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Study Confirms Marcellus Shale Development Will Have $14.17 Billion Impact In 2010
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Marcellus Shale development will pump $14.17 billion into the state’s economy in 2010 and create more than 98,000 jobs, while generating $800 million in state and local tax revenues, according to an economic study completed by the Pennsylvania State University for the Marcellus Shale Committee and the House Natural Gas Caucus.
The industry study notes a consistent increase in annual drilling and projects a $25 billion contribution to the Commonwealth’s economy in the year 2020. This level of activity would generate almost $1.4 billion in state and local tax revenue and create more than 176,000 new jobs. Small Price Changes, Big Impact The study confirms the "main factor affecting (Marcellus Shale) development is the market price for natural gas." (page 7)In fact, the study says that for every one percent change in price, drilling increases 2.7 percent.(page 33) The study, however, contends drilling activity would be curtailed by about 30 percent if the proposed severance tax on natural gas production were enacted in the state.(page 31)The result would be to generate $1.4 billion less state and local total tax revenue between now and 2020 than if the industry is allowed to grow without the new proposed tax. The study, however, does not take into account projected changes is natural gas prices over the study period and its impact on drilling activity and state and local tax revenues. Even a small change in natural gas prices, less than 41 cents per million BTUs over the 11 years of the study, would offset the impact of the proposed severance tax, according to information in the study. The price of natural gas on July 22 was $3.37 per million BTUs, according to the Energy Information Administration. The study notes the average price of natural gas has been $7 per million BTUs since 2000.(page 7) PA Only State Without A Severance Tax Pennsylvania is the only state with major natural gas reserves without a severance tax on natural gas production. A recent poll found 87 percent of those surveyed support a severance tax if revenues were used to fund environmental programs. Gas Drillers Do Not Pay Corporate Income Tax The industry study also confirms companies drilling Marcellus Shale natural gas reserves do not pay Pennsylvania's 9.99 percent Corporate Net Income Tax like other large businesses in the state because they are organized as limited partnerships which pay taxes at the Personal Income Tax rate of 3.07 percent like any individual.(page 30) PA Produces Cheaper Gas “The study’s main finding – that a severance tax will drive up the cost of the gas, causing Pennsylvania drillers to lose customers to cheaper gas providers – has one very basic flaw,” said Jan Jarrett, president and CEO of PennFuture. “There is no cheaper gas anywhere, with or without a severance tax. Pennsylvania’s natural gas deposits have a huge competitive advantage, with higher Btu ratings than supplies elsewhere, and reduced delivery costs, since the gas is close to lucrative northeast markets. And I don’t care how much they dress it up with a study, this fact cannot be denied. “And there is no case to be made that the severance tax will harm the growth of this industry,” continued Jarrett. “If this tax is onerous, we would expect that Pennsylvania would be the drilling capital of the nation. But it isn’t. Pennsylvania is 15th out of 32 gas-producing states, nearly all of whom have a severance tax. The gas is here, and the industry will drill where the gas is. “No one doubts that drilling in the Marcellus Shale formation presents a tremendous opportunity for growing Pennsylvania’s economy,” said Jarrett. “But without a severance tax, Pennsylvania taxpayers will get very little benefit, while they risk being stuck with the bill to fix the environmental damage the drilling causes. Instead, the only folks who stand to make really big money out of Pennsylvania’s natural gas assets will be the multinational corporations who are blocking the tax. Other Study Findings Using conservative assumptions for production, commodity prices and related factors, the study found the industry making the following current and future economic contributions to Pennsylvania: -- Natural gas production had a $2.3 billion direct impact on Pennsylvania’s economy in 2008, adding more than 29,000 new jobs and $240 million in state and local tax revenue. More than thirty-percent of all tax revenues remain at the level local. -- The industry will contribute a cumulative economic impact to the state of $265 billion by 2020, along with nearly $15 billion in state and local revenue. The study includes direct, indirect and induced jobs, and economic activity from Marcellus Shale development in Pennsylvania. -- Pennsylvania currently imports approximately 75 percent of its natural gas consumption. If Marcellus activity continues as expected, Pennsylvania could reverse its position as a natural gas importer to a net natural gas exporter by 2014. The leading researchers on the study are Dr. Timothy Considine, School of Energy Resources Professor of Energy Economics with the Department of Economics and Finance at the University of Wyoming; Dr. Robert Watson, Emeritus Associate Professor of Petroleum and Natural Gas Engineering and of Environmental Systems Engineering at the Pennsylvania State University, and Chairman of the Technical Advisory Board for the Bureau of Oil and Gas Management of the Pennsylvania Department of Environmental Protection. The study estimates that the Marcellus Shale may contain 2,445 trillion cubic feet of natural gas reserves in place with recoverable reserves amounting to 489 trillion cubic feet – or enough natural gas to last the entire United States for more than 20 years. Taking into account the other vast reserves of domestic natural gas, the Marcellus Shale will more than likely support Pennsylvania’s economy for 100 years or longer. According to the Energy Information Association, natural gas usage is expected to increase more than 20 percent through the 2020 in the United States and 40 percent worldwide. The EIA also indicates that 57 percent of all new electric generation will come from natural gas, which is more than all other sources combined. Rapid Growth In Marcellus Shale Jobs, Study Says |
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8/3/2009 |
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