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The Economic Effects of Hydrofracturing on Local Economies: A Comparison of New York and Pennsylvania

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The Economic Effects of Hydrofracturing on Local Economies: A Comparison of New York and Pennsylvania

By Diana Furchtgott-Roth May 5, 2013

Executive Summary

In 2013, New York's state government will decide whether to permit extraction of natural gas by hydraulic fracturing or, instead, turn its current moratorium into a permanent ban on this technology. In weighing their choice, New York officials have an abundance of useful data from neighboring Pennsylvania. There, nearly 5,000 wells have been hydrofractured since 2002. If New York lifts its moratorium, companies will be drilling the same type of wells to exploit the same subterranean source of gas—the Marcellus Shale. Pennsylvania's experience is a good guide to what would happen in New York.

In this paper, we analyze the effect of hydrofracturing—at modest, moderate, and high levels—on jobs and income growth in Pennsylvania counties. We then use these data to project the benefits that New York counties stand to gain if the state again permits hydrofracturing.

We find that:

  • Pennsylvania counties with hydrofractured gas wells have performed better across economic indicators than those that have no wells.
  • The more wells a county contains, the better it performed.
  • Between 2007 and 2011, per-capita income rose by 19 percent in Pennsylvania counties with more than 200 wells, by 14 percent in counties with between 20 and 200 wells, and by 12 percent in counties with fewer than 20 wells.
  • In counties without any hydrofractured wells, income went up by only 8 percent.
  • Counties with the lowest per-capita incomes experienced the most rapid growth.
  • Counties with more than 200 wells added jobs at a 7 percent annual rate over the same time period.
  • Where there was no drilling, or only a few wells, the number of county jobs shrank by 3 percent.
  • Using the Pennsylvania data to project hydrofracking's effect on New York counties, we find that the income of residents in the 28 New York counties above the Marcellus Shale has the potential to expand by 15 percent or more over the next four years—if the state's moratorium is lifted.
  • Our data also suggest that had New York allowed its counties to fully exploit the Marcellus Shale, those counties would have seen income-growth rates of up to 15 percent for a given four-year period, or as much as 6 percent more than they are experiencing.

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