinphiladelphia orunlessthatjurisdictiondoesnotlevythetax(inwhichcaseitispaidtothejurisdictionwherethey primarilywork),andthelocalservicestaxalsoispaidtotheirprimarilyplaceofoccupation.because naturalgasdevelopmentworkmovesfrequentlyfromsitetosite,withoutregardformunicipal boundaries,manycompanyemployeestypicallyworkinmanydifferentmunicipalitieseachyear.only onewillreceivetheirearnedincometaxandlocalservicestaxpayments.thelocaltaximpactsclearly requiremorestudytoclarifywhatisoccurringandwhy.regardlessofthecause,thelownumbersof municipalofficialsreportinghighertaxrevenuesindicatethatthemajorityofmunicipalitieswhere drillingisoccurringbelievetheyarenotreceivingmoretaxrevenuesasaresultoftheactivity. Taxesareonlyonehalfofthepotentialfinancialimpactonlocalgovernments.Equallyimportantare theimpactsonlocalservicesandonlocalgovernmentexpenditures.about67percentofthe131 municipalitiesexperiencingmarcellusactivitysaidtheservicestheyprovidehavenotchanged.about 28percentreportedtheirserviceshaveincreasedduetonaturalgasdevelopmentactivityand4percent (5municipalities)saidtheirserviceshavedecreasedoverallduetoMarcellusdevelopmentactivity.The surveydidnotaskaboutthesizeofsuchincreasesordecreases,sowearenotabletodescribehow 2011PennStateExtensionandPennCollegewww.msetc.org28
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 significantthesechangeswere.allmunicipalitieswhohadtoincreaseservicesidentifiedroadsasbeing affectedand13(10percentofallthe131municipalities)saidbuildingandcodeenforcementhad increased.fourpercentsaidpoliceserviceneedshadincreased,asdid2percentwhocitedfireand emergencyservices.thelatterrelativelylowpercentagelikelyreflectsthatfewmunicipalities themselvesdirectlyprovidefireandemergencyservicesandinsteadrelyuponvolunteers,sotheyeither maybeunawareofsuchchangeorconsidersuchchangesasnotaffectingtheirlocalgovernment. Ofthemunicipalitiesindicatingtheneedformunicipalserviceshaddecreased,foursaidthatmunicipal roadserviceshaddecreased,andonesaidtheneedforvegetationcontrolhaddecreased.theroad serviceresponseslikelyreflectthatgascompaniesarerepairingandrebuildingroadsinaffected communities,andsotheneedforthemunicipalityitselftodosuchrepairsinthesefourjurisdictionshas decreased.thereareserviceneeddifferencesbetweenthemunicipalitiesbasedupontheamountof drillingactivity(seetable7),butthesedifferencesarenotsignificant. Table7.MunicipalServicesandLevelofDrillingActivity HasdevelopmentordrillingofMarcellusShaleaffectedtheservices yourmunicipalityprovides?percent(number)responding ServicesProvided HaveIncreased Overall ServicesProvided HaveDecreased Overall DrillingActivityin Municipality Nochange Don tknow Nowells 78%(18) 22%(5) 1 10wells 65%(47) 28%(20) 6%(4) 1%(1) 11 25wells 38%(5) 46%(6) 8%(1) 8%(1) 26 50wells 80%(4) 20%(1) 51 75wells 100%(1) Over75wells 100%(1) About71percentofthemunicipalitieswithMarcellusactivityindicatedtheirlocalgovernment stotal expenditureshadnotbeenaffectedbythegasdevelopment.twenty sixpercentsaidexpenditureshad increasedoverall,andonereportedthatexpenditureshaddecreased.threeofthemunicipalities(2 percent)didnotknowhowgasdevelopmenthadaffectedtheirexpenditures.mostoftherespondents reportinghigherexpenditurescitedgreaterroadmaintenancecosts,andindeed,thiswas22percentof allthemunicipalitieswithmarcellusactivity.higherspendingonclericalservices(8percentofall municipalities),permittingandcodeenforcement,legalservices(both3percent),andpolice(2percent) werealsomentionedbyrespondents.therewerenoclearpatternsofexpenditureswhenanalyzedby thelevelofdrillingactivity(seetable8). 2011PennStateExtensionandPennCollegewww.msetc.org29
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Table8.MunicipalExpendituresandLevelofDrillingActivity HasdevelopmentordrillingofMarcellusShaleaffectedyourmunicipality stotal expenditures?percent(number)responding DrillingActivityin Municipality Nochange Expenditures IncreasedOverall Expenditures DecreasedOverall Don tknow Nowells 74%(17) 26%(6) 1 10wells 71%(52) 26%(19) 3%(2) 11 25wells 62%(8) 31%(4) 8%(1) 26 50wells 100%(5) 51 75wells 100%(1) Over75wells 100%(1) Thelackofclearpatternsbylevelofdrillingactivityacrossrevenues,services,andexpendituresmay occurbecausedrillingisonlyoneofmultipleactivitiesrelatedtomarcellusthatcanaffectmunicipal budgets.priortoawellbeingdrilled,significantworkmustbedoneconductingseismicandother studies,obtainingpermits,creatingaccessroadsandwellpads,andcreatingstagingareasfor companiesandworkers.theseoftenoccurinneighboringmunicipalities,ratherthandirectlywherethe drillingistakingplace.inaddition,trafficandpipelinesbynecessitycrossmunicipalboundaries.the perwell focusintables6,7,and8thusmaybetoonarrowtoadequatelyrepresentthelevelof Marcellusactivityinacommunityandthusitsimpactonthelocalgovernment. IV.EconomicImpactResults BelowwediscusstheresultsfromeachtypeofeconomicimpactfromMarcellusShaledevelopmentand thenreporttheoverallestimatedeconomicimpact.detailedtablesforeachappearintheappendix.it isimportanttonotethattheseimpactsarethoseestimatedtohaveoccurredin2009duetoactivitiesin thatyear,nottheoverallimpact,whichwilloccurinsubsequentyearsasdollarssavedin2009laterare spent. Thedirectimpactsrepresentthedirectincreaseinthenumberofjobsduetothespendingbynatural gascompanies,includinglandmen,geologists,roustabouts,governmentrelationsspecialists,andother companyemployees.theindirectimpactsmeasuretheadditionaljobsandoutputgainedinthose sectorsfromwhomthenaturalgasindustrycontractsorpurchasestodevelopmarcellusshale,suchas seismicandwellcompletioncompanies,truckingandconstructioncompanies,gasprocessing,andeven janitorialservices.inducedimpactsmeasuretheadditionaljobsduetoanincreaseinhouseholdand governmentexpenditures.thetotaleconomicimpactisthecombinationofthesedirect,indirect,and inducedeffects. 2011PennStateExtensionandPennCollegewww.msetc.org30
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Employmentisthenumberofjobscreatedasaresultoftheactivity.LaborIncome(sometimesreferred toas EmployeeCompensation )inimplanistotalpayrollcostpaidbytheemployer,includingwages andsalary,allbenefits,andpayrolltaxes.totaloutputisthevalueofindustryproduction,whichissales minusinventorychangesformanufacturers,totalsalesforservicesectors,andgrossmarginforretail andwholesaletrade.valueaddedisthedifferencebetweentotaloutputandthecostofinputs,soin manywaysisthebestmeasureofoveralleconomicimpact. A.CompanySpendingandPayroll Naturalgascompanyspendinghasimpactonbothgeneralspendingonpurchasesandservices,and spendingontheworkforceviapayroll.basedupontheamountofnon payrollindustryspendingin2009 reportedbyconsidine(2010),weestimatethatthetotalemploymenteffectwas13,626jobs.this included6,741pennsylvaniajobsdirectlywithinthemajorgascompaniesandanadditional6,885 indirectorinducedjobs(seetable9). Table9.EconomicImpactofNaturalGasCompanyNon PayrollSpending,2009 ImpactType Employment LaborIncome ValueAdded Output DirectEffect 6,741 $398,405,378 $626,335,174 $1,200,667,093 IndirectEffect 2,631 $146,829,148 $250,664,416 $428,097,138 InducedEffect 4,254 $184,097,066 $316,891,277 $517,027,001 TotalEffect 13,626 $729,331,592 $1,193,890,867 $2,145,791,232 Spendingbytheseworkerscreatedanadditional704or817jobs,dependinguponhowmuchnon PennsylvaniaworkersspendwithintheCommonwealthorsendhometotheirstateofresidence(see Table10). Table10.EconomicImpactofNaturalGasCompanyPayroll,2009 ImpactType Employment LaborIncome ValueAdded Output If50percentofnon residentemployeeincomestaysinpa TotalEffect 704 $30,955,834 $52,988,161 $86,952,840 If75percentofnon residentemployeeincomestaysinpa TotalEffect 817 $34,850,239 $59,674,181 $97,772,457 2011PennStateExtensionandPennCollegewww.msetc.org31
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 B.LeasingandRoyalties LeasingandroyaltydollarsbeingpaidbythegascompaniesasaresultofMarcellusShaledevelopment inpennsylvaniaprimarilygotothecommonwealthofpennsylvaniaandtoprivatehouseholds.we discusstheestimatedimpactofeachinturn. 1.PennsylvaniaGovernment LeasingdollarsreceivedbytheCommonwealthofPennsylvaniasupportedapproximately5,409total jobsin2009(seetable11).thisincludedapproximately$268millionintotalwagesand$477millionin totaloutput.royaltydollarstothecommonwealthwereestimatedtohavesupportedabout171total job,andalmost$16millionintotaloutput(seetable11).inreality,theseimpactsin2009likelywere lowerbecausethecommonwealthsavedsomeoftheseleasingandroyaltydollarsforfutureuse. Table11.EconomicImpactofLeaseandRoyaltyPaymentstoStateGovernment,2009 LeasePaymentstoStateGovernment,2009 ImpactType Employment LaborIncome ValueAdded Output DirectEffect 3,718 $193,319,220 $227,647,326 $259,010,759 IndirectEffect 203 $9,640,917 $15,046,706 $26,648,423 InducedEffect 1,488 $64,765,566 $114,898,509 $191,686,833 TotalEffect 5,409 $267,725,703 $357,592,541 $477,346,015 RoyaltyPaymentstoStateGovernment,2009 ImpactType Employment LaborIncome ValueAdded Output DirectEffect 118 $6,366,637 $7,497,164 $8,723,184 IndirectEffect 6 $317,495 $495,519 $883,007 InducedEffect 47 $2,132,939 $3,783,978 $6,302,518 TotalEffect 171 $8,817,071 $11,776,661 $15,908,709 2011PennStateExtensionandPennCollegewww.msetc.org32
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 2.PennsylvaniaHouseholds TheleaseandroyaltydollarsreceivedbyPennsylvaniahouseholdssimilarlygeneratednewjobsand greatereconomicoutput.ourestimatesrangedfrom3,360to3,733newjobscreatedbyleasingdollars receivedin2009,dependingupontheassumptionaboutout of statemineralrightownership(seetable 12),andbetween114and127newjobscreatedbytheroyaltydollars.Sincenotmanywellswereonlineduring2009,itwouldbeexpectedthattheamountofroyaltyincomegoingtohouseholdswill increasesignificantlyinlateryears,andthusthenumberofjobswillincrease,whilejobscreateddueto leasingwilldeclineasleasingactivitywanes. Table12.EconomicImpactofLeaseandRoyaltyPaymentstoPennsylvaniaHouseholds,2009 LeasePaymentstoPennsylvaniaHouseholds,2009 ImpactType Employment LaborIncome ValueAdded Output If15.4percentofmineralrightsareownedout of state DirectEffect 1,939 $97,098,174 $129,963,234 $213,731,744 IndirectEffect 523 $24,836,241 $39,103,622 $69,483,690 InducedEffect 898 $39,084,680 $69,369,287 $115,692,020 TotalEffect 3,360 $161,019,095 $238,436,143 $398,907,454 If7.7percentofmineralrightsareownedout of state DirectEffect 2,154 $107,886,860 $144,403,593 $237,479,715 IndirectEffect 581 $27,595,823 $43,448,469 $77,204,100 InducedEffect 998 $43,427,422 $77,076,986 $128,546,689 TotalEffect 3,733 $178,910,105 $264,929,048 $443,230,504 RoyaltyPaymentstoHouseholds,2009 ImpactType Employment LaborIncome ValueAdded Output If15.4percentofmineralrightsareownedout of state TotalEffect 114 $5,006,261 $8,605,902 $14,088,728 If7.7percentofmineralrightsareownedout of state TotalEffect 127 $5,575,826 $9,585,000 $15,691,609 2011PennStateExtensionandPennCollegewww.msetc.org33
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 C.OverallEconomicImpact 1.TotalImpact TheestimatedtotaleconomicimpactofMarcellusShaledevelopmentactivityinPennsylvaniain2009 rangedbetween23,385and23,884jobsand$3.1and$3.2billion(seetable13).thisincludedabout $1.2billioninlaborincomeandalmost$1.9billionintotalvalueadded.Wedidnotestimatetax impactsofmarcellusshaleactivitybecausewewerenotcomfortablewiththereliabilityofimplan stax analysis. Table13.SummaryofEconomicImpactsandTotalEconomicImpact,2009 ImpactType Employment LaborIncome ValueAdded Output SummaryofEconomicImpacts NaturalGasCompany Non PayrollSpending 13,626 $729,331,592 $1,193,890,867 $2,145,791,232 NaturalGasCompany Payroll LeasePaymentstoState Government RoyaltyPaymentsto StateGovernment LeasePaymentsto Pennsylvania Households RoyaltyPaymentsto Pennsylvania Households 704 817 $30,955,834 $34,850,239 $52,988,161 $59,674,181 $86,952,840 $97,772,457 5,409 $267,725,703 $357,592,541 $477,346,015 171 $8,817,071 $11,776,661 $15,908,709 3,360 3,733 114 127 $161,019,095 $178,910,105 $5,006,261 $5,575,826 $238,436,143 $264,929,048 $8,605,902 $9,585,000 $398,907,454 $443,230,504 $14,088,728 $15,691,609 TotalEconomicImpact LowerBound:if50%ofnon residentemployeeincomestaysinpaand15.4%ofmineralrightsare ownedout of state TotalEconomicImpact 23,385 $1,202,855,556 $1,863,290,275 $3,138,994,978 UpperBound:if75%ofnon residentemployeeincomestaysinpaand7.7%ofmineralrightsare ownedout of state TotalEconomicImpact 23,884 $1,225,210,536 $1,897,448,298 $3,195,740,526 2011PennStateExtensionandPennCollegewww.msetc.org34
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 2.Multiplier Theeconomicmultiplierweestimatedvariesbetweenthesetwoscenarios,rangingfrom1.86to1.90, dependinguponnon residentworkerspendingandmineralrightownershippatterns.ourresults suggestthatforevery$1inmarcellusindustryspendinginthestatebetween$1.86and$1.90intotal economicoutputisgenerated. 3.EconomicImpactonaPerWellBasis Thetotaleconomicimpactsin2009,dividedbythenumberofwellsdrilledin2009,suggestthateach newmarcelluswellgenerated30jobsinpennsylvaniaduring2009andaround$4millionintotaloutput withinpennsylvania seconomy(seetable14).thisincludesthejobscreatedbydirectgasindustry spendingandindirectlythroughthecompanieswithwhomtheycontract,byworkerspendingof earnings,andbymineralrightownerspendingofleasingandroyaltydollars.thisestimatelikelywill changeasthemarcellusplaydevelopsandtheproportionofleasingincomedeclineswhileroyalty incomeincreases.theestimateisconsistentwiththebrundageetal.studiesofperwellworkforce needs,whichsuggestapproximately13fulltimejobsarecreatedperwell.unlikethoseworkforceneed studies,thiseconomicimpactanalysisincludestheemploymentimpactsresultingfromleasingand royaltyincome,andindirectandinducedemploymentoccurringfromworkerspendingwithinthelocal economy. TheeconomicimpactswithinanyindividualPennsylvaniacountyorcommunitywillbemuchlessona perwellbasisbecausealargershareofthebusinessspending,payroll,andleasingandroyaltyincome willgooutsidethoseboundariesthanoccursatthestatelevel.ourgisanalysissuggeststhatan averageofonly51percentoflandinmarcelluscountiesisownedbyresidentswithineachcounty, whichmeansabouthalfofleasingandroyaltydollarsimmediatelyleavethecommunity.yetas suggestedbythesurveyoflocalbusinesses,theeconomicactivitylikelywillbemuchmorevisiblein smallcommunitiesduetothescaleandsizeofmarcellusdevelopmentactivity. Table14.TotalEconomicImpactbyWell,2009 ImpactType Employment LaborIncome ValueAdded Output LowerBound:if50%ofnon residentemployeeincomestaysinpaand15.4%ofmineralrightsare ownedout of state TotalEconomicImpact 30 $1,532,300 $2,373,618 $3,998,720 LowerBound:if75%ofnon residentemployeeincomestaysinpaand7.7%ofmineralrightsare ownedout of state TotalEconomicImpact 30 $1,560,778 $2,417,132 $4,071,007 2011PennStateExtensionandPennCollegewww.msetc.org35
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 V.Discussion/Implications ThestudyresultsindicatethatdevelopmentofMarcellusShaleinPennsylvaniaishavingsignificant employmentandincomeeffectsinpennsylvania.weexaminedtheimpactsin2009,asdrillingactivity begantoincreasesubstantiallyinthecommonwealth,soitwouldbeexpectedthattheeconomic impactsareevengreatertodayastheindustryactivityhasgrown.atotalof785marcelluswellswere drilledin2009,andthisnumberincreasedby85percentto1,445newwellsin2010(padep).ifthe per welleconomicimpactsfrom2009areconsistentwiththeimpactsin2010,thiswouldsuggestthat thetotalemploymentimpactofmarcellusshaleactivityinpennsylvaniain2010wasaround44,000jobs (thisnumberincludesthe23,000plusjobssupportedin2009). TheeconomicimpactresultingfromMarcellusShaledevelopmentactivityin2009willbespreadover multipleyears,ratherthanalloccurringin2009,becauseoursurveyofhouseholdsindicatedtheyare savingmorethanhalfoftheirleaseandroyaltydollarsforlateruse.ourestimatesfocusonlyonthe economicimpactactuallyoccurringwithin2009duetodrillingactivityinthatyear.howmuchimpact thesesaveddollarshadin2010andwillhaveinfutureyearsdependsuponhowquicklythehouseholds spendthosedollarsandhowmanyofthosedollarsarespentinpennsylvania(forexample,ifsome landownersaresavingthemoneytoretireinflorida).therehasbeensomeconcernthatmarcellus Shaledevelopmentcouldbeaboom/bustcycle,similartowhatPennsylvaniaexperiencedwithprior naturalresource basedeconomicdevelopment.thefactthathouseholdsaresavingasignificant portionoftheirleasingandroyaltydollarsshouldhelpspreadtheeconomicimpactsacrossmultiple years,irrespectiveofdrillingactivity,helpingsomewhatreduceanyboom/bustphenomenon. Theseresults,likeothereconomicimpactstudies,dependcriticallyupontheassumptionsusedinthe analysis.ourestimatesoftheeconomicimpactsofleasingandroyaltyincomemayoverestimatethe actualimpactsbecausedataisunavailableaboutwhospecificallyownsthemineralrights,andthuswho isreceivingthosedollars.weestimatedundertwoscenarios(7.7percentand15.4percentownership outofstate),butbothcouldstillbesomewhatlow.inaddition,anecdotalevidencesuggeststhatsome ofthemineralrightsinsouthwestpennsylvaniaareownedbycoalandothercompanies,sothose leasingandroyaltydollarswouldnothavethesameimpactasiftheygotohouseholds. OurresultsalsooverestimatetheimpactofthedollarstheCommonwealthitselfreceivesinleasingand royaltydollars,sinceweassumedthatthestatespentallthosedollarsin2009.thisassumptionhada largeeffectontheoverallresultsbecausestateleasereceiptsaccountedforaround23percentofallthe estimatedjobcreationandaround15percentoftotaleconomicoutput.theactualeconomicimpacts willbelessintheyearthedollarsarereceived,dependingupontheextentthatthestateagenciesand commissionsreceivingthosedollarssavethemforlateruse. Wehadtomakeassumptionsabouttheproportionofwagesandsalarynon residentworkersspendin Pennsylvaniaandrantheanalysisusingboth50percentand75percent.Thereweredifferencesinthe resultsbetweenthescenarios,butonlyof113workers.thisisanapproximate16percentdifferencein totalpayroll relatedimpacts,sotheassumptionsdonotappeartohaveameaningfulimpactonour overallresults.ourresultslikelyunderstatetheimpactofgascompanynon payrollspendingsincewe 2011PennStateExtensionandPennCollegewww.msetc.org36
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 couldnotaccuratelyreflecttheircurrentpurchasingpatternsandparticularlyhowthegrowthofthe industryandsupportingbusinessesinpennsylvaniawillhaveincreasedtheamountofindustryspending whichstayswithinpennsylvania. Theresponsestothesurveyoflocalbusiness,witharelativelylargenumberoffirmssayingthatthey areexperiencinghighersalesduetomarcellusshaledevelopment,supportstheimplanresultsthatgas developmentactivityishavingbroadeffectsacrosstheeconomy.thisincludesallsectors,notjust thosewithadirectrelationshiptothedrillingcompanies. Ourfindingsarelessthanwhatseveralpreviousstudieshaveestimatedastheeconomicimpactof MarcellusShaledevelopmentinPennsylvania,butthisisnotsurprisingbecausewewereabletouse moredetailedinformationonwhereleasing,royalty,andpayrollweregoing,andthuswereableto directlyconsidertheassociatedleakage.ouremploymentestimateofbetween23,385and23,884new jobsisabout52percentofthe44,098jobsconsidine,watsonandblumsack(2010)estimatedfor2009. Weconductedsomesensitivityanalysisofourresultsanddeterminedthatroughlyhalfofthis differenceoccursduetoourmorespecificleasing,royalty,andpayrolldata.wewereabletobetter accountforhowmanysuchdollarsactuallyremainwithinthepennsylvaniaeconomyandwerespentin 2009.Webelievethattheremainingdifferenceoccursbecauseoftheupdatestheywereabletomake toimplanbaseduponthepurchasingdatacompaniesprovidedthem.despitethesedifferencesin estimatedtotalimpact,theeconomicmultipliersweestimated(1.86and1.90,dependingupon scenario)areconsistentwithwhattheyfound. Thedifferenceinthefindingsbetweenthesestudiesindicatesthatwhereleasingandroyaltydollarsgo substantiallyaffectstheeconomicimpactsofmarcellusactivity.thiswillbeevenmoresignificant whenconsideringeconomicimpactsatacountylevelorregionallevel.becauseonlyabouthalfofland inatypicalmarcelluscountyisownedbyresidentsofthatcounty,itwouldsuggestthatamajorportion oftheeconomicbenefitsimmediatelyleavethecommunitiesbeingimpactedbydrilling. Importantly,ourfindingsareconsistentwithseveralotherrecentemploymentstudiesofMarcellus Shalewhicheitherrelieduponcompanyinterviewsaboutemploymentneeds(Brundage,etal.2011)or directobservationofhiringandemploymenttrends(herzenberg,2011,usingpennsylvaniadepartment oflaborandindustrydata).brundage,etalestimatedthat8,752directandindirectjobswerecreated asaresultofindustryspendingondrillingactivityinpennsylvaniaduring2009,whichcomparestoour estimateof6,741directjobsresultingfromindustryspendingandanadditional2,631indirectjobs,fora totalof9,372jobs.theiranalysisdidnotincludetheimpactsofleasingandroyaltyincomenorall indirectandinducedeconomicimpactsasindustry,worker,andmineralownerdollarsflowthroughthe economy,soisnotdirectlycomparabletoouroverallestimatedimpactofaround23,000jobs. HerzenbergusedPennsylvaniaDepartmentofLaborandIndustrydataaboutnewjobcreationand calculatedthatbetweenthefourthquarterof2007andthefourthquarterof2010,therewere9,288 newjobswithinthemarcelluscoreindustry.thisissomewhatlowerthanourestimateandspans severalyearsratherthanjust2009.butthedefinitionof MarcellusCore industryisnarrowerthanthe actualbusinessrelationshipsnaturalgascompanieshavewithinpennsylvaniacommunities,andwhich 2011PennStateExtensionandPennCollegewww.msetc.org37
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 IMPLANmodels,sotheLaborandIndustrynumbersundercountrelatedemployment.Inaddition,the dataandherzenberg sanalysisdonotconsiderleasingandroyaltydollars,soisnotdirectlycomparable toouroverallestimatedeconomicimpacts. Thesurveyresponsesfrommunicipalgovernmentssimilarlysuggestthatthelocaltaximpactsof MarcellusShaledevelopmentaresignificantlylowerthanreportedinpriorstudies,whichhadsimply estimatedthosetaximpactswithoutverifyingwhatisactuallyoccurring.incontrast,oursurveyresults providedirectinsightsfromlocalgovernmentofficialsthatarebasedontheiractualexperience, includingimpactsonbothrevenuesandexpenditures,whichareessentialtoconsidertogethertohave acompletepictureoftheeffectsonlocalgovernments. A.LimitationsofOurStudy Wheninterpretingtheresultsofthisstudy,thereareimportantlimitationsthatmustbekeptinmind. Thisstudyestimatedimpactsin2009,veryearlyinthedevelopmentofMarcellus.Thepaceofdrilling activityincreasedin2010,andallindicationsarethatitwillcontinuetoincreaseinfutureyears.the longruneconomicimpactsofmarcellusshaledevelopment,particularlyforresource dependentsectors oftheeconomyliketourismandagriculture,likelywillbeverydifferentthanwhatoccursintheearly yearsofdevelopmentduetocumulativeandscaleeffectsasthenumberofwellsdrilledandin operationincrease.somehavearguedthattourismwilldecline(eitherbecauseofactualphysical changestothelandscapeorbecausecontroversyoverdrillingscarestouristsaway),thoughothershave arguedthattourismmayincreasebecauseaccessroadsandpipelinerightsofwayareopeningup previouslyinaccessiblehuntinglandsandcreatingbetterecosystemsforwhitetaileddeer,whichcould attractmorehunters. Inaddition,thecompositionofcompanyspendingwillchangesignificantlyastheplaydevelopswith leasingactivitydecliningandroyaltydollarsincreasing.theproportionofworkerspendingremaining withinpennsylvaniawillriseastheshareofpennsylvaniaworkersincreases.likewise,asthemarcellus playmatures,theproportionofgas relatedcompanieslocatedinpennsylvanialikelywillincrease, reducingleakageofdollarsoutofthecommonwealthandincreasingtheeconomicimpact.state economicpolicycaninfluencethis. Theeconomicimpactmodelweusedforconductingtheanalysis,IMPLAN,hasbeenwidelyusedby economistsforawidevarietyofeconomicimpactstudiesandisgenerallyrecognizedasworkingwell whenstudyingsmallchangeswithinaneconomy.itswidespreaduseallowssomeconsistencyfor comparingacrossdifferentstudiesonthesametopic.inaddition,manyeconomistsarefamiliarwith itsstrengthsandweaknesses.itdoeshavelimitationsforstudyingsignificantlylargeeconomicchanges whichaffectcorerelationshipswithintheeconomybecausethemodelassumesthatthoserelationships donotchange.thisisthesituationwithmarcellusshale,whichmeanstheresultsofanyimplan based economicanalysisofmarcellusshaleneedtobeviewedwithcaution.despitethislimitation,wechose touseimplanforthestudybecausewewantedtoinvestigatetheinfluenceofleasingandroyalty 2011PennStateExtensionandPennCollegewww.msetc.org38
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 dollars,andoutofstateworkers,anditsuseallowedustodirectlycompareourresultstoprevious studiesofmarcelluswhichwerenotabletoconsiderthesefactors. Mostimportantly,thisstudyonlyfocusedonthejobandincomeeffectsofgasindustryspending.These economicelementsmustbeunderstoodinbalancewithothersignificanteffects,suchasimpactsonthe environment,humanhealth,society,localgovernment,andqualityoflife.thefullextentofthese impactsisnotyetknown(norlikelywillbeknownuntillaterintheplay),butcurrentexperience suggeststhatsuchchangeswillbeoccurring.undoubtedly,theeffectofmarcellusdevelopmentonthe environmentandtheseotherimportantissueswillhaveeconomicimplications,butitistooearlyinthe developmentoftheplaytoreliablyidentifytheincidenceofsuchcostsandbenefits. B.WhatNoOneKnows(ButShouldbeKnown) Duringthecourseofthisstudy,webecameincreasinglyawareofseveralcriticaleconomicaspects relatedtomarcellusshaledevelopmentthatareeithermisunderstoodorcompletelyunknown,butyet areessentialforacompleteandcomprehensiveunderstandingoftheimplicationsandimpactsof MarcellusShale.Theseincludethecostsassociatedwithdevelopment,thedistributionofcostsand benefits,thelong runimplications,andwhatisactuallyoccurringonareal timebasis. 1.Costs ExistingeconomicimpactstudiesofMarcellusdevelopment,includingthisone,havefocusedalmost exclusivelyonjobandincomecreationresultingfromgasindustryspending,includingleasingand royaltypayments,payroll,andpurchasesfromotherbusinesses.incontrast,noeconomicstudyhas includedthepotentialcostsofmarcellusshaledevelopment,suchastheimpactonexistingbusinesses losingemployeesduetomarcellusactivity,damageandcleanupcostsresultingfromaccidentsor environmentaldegradation,orhigherstateandlocalgovernmentcostsduetoactivity.thereclearlyare andwillbecostsassociatedwithmarcellusshaledevelopment,bothout of pocketandnon monetary (suchastheecosystemeffectsofforestfragmentationorwaterqualityimpacts).theremayalsobe opportunitycosts,suchasbusinesseswhomaychoosenottolocateorexpandwithinpennsylvaniadue tothechangesresultingfrommarcellusshaledevelopment.yetbecausepennsylvaniaisstillrelatively earlyinthemarcellusplay,thesecurrentlycannotbefullyidentifiedorquantified.somecostsmaynot showupuntilmuchlaterinthedevelopmentoftheplay,suchaswhentheamountofactivitypasses currentlyunknownthresholdsorachievesacriticalmass.thatthecostscurrentlycannotbe comprehensivelymeasureddoesnotmeanthatsuchcostsdonotorwillnotexist,butrathermeansitis vitaltoinvestigateandidentifythem.tofocusonlyonjobs,income,ortaxrevenuewithoutputting thoseintoabroadercontextcanbeverymisleadingandcostlyinthelongrun. 2011PennStateExtensionandPennCollegewww.msetc.org39
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 2.WhoIsBenefitingandWhoIsBearingtheCosts ThedistributionofthebenefitsandthecostsassociatedwithMarcellusShaledevelopmenthasnot beenfullyinvestigated.economicinput Outputmodels,suchasIMPLAN,estimatetotaldollarsacross sectorsandcategories,butdonotidentifyhowthosedollarsaredistributedwithinthosesectors.in addition,sincethemodelingignorescosts,studiesdonothelpunderstandhowcostsrelatetothe benefits,andmostparticularly,whobearsthecostsandwhogetsthebenefits.yetmuchofthepublicly expressedconcernaboutmarcellusdevelopmentrelatesdirectlytosuchequityissues,whichsome wouldcharacterizeas socialjustice. Thedistributionofbenefitsandcostsmatterstomany Pennsylvanians. Equityissues(andconflicts)aboutMarcellusShalecanoccuratmultiplelevels,includingwithinfamilies whosemembersdisagreeonwhethertolease,betweenneighborswhohavedifferentvisionsforthe communityandforqualityoflife,betweentheownerofthesubsurfacemineralrightsandtheownerof thelandabovethatparcel,betweennewcomersandlong termresidents,betweentraffic impacted boroughswithfewwellsandsurroundingtownshipswithmanywells,betweenregionswithin Pennsylvania(suchasbetweenPhiladelphiaandupstreamcommunitieswithMarcellus),andeven betweencurrentandfuturegenerations. WearenotarguingherefororagainstthefairnessofMarcellusactivity,butratherwearestressingthat differingviewpointsaboutitsfairnessdoexist.indeed,judgmentsaboutequityandfairnessalready underliemuchoftherhetoricandpublicpolicydebateaboutthemarcellusshalegasplay,suchas whetheraseverancetaxisneeded(andifitis,howthedollarsshouldbedistributed),towhatextent localgovernmentsshouldbeallowedtoregulateandcontrolgasdevelopment,andwhethermineral rightownersundersomecircumstancesshouldbeforcedtoallowdrilling(e.g.forcedpooling). ObjectiveinformationaboutthecostsANDthebenefitsofMarcellusShaledevelopment,and particularlyhowthesearedistributed,shouldhelppeoplemakeinformedvaluejudgmentsabout whetherorhowpolicyshouldchange.currentlythesedistributionissuesarenotadequatelyknown. 3.Long RunImplications MostoftheexistinguncertaintyaboutMarcellusShaledevelopmentrelatestoitspossiblelong term effects,includingwaterquality,landuse,forest,health,andsocialimpacts.inaddition,thereis uncertaintyaboutwhethertheeconomicactivitywillconformtotheboom/bustcyclesthathave occurredwithenergydevelopmentinthewestandwhichhavecharacterizedpennsylvania sprior experiencewithtimber,coal,andpetroleumdevelopment.muchofthisdependsuponthescaleand paceofthedevelopment,pluswhetherthereareunforeseencumulativeeffectsastheplayisdeveloped andthenumberofwells(andsupportingaccessroads,milesofpipeline,andotherinfrastructure) increases.inaddition,itdependsuponhowindividualsandcommunitiesrespond(forexample,towhat extentwillrecipientsofleasesandroyaltiessellthesurfacerightsandmoveawaywiththatstreamof income,takingtheeconomicbenefitwiththem?willcommunitiesusethecurrenteconomicbenefitsto 2011PennStateExtensionandPennCollegewww.msetc.org40
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 strategicallyinvestforthefuture?)andwhetherthegasismostlyexportedandusedout of state,orifit insteadisusedtoattractotherindustries,andthushelpsbuildamorediversifiedandstrongeconomyin thecommonwealth.nooneknowstheanswerstothesequestionsbecausemuchofthiswilloccurin thefuture,butitisimportanttobegatheringappropriateinformationnowsowecanpredictand anticipatetheseearlierratherthanlater.inaddition,local,state,andfederalpolicywillinfluencethis future. 4.WhatIsActuallyOccurring AvarietyofsecondarydataisbeingcollectedthatprovidesinsightsintotheimpactsofMarcellusShale, suchasatthestatelevelbythedepartmentofenvironmentalprotection,thedepartmentofrevenue, andthedepartmentoflaborandindustry,andatthefederallevelbytheu.s.censusbureau.such datacollectionandmonitoringiscriticaltoidentifyanyproblemsbeforetheygrowtoolargeandto identifyopportunitieswhenthereistimetotakefulladvantageofthem.yetexistingdatasetsoftenlag byseveralyears,whichmeansourknowledgeisofthepastratherthanofthepresent,whichcanbe misleadingwithfast paceddevelopmentlikemarcellus.inaddition,therehasbeenlittleefforttodate tobringthesedifferentdatasetstogethertoprovideacomprehensiveunderstanding(andmonitoring) ofactivities. Ofgreaterconcernisthatsomeimportantdatacurrentlyarenotbeingcollectedoraggregated,which meanstherearesignificantthingswedonotknow,muchlesshaveameansofknowing.thisincludes howmuchleasinghasoccurred,andthuswhatpercentageoflandareapotentiallycouldbeaffectedby drilling;whotheworkersareandhowmanyarepennsylvaniaresidentsversusfromout of state; baselineenvironmentalmonitoringofgroundwaterquality,forestecosystemdiversity,airquality,and othernaturalresourcespotentiallybeingaffectedbydevelopment;baselinemonitoringofsocialand communityimpacts,suchaseffectsonrentersandlowincomeresidents,familywell being,housing affordabilityandaccess,andsocialservices;andmonitoringofhumanandanimalhealthnearactive sites. Mostimportantlyfortheeconomicdevelopmentimpacts,informationaboutwhoactuallyownsthe mineralrightsisnotbeingcomprehensivelycollected,andthusnooneknowswhereleasingandroyalty dollarsaregoing.neitherthecommonwealthnorcountygovernmentstrackmineralrightownership, unlikeownershipofsurfacerights,whichcountiescompileintocomprehensiverecords.theresultis thatinplaceswheresurfaceandmineralrightshavebeensevered,nooneknowswhereleasingand royaltydollarsaregoing,bothbytypeofrecipient(e.g.privatehousehold,publicsector,orbusiness) andbylocation(e.g.livingwithinthecommunity,livingelsewhereinpennsylvania,orlivingoutsideof thecommonwealth).ownershipofsuchrightsisimportanttoknowfromeconomicdevelopmentand equityperspectivesbecauseitaffectshowmuchoftheeconomicbenefitstayswithinthecommunity wheredrillingactivitiesareoccurring(andthustowhatextentthepeoplelivingwiththeinconveniences arereceivingpositivebenefitsfromthatactivity). 2011PennStateExtensionandPennCollegewww.msetc.org41
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 VI.Conclusions OurstudyoftheeconomicimpactofMarcellusShaleindicatesthatithadmajorimpactwithin Pennsylvaniaduring2009.AswithpriorstudiesofMarcellusShaleinPennsylvania,werelieduponthe standardinput OutputeconomicmodelIMPLANtoestimatethedirect,indirect,andinducedeffects acrosstheeconomyandfoundthatmarcellusshale relatedactivityaccountedforapproximately24,000 newjobsand$3billionofeconomicoutputinpennsylvaniaduring2009. TheseestimatesaresmallerthanprioreconomicstudiesofMarcellus,primarilybecausewewereable toaccountforhowleasingandroyaltyincomearebeingused.oursurveyoflandownersandthegis analysisoflandownershippatternsallowedustoestimatehowmanyleasingandroyaltydollarsare goingdirectlytopennsylvaniaresidents,thecommonwealth,andtonon residentpropertyownersand howthosedollarsareactuallybeingspent.ourresultsconfirmthatwhereleasingandroyaltydollars aregoinghassignificanteffectontheoveralleconomicimpactsofmarcellusshaledevelopment,soitis vitaltopaycloseattentiontosuchpaymentstohaveanaccurateviewonthedistributionofeconomic benefitsandcostsfrommarcellusshaledevelopment.becauseonlyabouthalfoflandinatypical Marcelluscountyisownedbyresidentsofthatcounty,itwouldsuggestthatamajorportionofthe economicbenefitsimmediatelyleavethecommunitiesbeingimpactedbydrilling. Inaddition,weaccountedforhowmanyMarcellusworkersarenon Pennsylvanian,andthushowmuch payrollisnotgoingtopennsylvaniahouseholds.suchworkersdospendsomeoftheirincomein Pennsylvania,buttheytendtospenditdifferentlythandoresidents,whichaffectstheoveralleconomic impacts. Ourstudyincludedasurveyoflocalbusinesses,whichconfirmedtheIMPLANresultsthatpositive economicimpactsareoccurringbroadlyacrosstheeconomyinthecommunitieswheredrillingisvery activelyoccurring.aboutone thirdofallthebusinessesinbradfordcounty,forexample,reportedthat theirsaleshadincreasedduetonaturalgasdevelopmentandonly3percentreportedsaleshad declined. WealsosurveyedPennsylvanialocalgovernmentsintheMarcellusShaleregiontoidentifywhetherthey areexperiencingnewtaxrevenues,newservicedemands,ornewcostsasaresultoftheearlystagesof MarcellusShaledevelopment.Anumberoflocalgovernmentsreportedthatthesehadincreased,but therewaslittlepatterntotheirresponsesinrelationtotheamountofdrillingactivityoccurringwithin theirjurisdiction.only18percentofthegovernmentsexperiencingmarcellusdevelopmentactivitysaid theirtaxrevenueshadincreased,whichindicatesthatmostlocalgovernmentswithmarcellusactivity arenotseeingmoretaxrevenueasaresult.incomparison,26percentofthelocalgovernments indicatedthattheircostshadincreased,particularlyrelatedtoroadexpenses.thisconfirmsthat consideringbothrevenuesandcostsiscriticalforhavingacompleteunderstandingoftheimpactsof MarcellusShale. WedidnotattempttoquantifythecostsofMarcellusShaledevelopment,suchaseffectsonthe environmentandhealth.wehopethatfutureeconomicstudiescanconsidersuchcostsasbetter 2011PennStateExtensionandPennCollegewww.msetc.org42
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 informationbecomesavailableabouttheincidenceandextentofsuchimpacts.inaddition,wedidnot addressthedistributionofbenefitsandcosts,eventhoughtheequityofhowthesearedistributed underliesmuchofthecurrentpolicydebateaboutmarcellusshale.thelongrunimplicationsof MarcellusShaledevelopmentarestillunknown.Jobsandincomeintheshortrunareimportant,but manywouldarguethatotherfactorsareequally(ifnotmore)important,suchascleanwater,healthy forestsandotherecosystems,cleanair,andgoodpublichealth.inadditiontoaffectingqualityoflife, theseareimportantresourcesforthefutureofpennsylvaniacommunities,includingfutureeconomic opportunities,socialandphysicalinfrastructure,well functioninglocalgovernmentandinstitutions,and communitywell being.webelieveourresultsmustbeviewedasapreliminary,short runviewofthe economicimpactsofmarcellusshale,andbeplacedinabroadercontextoftheseotherimportant concerns. ThisworkwasfundedbythePennsylvaniaEconomicDevelopmentFinancingAuthority(Pennsylvania DepartmentofCommunityandEconomicDevelopment)ContractNo.29 000 2222 2011PennStateExtensionandPennCollegewww.msetc.org43
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 VII.References Baker,RoseM.andDavidL.Passmore,(2010). BenchmarksforAssessingthePotentialImpactofa NaturalGasSeveranceTaxonthePennsylvaniaEconomy. UniversityPark,PA:ThePennsylvaniaState University,InstituteforResearchinTrainingandDevelopment. Brundage,TracyL.,JeffreyJacquet,TimothyW.Kelsey,JamesR.Ladlee,JaniceLobdell,JeffreyF. Lorson,LarryL.Michael,andThomasB.Murphy.(2011). PennsylvaniaStatewideMarcellusShale WorkforceNeeds. Williamsport,PA:MarcellusShaleEducationandTrainingCenter. Brundage,TracyL.,JeffreyJacquet,TimothyW.Kelsey,JamesR.Ladlee,JeffreyF.Lorson,LarryL. Michael,andThomasB.Murphy.(2010). SouthwestPennsylvaniaMarcellusShaleWorkforceNeeds Assessment. Williamsport,PA:MarcellusShaleEducationandTrainingCenter. CenterforBusinessandEconomicResearch.(2008). ProjectingtheEconomicImpactofthe FayettevilleShalePlayfor2008 2012. Fayetteville,AR:SamM.WaltonCollegeofBusiness. CenterforWorkforceInformationandAnalysis.(2011). MarcellusShaleFastFact. Harrisburg,PA: PennsylvaniaDepartmentofLaborandIndustry.April. CommonwealthofPennsylvania.(2009). 2009 2010BudgetinBrief. Harrisburg,PA:Commonwealth ofpennsylvania. Considine,TimothyJ.,RobertWatson,RebeccaEntler,andJeffreySparks(2009) AnEmergingGiant: ProspectsandEconomicImpactsofDevelopingtheMarcellusShaleNaturalGasPlay. UniversityPark, PA:ThePennsylvaniaStateUniversity,Dept.ofEnergyandMineralEngineering.August. Considine,TimothyJ.,RobertWatson,andSethBlumsack(2010). TheEconomicImpactsofthe PennsylvaniaMarcellusShaleNaturalGasPlay:AnUpdate. UniversityPark,PA:ThePennsylvaniaState University,Dept.ofEnergyandMineralEngineering.May. Costanzo,Charles,andTimothyW.Kelsey.(2011). StateTaxImplicationsofMarcellusShale:Whatthe PennsylvaniaDataSayin2010. UniversityPark,PA:ThePennsylvaniaStateUniversity,PennState Extension. Herzenberg,Stephen.(2011). DrillingDeeperintoJobClaims:TheActualContributionofMarcellus ShaletoPennsylvaniaJobGrowth. Harrisburg,PA:KeystoneResearchCenter. Jacobson,Michael,andTimothyW.Kelsey(2011). ImpactsofMarcellusShaleDevelopmenton MunicipalGovernmentsinSusquehannaandWashingtonCounties,2010. UniversityPark,PA:The PennsylvaniaStateUniversity,PennStateExtension. Kay,DavidL.(2011). TheEconomicImpactofMarcellusShaleGasDrilling:WhatHaveWeLearned? WhatAretheLimitations? Ithaca,NY:CornellUniversity. 2011PennStateExtensionandPennCollegewww.msetc.org44
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Kinnaman,ThomasC.(2011). TheEconomicImpactofShaleGasExtraction:AReviewofExisting Studies. EcologicalEconomics70:1243 1249. NationalEnergyTechnologyLab(NETL).(2010). ProjectingtheEconomicImpactofMarcellusShaleGas DevelopmentInWestVirginia:APreliminaryAnalysisUsingPubliclyAvailableData. Morgantown,W.V.: U.S.DepartmentofEnergy. Olson,DouglasC. UsingSocialAccountstoEstimateTaxImpacts. (1999).PaperpresentedattheMid ContinentRegionalScienceAssociationMeetings.Minneapolis,MN. PennsylvaniaDepartmentofEnvironmentalProtection.(2011). 2010WellsDrilledByCountyasof 02/11/2011. Harrisburg,PA.:PennsylvaniaDepartmentofEnvironmentalProtection. PennsylvaniaDepartmentofRevenue.(2011). DrillingIndustryPaidMoreThan$1BillioninStateTaxes Since2006. Harrisburg,PA.:PennsylvaniaDepartmentofRevenue. PennsylvaniaDepartmentofRevenue.(2010). TaxCompendium 2007 08;through2009 2010. Harrisburg,PA:PennsylvaniaDepartmentofRevenue. PennsylvaniaDepartmentofRevenue.(2010). PersonalIncomeStatistics, 2007and2008.Harrisburg, PA.:PennsylvaniaDepartmentofRevenue. PennsylvaniaEconomyLeague.(2008). TheEconomicImpactoftheOilandGasIndustryin Pennsylvania. Pittsburgh,PA:PennsylvaniaEconomyLeague. Scott,LorenC.andAssociates.(2009). TheEconomicImpactoftheHaynesvilleShaleontheLouisiana Economyin2008. BatonRouge,LA:LouisianaDepartmentofNaturalResources. U.S.CensusBureau.(2010). AmericanCommunitySurvey:Five YearEstimates(2005 2009). Washington,D.C.:U.S.DepartmentofCommerce. U.S.CensusBureau.(2010). CountyBusinessPatterns:2008. Washington,D.C.:U.S.Departmentof Commerce. U.S.CensusBureau.(2007). CensusofGovernments.Washington,D.C.:U.S.Departmentof Commerce. U.S.DepartmentofAgriculture.(2009). 2007CensusofAgriculture. Washington,D.C.:U.S. DepartmentofAgriculture. Ward,MelissaandTimothyW.Kelsey.(2001). LocalBusinessImpactsofMarcellusShaleDevelopment: TheExperienceinBradfordandWashingtonCounties,2010. UniversityPark,PA:ThePennsylvania StateUniversity,PennStateExtension. 2011PennStateExtensionandPennCollegewww.msetc.org45
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 VIII.Appendices Appendix1.MarcellusNaturalGasIndustrySpendingResults Output Sector Description Direct Indirect Induced Total 0 Total $1,200,667,093 $428,097,138 $517,027,001 $2,145,791,233 1 11Ag,Forestry,Fish&Hunting $4,706,562 $1,401,464 $1,158,103 $7,266,129 20 21Mining $474,430,258 $17,521,225 $1,043,333 $492,994,816 33 22Utilities $5,675,796 $12,752,545 $12,038,327 $30,466,668 34 23Construction $378,171,901 $6,242,481 $2,149,609 $386,563,992 41 31 33Manufacturing $9,013,135 $60,938,528 $34,427,891 $104,379,554 319 42WholesaleTrade $194,407,911 $34,324,793 $25,103,738 $253,836,441 320 44 45Retailtrade $9,303,714 $13,850,988 $46,663,562 $69,818,264 332 48 49Transportation&Warehousing $37,593,267 $28,914,245 $13,871,566 $80,379,079 341 51Information $425,882 $20,771,076 $18,586,472 $39,783,430 354 52Finance&insurance $572,142 $33,375,849 $66,491,790 $100,439,781 360 53Realestate&rental $842,046 $54,479,472 $89,572,925 $144,894,443 367 54Professional scientific&tech services $70,525,649 $76,160,148 $24,394,990 $171,080,787 381 55Managementofcompanies $0 $24,259,451 $5,698,687 $29,958,138 382 56Administrative&wasteservices $9,794,052 $19,843,289 $12,200,535 $41,837,876 391 61Educationalservices $1,309,237 $284,576 $12,227,617 $13,821,430 394 62Health&socialservices $1,303,644 $39,703 $92,871,967 $94,215,314 402 71Arts entertainment&recreation $579,029 $1,631,571 $7,829,442 $10,040,043 411 72Accommodation&foodservices $717,045 $5,488,889 $24,271,390 $30,477,325 414 81Otherservices $1,295,823 $8,021,215 $17,554,423 $26,871,460 427 92Government&nonNAICs $0 $7,795,630 $8,870,635 $16,666,266 Valueadded Sector Description Direct Indirect Induced Total 0 Total $626,335,174 $250,664,416 $316,891,277 $1,193,890,867 1 11Ag,Forestry,Fish&Hunting $1,553,659 $462,630 $382,295 $2,398,584 20 21Mining $226,303,866 $8,400,164 $500,203 $235,204,232 33 22Utilities $3,279,844 $7,401,126 $6,986,619 $17,667,588 34 23Construction $176,414,670 $3,009,539 $1,036,340 $180,460,548 41 31 33Manufacturing $2,541,090 $17,125,363 $9,675,162 $29,341,616 319 42WholesaleTrade $131,192,812 $22,589,089 $16,520,728 $170,302,629 320 44 45Retailtrade $7,917,929 $11,680,779 $39,352,191 $58,950,899 332 48 49Transportation&Warehousing $19,737,700 $15,476,604 $7,424,878 $42,639,182 341 51Information $225,655 $11,058,350 $9,895,285 $21,179,290 354 52Finance&insurance $326,404 $19,276,801 $38,403,488 $58,006,693 360 53Realestate&rental $593,583 $38,147,930 $62,721,270 $101,462,784 367 54Professional scientific&tech services $47,235,368 $52,500,219 $16,816,437 $116,552,023 381 55Managementofcompanies $0 $15,970,647 $3,751,598 $19,722,245 2011PennStateExtensionandPennCollegewww.msetc.org46
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 382 56Administrative&wasteservices $6,084,957 $12,568,111 $7,727,433 $26,380,501 391 61Educationalservices $767,889 $171,855 $7,384,237 $8,323,981 394 62Health&socialservices $737,597 $23,031 $53,872,749 $54,633,377 402 71Arts entertainment&recreation $339,804 $981,029 $4,707,677 $6,028,510 411 72Accommodation&foodservices $361,707 $2,810,475 $12,427,675 $15,599,858 414 81Otherservices $720,642 $4,545,952 $9,948,811 $15,215,405 427 92Government&nonNAICs $0 $6,464,724 $7,356,199 $13,820,923 LaborIncome Sector Description Direct Indirect Induced Total 0 Total $398,405,378 $146,829,148 $184,097,066 $729,331,592 1 11Ag,Forestry,Fish&Hunting $1,243,058 $370,143 $305,868 $1,919,069 20 21Mining $102,756,963 $3,814,231 $227,125 $106,798,319 33 22Utilities $950,784 $2,145,490 $2,025,330 $5,121,603 34 23Construction $150,200,762 $2,562,344 $882,347 $153,645,453 41 31 33Manufacturing $1,396,083 $9,408,729 $5,315,565 $16,120,378 319 42WholesaleTrade $76,418,158 $13,157,859 $9,623,115 $99,199,132 320 44 45Retailtrade $4,764,601 $7,028,890 $23,680,119 $35,473,611 332 48 49Transportation&Warehousing $14,570,645 $11,425,045 $5,481,148 $31,476,839 341 51Information $114,213 $5,597,050 $5,008,379 $10,719,642 354 52Finance&insurance $164,397 $9,709,010 $19,342,413 $29,215,820 360 53Realestate&rental $46,330 $2,977,484 $4,895,457 $7,919,270 367 54Professional scientific&tech services $38,495,755 $42,786,489 $13,705,015 $94,987,259 381 55Managementofcompanies $0 $13,107,316 $3,078,985 $16,186,301 382 56Administrative&wasteservices $4,741,450 $9,793,179 $6,021,281 $20,555,910 391 61Educationalservices $728,465 $163,032 $7,005,119 $7,896,615 394 62Health&socialservices $681,535 $21,280 $49,778,051 $50,480,866 402 71Arts entertainment&recreation $232,351 $670,808 $3,219,014 $4,122,172 411 72Accommodation&foodservices $253,111 $1,966,678 $8,696,480 $10,916,269 414 81Otherservices $646,719 $4,079,632 $8,928,271 $13,654,622 427 92Government&nonNAICs $0 $6,044,460 $6,877,981 $12,922,441 Employment Sector Description Direct Indirect Induced Total 0 Total 6,741.40 2,630.80 4,253.70 13,625.90 1 11Ag,Forestry,Fish&Hunting 69.6 20.5 16.9 107.1 20 21Mining 1,614.50 60.5 3.6 1,678.60 33 22Utilities 6.8 15.6 14.7 37.1 34 23Construction 2,861.80 49.3 17 2,928.00 41 31 33Manufacturing 19.9 135.6 76.6 232.1 319 42WholesaleTrade 988.1 171.7 125.6 1,285.40 320 44 45Retailtrade 164.6 245.1 825.6 1,235.30 332 48 49Transportation&Warehousing 282.8 223.8 107.4 614 341 51Information 1.4 70.5 63.1 135.1 354 52Finance&insurance 2.4 140.7 280.2 423.2 360 53Realestate&rental 2.6 169.3 278.4 450.3 367 54Professional scientific&tech services 512.3 574.6 184.1 1,271.00 2011PennStateExtensionandPennCollegewww.msetc.org47
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 381 55Managementofcompanies 0 110 25.8 135.9 382 56Administrative&wasteservices 144.3 300.8 184.9 630 391 61Educationalservices 17.4 3.9 168.9 190.2 394 62Health&socialservices 13.1 0.4 965.6 979.1 402 71Arts entertainment&recreation 9.5 27.8 133.5 170.8 411 72Accommodation&foodservices 11.9 93.3 412.5 517.7 414 81Otherservices 18.2 115.9 253.7 387.9 427 92Government&nonNAICs 0 101.5 115.5 217.1 2011PennStateExtensionandPennCollegewww.msetc.org48
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Appendix2.MarcellusNaturalGasIndustryPayrollImpacts:Scenario1 Scenario1:If50PercentofNon ResidentWorkerIncomeLeavesPennsylvania Output Sector Description Direct Indirect Induced Total 0 Total $0 $0 $86,952,840 $86,952,840 1 11Ag,Forestry,Fish&Hunting $0 $0 $200,818 $200,818 20 21Mining $0 $0 $182,838 $182,838 33 22Utilities $0 $0 $2,156,805 $2,156,805 34 23Construction $0 $0 $362,199 $362,199 41 31 33Manufacturing $0 $0 $5,925,582 $5,925,582 319 42WholesaleTrade $0 $0 $4,452,032 $4,452,032 320 44 45Retailtrade $0 $0 $6,732,106 $6,732,106 332 48 49Transportation&Warehousing $0 $0 $2,264,402 $2,264,402 341 51Information $0 $0 $3,161,565 $3,161,565 354 52Finance&insurance $0 $0 $10,928,098 $10,928,098 360 53Realestate&rental $0 $0 $15,020,759 $15,020,759 367 54Professional scientific&tech services $0 $0 $4,166,232 $4,166,232 381 55Managementofcompanies $0 $0 $975,913 $975,913 382 56Administrative&wasteservices $0 $0 $2,055,236 $2,055,236 391 61Educationalservices $0 $0 $1,943,453 $1,943,453 394 62Health&socialservices $0 $0 $16,603,941 $16,603,941 402 71Arts entertainment&recreation $0 $0 $1,288,409 $1,288,409 411 72Accommodation&foodservices $0 $0 $4,002,456 $4,002,456 414 81Otherservices $0 $0 $3,014,620 $3,014,620 427 92Government&nonNAICs $0 $0 $1,515,374 $1,515,374 Valueadded Sector Description Direct Indirect Induced Total $52,988,161 0 Total $0 $0 $52,988,161 1 11Ag,Forestry,Fish&Hunting $0 $0 $66,291 $66,291 20 21Mining $0 $0 $87,658 $87,658 33 22Utilities $0 $0 $1,251,733 $1,251,733 34 23Construction $0 $0 $174,619 $174,619 41 31 33Manufacturing $0 $0 $1,665,248 $1,665,248 319 42WholesaleTrade $0 $0 $2,929,875 $2,929,875 320 44 45Retailtrade $0 $0 $5,677,302 $5,677,302 332 48 49Transportation&Warehousing $0 $0 $1,212,041 $1,212,041 341 51Information $0 $0 $1,683,191 $1,683,191 354 52Finance&insurance $0 $0 $6,311,713 $6,311,713 360 53Realestate&rental $0 $0 $10,517,922 $10,517,922 367 54Professional scientific&tech services $0 $0 $2,871,949 $2,871,949 2011PennStateExtensionandPennCollegewww.msetc.org49
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 381 55Managementofcompanies $0 $0 $642,470 $642,470 382 56Administrative&wasteservices $0 $0 $1,301,722 $1,301,722 391 61Educationalservices $0 $0 $1,173,648 $1,173,648 394 62Health&socialservices $0 $0 $9,631,539 $9,631,539 402 71Arts entertainment&recreation $0 $0 $774,693 $774,693 411 72Accommodation&foodservices $0 $0 $2,049,377 $2,049,377 414 81Otherservices $0 $0 $1,708,509 $1,708,509 427 92Government&nonNAICs $0 $0 $1,256,663 $1,256,663 Laborincome Sector Description Direct Indirect Induced Total 0 Total $0 $0 $30,955,834 $30,955,834 1 11Ag,Forestry,Fish&Hunting $0 $0 $53,038 $53,038 20 21Mining $0 $0 $39,802 $39,802 33 22Utilities $0 $0 $362,861 $362,861 34 23Construction $0 $0 $148,672 $148,672 41 31 33Manufacturing $0 $0 $914,892 $914,892 319 42WholesaleTrade $0 $0 $1,706,615 $1,706,615 320 44 45Retailtrade $0 $0 $3,416,307 $3,416,307 332 48 49Transportation&Warehousing $0 $0 $894,746 $894,746 341 51Information $0 $0 $851,927 $851,927 354 52Finance&insurance $0 $0 $3,178,976 $3,178,976 360 53Realestate&rental $0 $0 $820,934 $820,934 367 54Professional scientific&tech services $0 $0 $2,340,574 $2,340,574 381 55Managementofcompanies $0 $0 $527,283 $527,283 382 56Administrative&wasteservices $0 $0 $1,014,313 $1,014,313 391 61Educationalservices $0 $0 $1,113,391 $1,113,391 394 62Health&socialservices $0 $0 $8,899,476 $8,899,476 402 71Arts entertainment&recreation $0 $0 $529,719 $529,719 411 72Accommodation&foodservices $0 $0 $1,434,087 $1,434,087 414 81Otherservices $0 $0 $1,533,252 $1,533,252 427 92Government&nonNAICs $0 $0 $1,174,968 $1,174,968 Employment Sector Description Direct Indirect Induced Total 0 Total 0 0 704.4 704.4 1 11Ag,Forestry,Fish&Hunting 0 0 2.9 2.9 20 21Mining 0 0 0.6 0.6 33 22Utilities 0 0 2.6 2.6 34 23Construction 0 0 2.9 2.9 41 31 33Manufacturing 0 0 13.2 13.2 319 42WholesaleTrade 0 0 22.3 22.3 320 44 45Retailtrade 0 0 119.1 119.1 332 48 49Transportation&Warehousing 0 0 17.5 17.5 341 51Information 0 0 10.7 10.7 354 52Finance&insurance 0 0 46.1 46.1 360 53Realestate&rental 0 0 46.7 46.7 2011PennStateExtensionandPennCollegewww.msetc.org50
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 54Professional scientific&tech 367 services 0 0 31.4 31.4 381 55Managementofcompanies 0 0 4.4 4.4 382 56Administrative&wasteservices 0 0 31.2 31.2 391 61Educationalservices 0 0 26.8 26.8 394 62Health&socialservices 0 0 172.6 172.6 402 71Arts entertainment&recreation 0 0 22 22 411 72Accommodation&foodservices 0 0 68 68 414 81Otherservices 0 0 43.6 43.6 427 92Government&nonNAICs 0 0 19.7 19.7 2011PennStateExtensionandPennCollegewww.msetc.org51
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Appendix3.MarcellusNaturalGasIndustryPayrollImpacts:Scenario2 Scenario2:If25PercentofNon ResidentWorkerIncomeLeavesPennsylvania Output Sector Description Direct Indirect Induced Total 0 Total $0 $0 $97,772,457 $97,772,457 1 11Ag,Forestry,Fish&Hunting $0 $0 $225,661 $225,661 20 21Mining $0 $0 $203,541 $203,541 33 22Utilities $0 $0 $2,378,908 $2,378,908 34 23Construction $0 $0 $403,551 $403,551 41 31 33Manufacturing $0 $0 $6,653,629 $6,653,629 319 42WholesaleTrade $0 $0 $5,282,446 $5,282,446 320 44 45Retailtrade $0 $0 $7,970,945 $7,970,945 332 48 49Transportation&Warehousing $0 $0 $2,573,400 $2,573,400 341 51Information $0 $0 $3,555,716 $3,555,716 354 52Finance&insurance $0 $0 $12,384,450 $12,384,450 360 53Realestate&rental $0 $0 $16,654,562 $16,654,562 367 54Professional scientific&tech services $0 $0 $4,680,622 $4,680,622 381 55Managementofcompanies $0 $0 $1,098,486 $1,098,486 382 56Administrative&wasteservices $0 $0 $2,299,910 $2,299,910 391 61Educationalservices $0 $0 $2,099,477 $2,099,477 394 62Health&socialservices $0 $0 $18,238,675 $18,238,675 402 71Arts entertainment&recreation $0 $0 $1,442,831 $1,442,831 411 72Accommodation&foodservices $0 $0 $4,537,129 $4,537,129 414 81Otherservices $0 $0 $3,394,428 $3,394,428 427 92Government&nonNAICs $0 $0 $1,694,089 $1,694,089 Valueadded Sector Description Direct Indirect Induced Total 0 Total $0 $0 $59,674,181 $59,674,181 1 11Ag,Forestry,Fish&Hunting $0 $0 $74,492 $74,492 20 21Mining $0 $0 $97,583 $97,583 33 22Utilities $0 $0 $1,380,634 $1,380,634 34 23Construction $0 $0 $194,554 $194,554 41 31 33Manufacturing $0 $0 $1,869,848 $1,869,848 319 42WholesaleTrade $0 $0 $3,476,369 $3,476,369 320 44 45Retailtrade $0 $0 $6,722,036 $6,722,036 332 48 49Transportation&Warehousing $0 $0 $1,377,435 $1,377,435 341 51Information $0 $0 $1,893,034 $1,893,034 354 52Finance&insurance $0 $0 $7,152,854 $7,152,854 360 53Realestate&rental $0 $0 $11,661,954 $11,661,954 367 54Professional scientific&tech services $0 $0 $3,226,539 $3,226,539 381 55Managementofcompanies $0 $0 $723,163 $723,163 382 56Administrative&wasteservices $0 $0 $1,456,690 $1,456,690 2011PennStateExtensionandPennCollegewww.msetc.org52
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 391 61Educationalservices $0 $0 $1,267,871 $1,267,871 394 62Health&socialservices $0 $0 $10,579,808 $10,579,808 402 71Arts entertainment&recreation $0 $0 $867,544 $867,544 411 72Accommodation&foodservices $0 $0 $2,323,145 $2,323,145 414 81Otherservices $0 $0 $1,923,761 $1,923,761 427 92Government&nonNAICs $0 $0 $1,404,867 $1,404,867 Laborincome Sector Description Direct Indirect Induced Total 0 Total $0 $0 $34,850,239 $34,850,239 1 11Ag,Forestry,Fish&Hunting $0 $0 $59,600 $59,600 20 21Mining $0 $0 $44,309 $44,309 33 22Utilities $0 $0 $400,228 $400,228 34 23Construction $0 $0 $165,645 $165,645 41 31 33Manufacturing $0 $0 $1,027,301 $1,027,301 319 42WholesaleTrade $0 $0 $2,024,941 $2,024,941 320 44 45Retailtrade $0 $0 $4,044,975 $4,044,975 332 48 49Transportation&Warehousing $0 $0 $1,016,842 $1,016,842 341 51Information $0 $0 $958,136 $958,136 354 52Finance&insurance $0 $0 $3,602,627 $3,602,627 360 53Realestate&rental $0 $0 $910,227 $910,227 367 54Professional scientific&tech services $0 $0 $2,629,556 $2,629,556 381 55Managementofcompanies $0 $0 $593,509 $593,509 382 56Administrative&wasteservices $0 $0 $1,135,065 $1,135,065 391 61Educationalservices $0 $0 $1,202,776 $1,202,776 394 62Health&socialservices $0 $0 $9,775,670 $9,775,670 402 71Arts entertainment&recreation $0 $0 $593,209 $593,209 411 72Accommodation&foodservices $0 $0 $1,625,661 $1,625,661 414 81Otherservices $0 $0 $1,726,424 $1,726,424 427 92Government&nonNAICs $0 $0 $1,313,538 $1,313,538 Employment Sector Description Direct Indirect Induced Total 0 Total 0 0 794.9 794.9 1 11Ag,Forestry,Fish&Hunting 0 0 3.3 3.3 20 21Mining 0 0 0.7 0.7 33 22Utilities 0 0 2.9 2.9 34 23Construction 0 0 3.2 3.2 41 31 33Manufacturing 0 0 14.8 14.8 319 42WholesaleTrade 0 0 26.4 26.4 320 44 45Retailtrade 0 0 141 141 332 48 49Transportation&Warehousing 0 0 19.9 19.9 341 51Information 0 0 12.1 12.1 354 52Finance&insurance 0 0 52.2 52.2 360 53Realestate&rental 0 0 51.8 51.8 367 54Professional scientific&tech services 0 0 35.3 35.3 2011PennStateExtensionandPennCollegewww.msetc.org53
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 381 55Managementofcompanies 0 0 5 5 382 56Administrative&wasteservices 0 0 34.9 34.9 391 61Educationalservices 0 0 29 29 394 62Health&socialservices 0 0 189.6 189.6 402 71Arts entertainment&recreation 0 0 24.6 24.6 411 72Accommodation&foodservices 0 0 77.1 77.1 414 81Otherservices 0 0 49.1 49.1 427 92Government&nonNAICs 0 0 22.1 22.1 2011PennStateExtensionandPennCollegewww.msetc.org54
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Appendix4.RoyaltyPaymentstoPrivateMineralRightOwners Scenario1:If7.7PercentofMineralRightsareOwnedOut of State Output Sector Description Direct Indirect Induced Total 0 Total $0 $0 $15,691,609 $15,691,609 1 11Ag,Forestry,Fish&Hunting $0 $0 $35,264 $35,264 20 21Mining $0 $0 $31,994 $31,994 33 22Utilities $0 $0 $374,205 $374,205 34 23Construction $0 $0 $65,348 $65,348 41 31 33Manufacturing $0 $0 $1,043,014 $1,043,014 319 42WholesaleTrade $0 $0 $867,268 $867,268 320 44 45Retailtrade $0 $0 $1,256,269 $1,256,269 332 48 49Transportation& Warehousing $0 $0 $407,857 $407,857 341 51Information $0 $0 $570,032 $570,032 354 52Finance&insurance $0 $0 $1,998,997 $1,998,997 360 53Realestate&rental $0 $0 $2,723,444 $2,723,444 367 54Professional scientific&tech services $0 $0 $745,767 $745,767 381 55Managementofcompanies $0 $0 $175,910 $175,910 382 56Administrative&wasteservices $0 $0 $368,143 $368,143 391 61Educationalservices $0 $0 $352,288 $352,288 394 62Health&socialservices $0 $0 $2,909,503 $2,909,503 402 71Arts entertainment& recreation $0 $0 $229,570 $229,570 411 72Accommodation&foodservices $0 $0 $738,610 $738,610 414 81Otherservices $0 $0 $529,298 $529,298 427 92Government&nonNAICs $0 $0 $268,827 $268,827 ValueAdded Sector Description Direct Indirect Induced Total 0 Total $0 $0 $9,585,000 $9,585,000 1 11Ag,Forestry,Fish&Hunting $0 $0 $11,641 $11,641 20 21Mining $0 $0 $15,339 $15,339 33 22Utilities $0 $0 $217,176 $217,176 34 23Construction $0 $0 $31,504 $31,504 41 31 33Manufacturing $0 $0 $293,115 $293,115 319 42WholesaleTrade $0 $0 $570,748 $570,748 320 44 45Retailtrade $0 $0 $1,059,433 $1,059,433 332 48 49Transportation& Warehousing $0 $0 $218,309 $218,309 341 51Information $0 $0 $303,480 $303,480 354 52Finance&insurance $0 $0 $1,154,556 $1,154,556 360 53Realestate&rental $0 $0 $1,907,026 $1,907,026 2011PennStateExtensionandPennCollegewww.msetc.org55
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 367 54Professional scientific&tech services $0 $0 $514,087 $514,087 381 55Managementofcompanies $0 $0 $115,806 $115,806 382 56Administrative&wasteservices $0 $0 $233,170 $233,170 391 61Educationalservices $0 $0 $212,746 $212,746 394 62Health&socialservices $0 $0 $1,687,731 $1,687,731 402 71Arts entertainment& recreation $0 $0 $138,036 $138,036 411 72Accommodation&foodservices $0 $0 $378,190 $378,190 414 81Otherservices $0 $0 $299,975 $299,975 427 92Government&nonNAICs $0 $0 $222,932 $222,932 LaborIncome Sector Description Direct Indirect Induced Total 0 Total $0 $0 $5,575,826 $5,575,826 1 11Ag,Forestry,Fish&Hunting $0 $0 $9,314 $9,314 20 21Mining $0 $0 $6,965 $6,965 33 22Utilities $0 $0 $62,956 $62,956 34 23Construction $0 $0 $26,823 $26,823 41 31 33Manufacturing $0 $0 $161,038 $161,038 319 42WholesaleTrade $0 $0 $332,453 $332,453 320 44 45Retailtrade $0 $0 $637,512 $637,512 332 48 49Transportation& Warehousing $0 $0 $161,159 $161,159 341 51Information $0 $0 $153,603 $153,603 354 52Finance&insurance $0 $0 $581,507 $581,507 360 53Realestate&rental $0 $0 $148,845 $148,845 367 54Professional scientific&tech services $0 $0 $418,969 $418,969 381 55Managementofcompanies $0 $0 $95,044 $95,044 382 56Administrative&wasteservices $0 $0 $181,688 $181,688 391 61Educationalservices $0 $0 $201,823 $201,823 394 62Health&socialservices $0 $0 $1,559,452 $1,559,452 402 71Arts entertainment& recreation $0 $0 $94,386 $94,386 411 72Accommodation&foodservices $0 $0 $264,645 $264,645 414 81Otherservices $0 $0 $269,204 $269,204 427 92Government&nonNAICs $0 $0 $208,439 $208,439 Employment Sector Description Direct Indirect Induced Total 0 Total 0 0 127.2 127.2 1 11Ag,Forestry,Fish&Hunting 0 0 0.5 0.5 20 21Mining 0 0 0.1 0.1 33 22Utilities 0 0 0.5 0.5 34 23Construction 0 0 0.5 0.5 41 31 33Manufacturing 0 0 2.3 2.3 319 42WholesaleTrade 0 0 4.3 4.3 320 44 45Retailtrade 0 0 22.2 22.2 2011PennStateExtensionandPennCollegewww.msetc.org56
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 332 48 49Transportation& Warehousing 0 0 3.2 3.2 341 51Information 0 0 1.9 1.9 354 52Finance&insurance 0 0 8.4 8.4 360 53Realestate&rental 0 0 8.5 8.5 367 54Professional scientific&tech services 0 0 5.6 5.6 381 55Managementofcompanies 0 0 0.8 0.8 382 56Administrative&wasteservices 0 0 5.6 5.6 391 61Educationalservices 0 0 4.9 4.9 394 62Health&socialservices 0 0 30.3 30.3 402 71Arts entertainment& recreation 0 0 3.9 3.9 411 72Accommodation&foodservices 0 0 12.6 12.6 414 81Otherservices 0 0 7.7 7.7 427 92Government&nonNAICs 0 0 3.5 3.5 2011PennStateExtensionandPennCollegewww.msetc.org57
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Appendix5.PaymentstoPrivateMineralRightOwners Scenario2:If15.4PercentofMineralRightsareOwnedOut of State Output Sector Description Direct Indirect Induced Total 0 Total $0 $0 $14,088,728 $14,088,728 1 11Ag,Forestry,Fish&Hunting $0 $0 $31,662 $31,662 20 21Mining $0 $0 $28,726 $28,726 33 22Utilities $0 $0 $335,981 $335,981 34 23Construction $0 $0 $58,672 $58,672 41 31 33Manufacturing $0 $0 $936,471 $936,471 319 42WholesaleTrade $0 $0 $778,677 $778,677 320 44 45Retailtrade $0 $0 $1,127,942 $1,127,942 332 48 49Transportation& Warehousing $0 $0 $366,195 $366,195 341 51Information $0 $0 $511,804 $511,804 354 52Finance&insurance $0 $0 $1,794,802 $1,794,802 360 53Realestate&rental $0 $0 $2,445,247 $2,445,247 367 54Professional scientific&tech services $0 $0 $669,588 $669,588 381 55Managementofcompanies $0 $0 $157,941 $157,941 382 56Administrative&wasteservices $0 $0 $330,537 $330,537 391 61Educationalservices $0 $0 $316,302 $316,302 394 62Health&socialservices $0 $0 $2,612,300 $2,612,300 402 71Arts entertainment& recreation $0 $0 $206,120 $206,120 411 72Accommodation&foodservices $0 $0 $663,162 $663,162 414 81Otherservices $0 $0 $475,231 $475,231 427 92Government&nonNAICs $0 $0 $241,367 $241,367 ValueAdded Sector Description Direct Indirect Induced Total 0 Total $0 $0 $8,605,902 $8,605,902 1 11Ag,Forestry,Fish&Hunting $0 $0 $10,452 $10,452 20 21Mining $0 $0 $13,772 $13,772 33 22Utilities $0 $0 $194,991 $194,991 34 23Construction $0 $0 $28,286 $28,286 41 31 33Manufacturing $0 $0 $263,174 $263,174 319 42WholesaleTrade $0 $0 $512,446 $512,446 320 44 45Retailtrade $0 $0 $951,213 $951,213 332 48 49Transportation& Warehousing $0 $0 $196,009 $196,009 341 51Information $0 $0 $272,480 $272,480 354 52Finance&insurance $0 $0 $1,036,619 $1,036,619 360 53Realestate&rental $0 $0 $1,712,225 $1,712,225 2011PennStateExtensionandPennCollegewww.msetc.org58
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 367 54Professional scientific&tech services $0 $0 $461,574 $461,574 381 55Managementofcompanies $0 $0 $103,977 $103,977 382 56Administrative&wasteservices $0 $0 $209,352 $209,352 391 61Educationalservices $0 $0 $191,014 $191,014 394 62Health&socialservices $0 $0 $1,515,331 $1,515,331 402 71Arts entertainment& recreation $0 $0 $123,935 $123,935 411 72Accommodation&foodservices $0 $0 $339,559 $339,559 414 81Otherservices $0 $0 $269,333 $269,333 427 92Government&nonNAICs $0 $0 $200,159 $200,159 LaborIncome Sector Description Direct Indirect Induced Total 0 Total $0 $0 $5,006,261 $5,006,261 1 11Ag,Forestry,Fish&Hunting $0 $0 $8,362 $8,362 20 21Mining $0 $0 $6,253 $6,253 33 22Utilities $0 $0 $56,525 $56,525 34 23Construction $0 $0 $24,083 $24,083 41 31 33Manufacturing $0 $0 $144,588 $144,588 319 42WholesaleTrade $0 $0 $298,494 $298,494 320 44 45Retailtrade $0 $0 $572,391 $572,391 332 48 49Transportation& Warehousing $0 $0 $144,697 $144,697 341 51Information $0 $0 $137,912 $137,912 354 52Finance&insurance $0 $0 $522,107 $522,107 360 53Realestate&rental $0 $0 $133,641 $133,641 367 54Professional scientific&tech services $0 $0 $376,172 $376,172 381 55Managementofcompanies $0 $0 $85,335 $85,335 382 56Administrative&wasteservices $0 $0 $163,129 $163,129 391 61Educationalservices $0 $0 $181,207 $181,207 394 62Health&socialservices $0 $0 $1,400,156 $1,400,156 402 71Arts entertainment& recreation $0 $0 $84,744 $84,744 411 72Accommodation&foodservices $0 $0 $237,612 $237,612 414 81Otherservices $0 $0 $241,705 $241,705 427 92Government&nonNAICs $0 $0 $187,147 $187,147 Employment Sector Description Direct Indirect Induced Total 0 Total 0 0 114.2 114.2 1 11Ag,Forestry,Fish&Hunting 0 0 0.5 0.5 20 21Mining 0 0 0.1 0.1 33 22Utilities 0 0 0.4 0.4 34 23Construction 0 0 0.5 0.5 41 31 33Manufacturing 0 0 2.1 2.1 319 42WholesaleTrade 0 0 3.9 3.9 320 44 45Retailtrade 0 0 20 20 2011PennStateExtensionandPennCollegewww.msetc.org59
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 332 48 49Transportation& Warehousing 0 0 2.8 2.8 341 51Information 0 0 1.7 1.7 354 52Finance&insurance 0 0 7.6 7.6 360 53Realestate&rental 0 0 7.6 7.6 367 54Professional scientific&tech services 0 0 5.1 5.1 381 55Managementofcompanies 0 0 0.7 0.7 382 56Administrative&wasteservices 0 0 5 5 391 61Educationalservices 0 0 4.4 4.4 394 62Health&socialservices 0 0 27.2 27.2 402 71Arts entertainment& recreation 0 0 3.5 3.5 411 72Accommodation&foodservices 0 0 11.3 11.3 414 81Otherservices 0 0 6.9 6.9 427 92Government&nonNAICs 0 0 3.1 3.1 2011PennStateExtensionandPennCollegewww.msetc.org60
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Appendix6.MethodologyandDefinitions Methodology Inthisanalysis,weuseaneconomicimpactsoftwareprogramknownasIMPLAN(ImpactAnalysisfor Planning).OriginallydevelopedbytheUSForestService,IMPLANisaninput outputmodelthatiswidely usedtoquantifyhowbusinessesusetechnology,laborandmaterials(i.e.,inputs)toproduceaproduct (i.e.,output).theimplansoftwareanddatabase(www.implan.com)establishesthecharacteristicsof economicactivityintermsofmorethan450sectors.inpractice,theimplanmodelisusedinevery stateandhundredsofcommunitiesacrossthenationtocatalogeconomicactivityandpredicttheeffect ofalternativepoliciesandvariouseconomicchanges. Definitions Multipliers Input outputmodelsaredrivenbyfinalconsumption(orfinaldemand).industriesrespondtomeet demandsdirectlyorindirectly(bysupplyinggoodsandservicestoindustriesrespondingdirectly).each industrythatproducesgoodsandservicesgeneratesdemandforothergoodsandservicesandsoon, roundbyround.thesesocalledrippleeffectsaredescribedbymultipliers.amultiplierexamineshow muchspinoffeconomicactivityisgeneratedbyamarginalchangeinanindustry.forexample, multiplierscandescribehowmanytotaljobsintheeconomyarecreatedwhenanindustryaddsone newjob.ingeneral,input outputmodelersdescribethreetypesofmultipliereffectswhenexamining theroleofanindustryinthecountyeconomy. 1. Thedirecteffectisthecontributionoftheindustryitself.Itmayrepresentthetotalrevenue (output),employment,oremployeecompensation.thevalueofthedirecteffectmultiplierisalways1. 2. Theindirecteffectsareeffectsoftheindustryonitssuppliers.Thismultipliercapturesthe additionalactivityinbusinessesthatprovideinputstotheindustryofinterest. 3. Theinducedeffectscapturetheimpactsofchangesinspendingfromhouseholdsasincome changesduetothedirecteffect.thiseffectcapturestheimpactofspendingbya)employeesofthe industrybeingstudied,andb)employeesoftheinputsupplyingbusinesses.theseeffectsusuallyshow upinretailandserviceindustries.inthestudyhere,thesecondaryeffectsarethesumoftheindirect andinducedeffects. InthisstudyweusetheIMPLANtypeSAMmultipliers.TheTypeSAMmultiplierisobtainedaccordingto thefollowingformula: TypeSAMmultiplier=(directeffect+indirecteffect+inducedeffect) directeffect 2011PennStateExtensionandPennCollegewww.msetc.org61
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009 Input outputanalysisisameansofexaminingtherelationshipswithinaneconomybothbetween businessesandbetweenbusinessesandfinalconsumers.itcapturesallmonetarytransactionsfor consumptioninagiventimeperiod.theresultingmathematicalformulaeallowonetoexaminethe effectsofchangeinoneorseveraleconomicactivitiesonanentireeconomy. Industryoutputisasinglenumberindollarforeachindustry.Thedollarsrepresentthevalueofan industry stotalproduction.inimplan,theoutputdataarederivedfromanumberofsourcesincluding BureauofCensuseconomiccensusesandtheBureauofLaborStatisticsemploymentprojections. Anotherwaytothinkaboutindustryoutputisasthetotalrevenuegeneratedbyanindustry. Employmentistotalnumberofwageandsalaryemployeesandself employedjobsinaregion.it includesbothfull timeandpart timeworkersandismeasuredintotaljobs.thedatasetsusedtoderive employmenttotalsintheimplanmodelarethees 202data,CountyBusinessPatterns,andthe RegionalEconomicInformationSystem(REIS)data. Whileoutputcapturesthetotaldollarvalueofeconomicactivity,itsuseasameasureofeconomic activitycanbeovercountedinthatitcapturesthevalueofallintermediatestagesoftheproduction processaswell.forexample,thepriceonepaysforacaratthelocalautodealershipinlargepart representseconomicactivitythatoccurredintheproductionprocess.ifoneweretoconsidertheprice onepaidforacarasthecontributiontothelocaleconomy,thenonewouldlikelybeoverstatingits impact.thisiscalleddoublecounting.toavoiddoublecounting,economistsusuallyexamineeconomic contributionsintermsofvalueadded.atthelocallevel,valueaddedisequivalenttotheconceptof GrossDomesticProductinthatitexaminestheuniquecontributionofanindustrytotheoverall economy.ininput outputanalysis,valueaddedconsistsoffourcomponents. 1. Employeecompensationiswageandsalarypaymentsaswellasbenefitsincludinghealthand lifeinsurance,retirementpayment,andanyothernon cashcompensation.itincludesallincometo workerspaidbyemployers. 2. Proprietaryincomeconsistsofpaymentsreceivedbyself employedindividualsasincome.this isincomerecordedonfederaltaxform1040c.thisincludesincomereceivedbyprivatebusiness owners,doctors,lawyers,andsoforth.anyincomeapersonreceivesforpaymentofself employed workiscountedhere.note:laborincomeisthesumofemployeecompensationandproprietary income. 3. Otherpropertytypeincomeconsistsofpaymentsforinterest,rent,royalties,dividends,and profits.thisincludespaymentstoindividualsintheformofrentsreceivedonproperty,royaltiesfrom contracts,anddividendspaidbycorporations.thisalsoincludescorporateprofitsearnedby corporations. 4. Indirectbusinesstaxesconsistprimarilyofexciseandsalestaxespaidbyindividualsto businesses.thesetaxesoccurduringthenormaloperationofthesebusinessesbutdonotincludetaxes onincomeorprofit. 2011PennStateExtensionandPennCollegewww.msetc.org62