economic impacts of marcellus shale in pennsylvania
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EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
©2011PennStateExtensionandPennCollegewww.msetc.org1
EconomicImpactsofMarcellus
ShaleinPennsylvania:EmploymentandIncomein2009
August2011
www.msetc.org
MarcellusShaleEducation&TrainingCenter(MSETC)isacollaborationofPennsylvaniaCollegeofTechnologyandPennStateExtension
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
©2011PennStateExtensionandPennCollegewww.msetc.org2
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein
2009
TimothyW.Kelsey(PennState),MartinShields(ColoradoState),JamesR.Ladlee(PennState),andMelissaWard(PennState),incooperationwithTracyL.Brundage(PennCollege),JeffreyF.Lorson
(PennCollege),LarryL.Michael(PennCollege),andThomasB.Murphy(PennState)
TheauthorswanttothankreviewersKathrynJ.Brasier(PennState),StevenC.Deller(UniversityofWisconsin),DavidL.Kay(CornellUniversity),ThomasKnapp(PennState),andStephenSmith(Penn
State)fortheirvaluablecommentsandsuggestionstoimprovethereport.Thefindingsandconclusions
inthisstudyaresolelythoseoftheauthors.
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
©2011PennStateExtensionandPennCollegewww.msetc.org3
AbouttheAuthors:
TimothyW.Kelsey,Ph.D.,isProfessorofAgriculturalEconomicsatThePennsylvaniaStateUniversity,andStateProgramLeader,EconomicandCommunityDevelopment,PennStateCooperativeExtension.
MartinShields,Ph.D.,isProfessorofEconomicsatColoradoStateUniversity.
JamesR.LadleeisCountyExtensionDirector,ClintonCounty,PennStateCooperativeExtension,andDirectorofSpecialInitiatives,MarcellusShaleEducation&TrainingCenter.
MelissaWardisagraduatestudentintheDepartmentofAgriculturalEconomicsandRuralSociology,
ThePennsylvaniaStateUniversity.
MarcellusShaleEducation&TrainingCenter(MSETC)isacollaborationof
PennsylvaniaCollegeofTechnologyandPennStateExtension
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
©2011PennStateExtensionandPennCollegewww.msetc.org4
EconomicImpactsofMarcellusShaleinPennsylvania:
EmploymentandIncomein2009
Abstract
ThisstudyexamineshowseveralkeyunexploredaspectsofMarcellusShalenaturalgasdevelopmentin
PennsylvaniawillaffecttheoveralleconomicimpactoccurringintheCommonwealth.Whereleasingandroyaltydollarsareactuallygoing,andhowtheyarebeingspent,hasnotbeenexaminedinpreviouseconomicstudies.Theeconomicimpactwillbeverydifferentdependinguponhowmanydollarsgoto
Pennsylvaniahouseholds,tothestategovernment,andtonon‐residents.Inaddition,howmanyofthosedollarsareimmediatelyspentbyrecipients,andhowmanydollarsaresaved,similarlywillaffecttheeconomicimpacts,aswilltheproportionofwagesbeingpaidtonon‐Pennsylvaniaworkers.
Thestudyincludessurveysoflandowners,localbusinesses,andlocalgovernmentofficials,andaGISanalysisoflandownershippatternsrelatedtoPennsylvaniaresidents,non‐residents,andtheCommonwealth.Wecombinedthisinformationwithindustryspendingdatatoestimatethe
distributionofnaturalgascompanyspending,bothspatiallyandtemporally.Thesenumberswerethenenteredintoaninput‐outputmodelofthePennsylvaniaeconomygeneratedwiththeeconomicimpacttoolIMPLANsowecouldestimatethemultipliereffects.
Accordingtoouranalysis,approximately51percentofthelandinMarcelluscountiesisownedby
residentswithinthecounty,25percentisownedbysomeonelivingelsewhereinPennsylvania,and7.7percentisownedbypeoplelivingoutsideofPennsylvania.Theremaining17percentisownedbythe
publicsector,primarilytheCommonwealth.Thesurveyof1,000landownerswithinathousandfeetofactiveMarcelluswellsinBradfordandTiogacounties(501replies,foraresponserateof50.1percent)suggeststhatlandownerssaveorinvestabout55percentofthetotalleasingdollarsintheyearthey
receivesuchpayments,ratherthanspendingthemimmediately.Theyalsosaveorinvestabout66percentofalltheroyaltydollarstheyreceive.ThismeansasignificantportionofleasingandroyaltydollarsarenotspentinPennsylvaniaintheyearthosedollarsarereceived,reducingtheirpotential
economicimpactintheyearthecompaniespaymineralrightownersforleasesandroyalties.
Weestimatedtheeconomicimpactofthesedollarsundertwoalternativescenariosofout‐of‐stateownership(7.7percentand15.4percent),butsuspectthatbothmayunderestimatetheamountofleasingandroyaltydollarsimmediatelyleavingPennsylvaniabecausemineralrightownershippatterns
donotcorresponddirectlywithlandownershippatterns.Manyoftheserightswereseveredgenerationsagoandhavesubsequentlybeenpasseddownthroughfamilies,splinteringintomultipleownershipacrosschildrenandgrandchildren,manyofwhomlikelynolongerliveinPennsylvania.
Wesurveyed1,000randomlyselectedbusinessesinbothBradfordandWashingtoncounties(foratotalof2,000businesses)toidentifytheimpactstheyareexperiencingfromMarcellusShaledevelopment(619replies,foraresponserateof31percent).Questionswereaskedaboutpossiblenegativeand
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
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positiveimpacts.Thesurveyresponsesindicatedpositiveeconomicimpactsareoccurringbroadlyacrosstheeconomyinthecommunitieswheredrillingisveryactivelyoccurring.Aboutone‐thirdofall
thebusinessesinBradfordCounty,forexample,reportedthattheirsaleshadincreasedduetonaturalgasdevelopment,andonly3percentreportedsaleshaddeclined.Businessesacrosstheeconomyreportedpositiveeffects,thoughhotels,construction,transportation,eatinganddrinkingplaces,
wholesaletrade,andfinancialservicebusinessesweremostlikelytoreporthighersales.
Wealsosurveyedall494municipalgovernmentsinthe12PennsylvaniacountieswiththemostMarcellusShaleactivity(293replies,foraresponserateof59percent).Onehundredthirty‐oneofthe
governmentssaidthatMarcellusdevelopmentactivitywasoccurringintheirjurisdiction.Therewaslittlepatterntotheiranswersinrelationtotheamountofdrillingactivityoccurringwithintheirjurisdiction.Only18percentofthegovernmentsexperiencingMarcellusdevelopmentactivitysaidtheir
taxrevenueshadincreased,whichindicatesthatmostlocalgovernmentsbeingaffectedarenotseeingmoretaxrevenueasaresult.Incomparison,26percentofthelocalgovernmentsindicatedthattheircostshadincreased,particularlyrelatedtoroadexpenses.Thisconfirmsthatconsideringboth
revenuesandcostsiscriticalforhavingacompleteunderstandingoftheimpactsofMarcellusShale.Thesefindingsfromlocalofficialscontrastwithprioreconomicstudieswhichpredictedthattherewouldbelargelocaltaximpacts,butwhichdidnotverifywhatisactuallyoccurring.
Weusedtheeconomicinput‐outputmodelIMPLANtolookattheeconomy‐wideimpacts,modifyingthe
informationwithresultsfromtheGISanalysisandsurveys.WeuseddetailedpublishednaturalgascompanyspendinginformationinPennsylvaniafrom2008,scalingitupto2009usingotherpublisheddataabouthowspendingchangedbetweenthetwoyears.Wemodifiedpayrollspending,usingdata
fromarecentMarcellusworkforcestudywhichindicatedthatabout37percentoftheMarcellusworkforcearenon‐Pennsylvaniaresidents.Weestimatedtwoalternativescenariosaboutthepayroll
goingtonon‐Pennsylvanians,recognizingthatworkersfromoutofstatesendsomeoftheirincomebacktotheirhomestatecommunity;thisincludedassumingthatnon‐Pennsylvaniaworkersspend50percentoftheirMarcellus‐earningsinsidePennsylvania,andalternatively,thattheyspend75percentof
theirearningshere.Wealsoaccountedforhowtheirspendinglikelydiffersfromtypicalresidentworkers.
OurfindingssuggestthattheeconomicimpactofMarcellusShaleinPennsylvaniaduring2009rangedbetween23,385and23,884jobs,and$3.1and$3.2billioninthatyear.Thisincludedabout$1.2billion
inlaborincomeandalmost$1.9billioninvalueaddedtothePennsylvaniaeconomy.Inaddition,therewillbeadditionaleconomicimpactsof2009MarcellusShaleactivityinfutureyearsasmineralrightownersspendtheleasingandroyaltyincometheyreceivedin2009butsavedforlateruse.Theseare
largeeconomicimpacts,especiallysincemuchofthisimpactisoccurringinrelativelysmallcounties.WedidnotestimatetaximpactsofMarcellusShaleactivitybecausewewerenotcomfortablewiththereliabilityofIMPLAN’staxanalysis.
TheseresultsareabouthalfthesizeofthoseestimatedinpreviouseconomicimpactstudiesofMarcellus,butthisisnotsurprisingbecausewehadmoredetailedinformationaboutleasingandroyaltyincome.OurfindingsareconsistentwithseveralotherrecentemploymentstudiesofMarcellusShale
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
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whichfocusedonindustryspending.OurresultsconfirmthatwhereleasingandroyaltydollarsaregoinghasasignificanteffectontheestimatedoveralleconomicimpactsofMarcellusShale
development.BecauseonlyabouthalfofthelandinatypicalMarcelluscountyisownedbyresidentsofthatcounty,itwouldsuggestthatalargeportionoftheeconomicbenefitsimmediatelyleavesthecommunitiesbeingimpactedbydrilling.
WedidnottrytoquantifymanyimportantbutevenmoredifficulttomeasurecostsofMarcellusShaledevelopment,suchaseffectsontheenvironmentandhealth.Wehopethatfutureeconomicstudiescanconsidersuchcostsasbetterinformationbecomesavailableabouttheincidenceandextentofsuch
impacts.Inaddition,wedidnotaddressthedistributionofbenefitsandcosts,eventhoughtheequityofhowthesearedistributedunderliesmuchofthecurrentpolicydebateaboutMarcellusShale.ThelongrunimplicationsofMarcellusShaledevelopmentareasofyetstillunknown.Jobsandincomein
theshortrunareimportant,butmanywouldarguethatotherfactorsareequally(ifnotmore)important,suchascleanwater,healthyforestsandotherecosystems,cleanair,andgoodpublichealth.Inadditiontoaffectingqualityoflife,theseareimportantresourcesforthefutureofPennsylvania
communities,includingfutureeconomicopportunities,socialandphysicalinfrastructure,well‐functioninglocalgovernmentandinstitutions,andcommunitywell‐being.Webelieveourresultsmustbeviewedasapreliminary,short‐runviewoftheeconomicimpactsofMarcellusShaleandbeplacedin
abroadercontextoftheseotherimportantconcerns.
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
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TableofContents
Abstract ........................................................................................................................................................4
I. Introduction........................................................................................................................................10
II. WhatAffectstheEconomicImpactsofMarcellusShale? ..................................................................10
A. Timing,Scale,andPace ..................................................................................................................11
1. TimingandLeasing/RoyaltyIncome...........................................................................................122. TimingandWorkforce ................................................................................................................12
3. OtherTimingIssues ....................................................................................................................13
B. Leakage...........................................................................................................................................13
1. LeakageandLeasing/RoyaltyIncome........................................................................................142.LeakageofEmployeeWagesandSalaries..................................................................................15
3.LeakageofBusinessActivity.......................................................................................................15
III.StudyMethods...................................................................................................................................16
A.CompanySpending............................................................................................................................16
1.GeneralSpending........................................................................................................................162.Workforce ...................................................................................................................................17
B.LeasingandRoyalties........................................................................................................................18
1.GISAnalysisofOwnership...........................................................................................................182.SurveyofLandowners.................................................................................................................21
i.WheretheOwnersLive ...........................................................................................................21
ii.DollarsReceivedforLeasing....................................................................................................21iii.UseofLeasingandRoyaltyDollars .........................................................................................22
3.AllocationofLeasingandRoyaltyDollarsintheStudy ...............................................................23
C.LocalBusinessEffects .......................................................................................................................24
1.BusinessImpacts .........................................................................................................................252.ChangesbyBusinessType...........................................................................................................25
D.LocalGovernmentEffects................................................................................................................26
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IV.EconomicImpactResults.......................................................................................................................30
A.CompanySpendingandPayroll..........................................................................................................31B.LeasingandRoyalties ........................................................................................................................32
1.PennsylvaniaGovernment ..........................................................................................................322.PennsylvaniaHouseholds............................................................................................................33
C.OverallEconomicImpact ...................................................................................................................34
1.TotalImpact ................................................................................................................................342.Multiplier ....................................................................................................................................353.EconomicImpactonaPerWellBasis .........................................................................................35
V.Discussion/Implications..........................................................................................................................36
A.LimitationsofOurStudy....................................................................................................................38B.WhatNoOneKnows(ButShouldbeKnown)....................................................................................39
1.Costs............................................................................................................................................39
2.WhoIsBenefitingandWhoIsBearingtheCosts ........................................................................403.Long‐RunImplications.................................................................................................................404.WhatIsActuallyOccurring..........................................................................................................41
VI.Conclusions............................................................................................................................................42
VII.References............................................................................................................................................44
VIII.Appendices ..........................................................................................................................................46
Appendix1.MarcellusNaturalGasIndustrySpendingResults .............................................................46Appendix2.MarcellusNaturalGasIndustryPayrollImpacts:Scenario1 .............................................49
Appendix3.MarcellusNaturalGasIndustryPayrollImpacts:Scenario2 .............................................52Appendix4.RoyaltyPaymentstoPrivateMineralRightOwners..........................................................55Appendix5.PaymentstoPrivateMineralRightOwners.......................................................................58
Appendix6.MethodologyandDefinitions ............................................................................................61
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TableofTables
Table1.NaturalGasCompanySpendinginPennsylvania,2009................................................................17Table2.PercentofAcresinMarcellusCounties,byOwnershipType .......................................................20Table3.MineralRightOwners’UseofLeasingDollars ..............................................................................22
Table4.ChangesinBusinessActivity .........................................................................................................25Table5.ChangesinBusinessActivitybyBusinessType .............................................................................26Table6.MunicipalRevenuesandLevelofDrillingActivity ........................................................................28
Table7.MunicipalServicesandLevelofDrillingActivity...........................................................................29Table8.MunicipalExpendituresandLevelofDrillingActivity...................................................................30Table9.EconomicImpactofNaturalGasCompanyNon‐PayrollSpending,2009.....................................31
Table10.EconomicImpactofNaturalGasCompanyPayroll,2009...........................................................31Table11.EconomicImpactofLeaseandRoyaltyPaymentstoStateGovernment,2009 .........................32Table12.EconomicImpactofLeaseandRoyaltyPaymentstoPennsylvaniaHouseholds,2009 ..............33
Table13.SummaryofEconomicImpactsandTotalEconomicImpact,2009 ............................................34Table14.TotalEconomicImpactbyWell,2009.........................................................................................35
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
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I. Introduction
ThepotentialoftheMarcellusShaleregiontobecomeamajornationalsourcefornaturalgashas
generatedsignificantinterestinPennsylvaniaoverthepastseveralyears.CountiesacrosstheMarcellusShaleregionoftheCommonwealthhaveexperiencedsignificanteconomicactivityasnaturalgascompanieshavebeguntoexploreandthenactivelydeveloptheresource.Thepaceofdevelopment
variesacrosstheregion,withsomecounties,suchasBradford,Tioga,Susquehanna,Washington,andGreene,becomingamajorfocusforgasdrillingactivity.Othercounties,suchasLycoming,arebecomingmajorhubsforthecompaniesworkingonMarcellus,whileothershaveseensignificant
pipelineconstructionrequiredtogetthegastomarket.DrillingactivityisexpandingintheCommonwealth,growingfrom27wellsin2007,to1,445wellsin2010(DEP).
TravelthroughthesecountiesandanecdotesfromresidentsandothersindicatethatthedevelopmentofMarcellusShaleisbringingmajorchange,includingmanynewdollarstomineralrightownerstolease
theirresourcefordevelopmentandsubsequentroyaltydollarstothemoncewellsbecomeactive.Additionally,manycommunitiesareseeingnewsalesandexpandedactivityforexistingbusinessesworkingwiththegascompaniesorprovidingservicestotheirworkers,newjobswithinthecommunity
forbothresidentsandnon‐residents,andmuchmorelocalspending.Inadditiontotheseincomeandjobeffects,therearenon‐monetaryeffects,suchassignificantincreasesintruckandothertraffic,roaddamage,andnewroads,wellpads,andpipelinescuttingthroughforestandfarmland,withpotential
health,environment,social,andotherimpacts.
PublicdebateoverMarcellusShaledevelopmentseemsincreasinglypolarizedbetweenthosewhobelieveitisgoodforPennsylvaniaandotherswhobelievethatitisnot.Becausedevelopmentisstillin
itsearlystages,muchisnotknownabouttheshort‐orlong‐runeffects,soitiscriticalthatwhatisoccurringbestudiedtohelppolicymakers,communities,andcitizensunderstanditsfullimplications.Thisstudyusesthewell‐knownandwidely‐usedeconomicimpactmodelIMPLANandresultsfrom
surveysoflandowners,localbusinesses,andmunicipalgovernments,pairedwithGISanalysisoflandownershippatterns,tobetterunderstandthecurrentjobandincomeimpactsofMarcellusShaledevelopment.Economicanalysisisusefultohelpunderstandwhatinfluencestheimpactofchange,and
inmanywaysthisismoreimportantthantheactualjobandincomeestimatesthateconomicmodelingcreates.ThisstudyexploreshowseveralkeyandunexploredaspectsofnaturalgasdevelopmentinPennsylvaniawillaffecttheoveralleconomicimpacts.
II. WhatAffectstheEconomicImpactsofMarcellusShale?
DevelopmentoftheMarcellusShaleregionwillaffectPennsylvania’seconomythroughseveralprimarymeans,including(1)leasingandroyaltyincomepaidtomineralrightowners;(2)purchasingofservices
andequipment,andemploymentbythecompaniesdirectlyinvolvedinthedevelopmentofthegasplay(e.g.thosebusinessesthatfind,extract,andprocessthegas);(3)employmentandpurchasesby
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companiesthatmaymovetoPennsylvaniabecauseofthesupplyofnaturalgas(e.g.thosebusinessesthatwanttousethegas);and(4)effectsofgasdevelopmentonbusinesses,communities,and
residentsthataffecttheircompetitivenessandqualityoflife,suchaslossofqualifiedemployeestogasindustryjobs,increasesinlocalgovernmentcosts,changesinenvironmentalorwaterquality,healtheffects,andotherimpactsofproduction.
Currentlyavailableinformationonlyallowseconomiststoexaminetheeconomicimpactsofleasingandroyaltyincomeandofgascompanyspending,somostpreviouseconomicstudiesofMarcellusShale(asdoesthisstudy)havefocusedonjustthesetwodriversofeconomicchange.Thelatterimpactsmight
belargeinthelongrun,whichiswhymanylocalandregionaleconomicdevelopmentgroupsarebeginningtofocusonencouraginggrowthofbusinessesthatusenaturalgas,andmanyenvironmentalagenciesandorganizationsarefocusingonbetterunderstandingtheenvironmentalimplicationsofgas
development.Eventhoughthelatterimpactshavenotbeenmodeled,theyareimportanttokeepinmindandshouldbethesubjectofadditionaleconomicstudies.
SeveralkeyelementswillaffecttheeconomicimpactofMarcellus,suchasthetimingofdevelopment,includingitsscaleandpace.Theseelementsareimportantforthefullrangeofimpacts,andstrongly
influencethesubsetofimpactsfocusedoninthisstudy.Inaddition,howmanyofthedollarsremaininthecommunityversusimmediatelyleave(whateconomistcall‘leakage’)alsoplaysacriticalroleininfluencingthemagnitudeoftheeconomicimpacts.Eachwillbediscussedinturn.
A. Timing,Scale,andPace
ItiscriticaltorecognizethattheeconomicimpactswillchangethroughoutthedevelopmentoftheMarcellusShaleplay,mostparticularlyrelatedtoleasingandroyaltyincome,andworkforce.In
addition,naturalgasdevelopmentbyitsnaturehasalimitedtimespanbecauseitisanon‐renewableresource.Expertsdon’tagreeonhowmanyyearsMarcellusShaledrillingwilloccurinPennsylvania,butmanyestimatesare20yearsormore.OthershalesunderPennsylvaniahavethepotentialofextending
naturalgasdrillingactivity,sonaturalgasdevelopmentcouldbealongerprocess,butatsomepointthegaswillbegoneorotherwisewillnolongerbecommerciallyviable.Manyfactorswillinfluencepaceandscale,includingthehealthoftheeconomyasawhole,theproductivityofshalewells,technological
changeandinnovation,foreignpolicy,domesticenergypolicy,andtherelativepricesofdifferentfuels.
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1. TimingandLeasing/RoyaltyIncome
Intheearlyyearsofagasplay,alargeshareofspendingbygascompaniesisforleasepaymentsto
mineralrightownerstoacquiretherighttoexploreanddevelopwells.Leasingdollarsaremostlyupfront,earlyinthedevelopmentoftheplayascompaniescompetetogaincontroloftheresource.Aswellsaredrilledandcomeon‐line,themineralrightownersreceiveroyaltypaymentsinsofarastheir
wellsareproductive.Pennsylvanialawspecifiesthatmineralrightownersmustreceiveatleastoneeighthofthevalueofproduction,butsomeownershavenegotiatedforhigherroyaltyvalues.Themajorityoftheseroyaltydollarsgotomineralrightownersinthefirstfewyearsofawell’sactivelife,
becauseproductionfromindividualMarcelluswellsdropsveryquicklybeforelevelingofftoaslowbutsteadydecline.ThismeansthatthemajorityofalltheroyaltydollarswillbepaidtomineralrightownersduringtheactivedrillingphaseoftheMarcellusShaleplayandwilldeclinequicklyoncedrilling
ends.
ThetimingoftheuseofthoseleasingandroyaltydollarsbymineralrightownershasimportantimplicationsfortheeconomicimpactsfromMarcellusShaledevelopment.PriorstudiesoftheeconomicimpactsofMarcellusShaleinPennsylvaniahaveassumedthatsuchownersspendleasingand
royaltydollarsonthesamegoodsandservices,andinthesameproportion,astheyspendtheircurrentincome.Thisisaparticularlystronganduntestedassumptionbecauseitimpliesthatmostofthosedollarsimmediatelybegincirculatingthroughtheeconomy.Bycomparison,anecdotesfromindividuals
receivingthosedollarsandfromlocalbankerssuggestthatmineralrightownersarespendingmoremoneyondifferentkindsofgoodsandsavingmuchofthemoneythey’rereceivingforlateryears.Thisisgoodfromalong‐runeconomicdevelopmentperspective,sinceitmeansthattheeconomicimpacts
ofMarcellusShaledevelopmentwillbespreadoveralongertimewithinacommunity,ratherthanoccurringonlyinthoseyearswhereleasingandroyaltydollarsarereceived,potentiallysmoothingthe
boom/bustcycle.Italsomaymeanthereismorecapitalwithinthecommunity,spurringmorelocalinvestment,withlong‐runbenefits.Butsuchsavingsresultinalowercurrenteconomicimpact,soitisimportanttoaccountforthemasaccuratelyaspossibleineconomicimpactstudies.
2. TimingandWorkforce
Laborrequirementsaresignificantlydifferentduringthedrillingphaseofgasdevelopmentthaninthesubsequentproductionphase,whichoccursonceallwellshavebeendrilled.Brundageetal(2010),forexample,foundthateachwetgaswellinsouthwestPennsylvaniarequirestheequivalentof13.1full
timejobs,spreadacrossalmost150occupationsand420individuals,duringtheyearwhendrillingandwellcompletionoccuronthewellsite,butonly0.18fulltimejobequivalentsduringeachofthatwell’ssubsequentproducingyears.Laborrequirements(andthereforemostoftheemployment‐based
economicdevelopment)arehighestduringtheactivedrillingyearsandlargelyaredrivenbythenumberofwellsdrilledperyear.Thispaceofdrillinghasimportantconsequencesforotherimpactsofgasdevelopment,includingtheneedforworkerhousing,thenumberoftrucksontheroad,other
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infrastructurerequirements,thequantityofwaterusedandneedingtobedisposedof,andotherenvironmentaleffects.
3. OtherTimingIssues
TheeconomicimpactofMarcellusShaledevelopmentwithinanindividualcommunitywilldependuponthescaleandpaceofactivitywithinthatcommunity,notnecessarilythedurationofdrillingactivitystatewide.Eventhoughsomeestimatethatitmaytake20ormoreyearstodrillalltheplanned
MarcellusShalewells,thedrillingphaseinanyonecommunitylikelywillbeshorter,asthecrewscompleteworkinoneareabeforemovingontoanother.Whethertheworkerslivewithinthecommunitieswherethedrillingisoccurringsimilarlyisimportant,becausetheresidenceoftheworkers
determineswhichmunicipalityandschooldistrictreceivetheirearnedincometaxandwheretheworkersandtheirfamilieswilltendtospendmuchoftheirearnings.
Afastpaceofdevelopment,withahighnumberofwellsdrilledinasingleyear,meansthedrilling
activitywithinacommunitywillbeconcludedmorequicklythanifthedrillingactivityoccursoveralongertimeframe.Becausethelaborrequirementsperwellarerelativelyconstant,afasterpacemeansmoreworkersareneededperyear,withmoretrucktraffic,higherhousingandotherlocalinfrastructure
needs,andgreaterdifficultyforthecommunitytoeasilyaccommodatethescaleofactivity.Aslowerpaceofdevelopmentthusgenerallywillbelessdisruptiveandwillextendthebenefitsoveralongerperiodoftime,thoughitmayaffectcompanycostsandthereforelandownerreturns.
B. Leakage
Whenconsideringtheeconomicimpactsofanactivity,suchasdevelopmentofMarcellusShale,itisimportanttotrackwherethedollarsareactuallygoing.Moneyimmediatelyleavingthecommunity,
suchaspurchasesfrombusinessesoutsideoftheregion,haslesslocalimpactthanmoneyspentatlocalbusinesses.ThespatialdistributionofthenewdollarsfromMarcellusShaleactivitythuscanbeasimportantasthetotalnumberofdollarsinvolved.Leakageisparticularlyanissuewithleasingand
royaltydollars,andwithworkerpayroll.
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1. LeakageandLeasing/RoyaltyIncome
Whoactuallyreceivesleasingandroyaltydollars,andhowthosedollarsarespent,hasanimportant
influenceontheeconomicimpactsofgasdevelopment.Notallmineralrightownerslivewithinthecommunitywheretheyowntherights,sotheleasingandroyaltydollarstheyreceiveimmediatelyleavethecommunity.Althoughthisisverysignificantforcounty‐leveleconomicimpactanalysis,froma
statewideeconomicimpactperspective(whichistheframeworkforthisstudy),itdoesnotmatterwhetherthemineralrightownerlivesinthecountywheretheyowntheirparcel,providedtheyliveelsewhereintheCommonwealth,sincemostofthosedollarswillcirculatesomewhereinthe
Pennsylvaniaeconomy.LeasingandroyaltypaymentstoownerswholiveoutsideofPennsylvania,incontrast,havelittlelocalorstateimpactsincethosedollarsimmediatelyleavetheCommonwealth.
Howthedollarsarespentalsohasimportantimplicationsfortheeconomicimpacts.Giventherelativelylargesizeofsomeofthechecksmineralrightownersarereceiving,itisexpectedthatmany
householdswilltreatlump‐sumpaymentsdifferentlythanregularincome.AnecdotesfromareaswithsubstantialMarcellusactivitysuggestthatmanylandownersarespendingmoreonconsumerdurables,orsavingorinvestingthedollars.Forexample,newtractors,vehicles,andfourwheelersarebeing
purchased,manyhousesandbarnsarebeingrepaired,andmineralrightownersareotherwiseusingthedollarsinspecialways.
TheCommonwealthofPennsylvaniaitselfownsasignificantshareofthemineralrightsbeingleased,
suchasonstateforestandstategameland.LeasingandroyaltydollarsfortheselandsgototheCommonwealth,immediatelyleavingthecommunitieswheredrillingisoccurring.Theeconomicimpactofthesedollarsisdifferentthantheimpactofpaymentsgoingtoprivateindividualsbecausethestate
spendsthosedollarsverydifferentlythandoindividualhouseholds.Somelocalgovernmentsandschooldistrictslikewisehaveleasedtheirmineralrights,andtheiruseofthosedollarssimilarlydiffersfromhouseholdspending.
PrioreconomicimpactstudiesofMarcellusShaleinPennsylvaniahavenotaddressedthedistributionofleasingandroyaltyincome,norhowthosedollarsarespent,butinsteadhaveassumedthatallthedollarsaccruetoPennsylvaniahouseholdsandarespentlikenormalincome.Thishasthepotentialof
significantlyaffectingoverallresults,since69percentoftotalindustryspendingin2008wasleasingandroyaltypayments(Considine,etal.2009)andabout38percentoftotalspendingin2009(Considineetal.2010),andthusthesedollarsareaverylargedriveroftheoveralleconomicimpact.
Severalstudiesofgasdevelopmentinotherstateshaveattemptedtoconsidertheinfluenceofsavings.
InastudyoftheHaynesvilleShaleinLouisiana,Scott(2009)assumedonly5percentofleasingandroyaltypaymentswerespentintheyearreceived.IntheirstudyofWestVirginia,theNationalEnergyTechnologyLab(2010)insteadestimatedhowmuchwassavedbyassumingthatpeoplesavedleasing
androyaltydollarsinthesameproportionastheydoregularincome.Nostudiestodatehavebasedtheirestimatesontheobservedoractualbehaviorofleaseandroyaltyrecipients,animportantlimitationwhichthisstudybeginstoremedy.
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2.LeakageofEmployeeWagesandSalaries
Lossofeconomicimpactalsooccurstotheextentthatworkersreceivingwages,salaries,andother
compensationspendtheirincomesoutsideofthecommunity–aneventualitythatismuchmorelikelyiftheyliveelsewhere.Wagestotransientworkerstypicallydohavesomelocaleconomicimpact,sincesuchworkersspendpartoftheirincomeintheareawheretheyaretemporarilyliving(suchasrent,
hotelorcampgroundfees,food,entertainment,andotherbasiclivingexpenses).Butsincetheirpermanentresidenceiselsewhere,alargershareoftheirearningsimmediatelyleavethecommunitythandowagesgoingtolocalworkers.
Theproportionofnaturalgasworkerswhoarefromoutofstatehasbeenasourceofcontroversyand
sensitivityinsomeregionsofPennsylvania,inpartbecauselittleconcreteinformationhasbeenavailableabouttheresidenceofsuchworkers.Thereislittledoubtthatmanyworkersinhighlyspecializedfields,suchasdirectionaldrillers,perforators,andwellcompletionsupervisors,currentlyare
fromoutsidetheCommonwealth.RelativelyfewPennsylvanianshavetheskillsortrainingtoimmediatelyfillsuchpositions,anduntillocaltrainingprogramsrampupandPennsylvaniansgeton‐the‐jobexperiencetodothesejobssafely,suchjobslikelywillremainlargelyheldbynon‐residents.At
thesametime,however,thereisalsolittledoubtthatasubstantialnumberofthenewjobsinthegasindustryaregoingtoPennsylvanians.ManyofthejobsareinoccupationsalreadyexistingwithinPennsylvania,suchasconstruction,commercialdrivers,anddieselmechanics,soPennsylvanianshave
theskillsandexperienceforthesenewjobopenings.
Identifyingtheportionofgas‐relatedworkerswhoarePennsylvaniaresidentsisimportantfromaneconomicimpactperspective,sinceitaffectshowmanywageandsalarydollarsremainwithinthe
Commonwealth.Aswithleasingandroyaltydollars,fromastatewideeconomicimpactperspectiveitdoesn’tmatterwhetherworkers’permanentresidenceisinthecountywheretheyworkoriftheirpermanentresidenceiselsewhereinPennsylvania,sincethosedollarswillcirculatesomewherein
Pennsylvania.Workersretaininganout‐of‐statepermanentresidencetypicallywillspendtheirincomedifferently,withalargershareimmediatelyleavingtheCommonwealth.
3.LeakageofBusinessActivity
WhetherthebusinessesprovidingservicestothenaturalgasindustryarelocatedinPennsylvaniaoroutsidetheCommonwealthhassimilareffectsontheeconomicimpactofsuchspending.Moreofthedollarsgoingtolocalbusinessestypicallywillre‐circulatewithinthePennsylvaniaeconomythanwill
dollarsgoingtofirmslocatedoutsideoftheCommonwealth.Locallyownedbusinessesmeantheprofitsaremorelikelytoremaininthecommunity.Locationofthebusinessalsomayaffectthecompositionoftheworkforce,particularlythesharethatarelong‐termresidents.
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III. StudyMethods
Thiseconomicimpactstudyusedseveralmeanstoestimatetheemploymentandincomeimpactsof
MarcellusShaledevelopment.Wereliedupontheeconomicinput‐outputmodelIMPLANasthemaintoolofanalysis,modifyingtheinformationwithresultsfromseveralsurveysthatweconducted.IMPLANisamongthemostcommonlyusedeconomicimpactmodels,andhasbeenfrequentlyusedto
estimatethejobandincomeeffectsofnaturalgasdevelopment(CenterforBusinessandEconomicResearch,2008;Considine,Watson,andBlumsack,2010;Considine,Watson,Entler,andSparks,2009;NationalEnergyTechnologyLab,2010;PennsylvaniaEconomyLeague,2008;ScottandAssociates,
2009).Yetthereareclearcautionstoitsuseandinterpretationfornaturalgasdevelopment(Kay,2011;Kinnaman,2011).
Ourstudyincludedsurveysoflandowners,localbusinesses,andlocalgovernmentofficialstobetterunderstandhowtheyareusingdollarsandtheimpactstheyareseeing.WeusedGeographic
InformationSystem(GIS)datatoanalyzelandownershippatternsrelatedtoPennsylvaniaresidents,non‐residents,andtheCommonwealth.Wecombinedthisinformationwithindustryspendingdatatoestimatethedistributionofnaturalgascompanyspending,bothspatiallyandtemporally.These
numberswerethenenteredintotheinput‐outputmodelIMPLANtoestimatethemultipliereffects.
A.CompanySpending
1.GeneralSpending
Weattemptedtogatherinformationfromthemajorgascompaniesabouttheireconomicactivity,but
noneultimatelyprovidedsuchinformationforuseinthisstudy.Wethusrelieduponpublishedcompanyspendinginformation,ascollectedandreportedbyConsidine,WatsonandBlumsack(2009
and2010).Weadjustedthespendingimpactstoreflect2009activitylevels,usingthe2008proportionsshowninTable1oftheir“EmergingGiant”reportandappliedtothe2009totalspendingfromthe"Update"report.
Considineetal.reportedthattheir2010surveywascompletedbytwelvecompanies,whocollectively
accountedforabout74percentoftotalwellsstartedduring2009.Sincetheirresponsesaccountedforsuchalargepercentageofdrillingactivity,theeffectofnon‐responsebiasislikelytobelow.Theyusedtheseresponsestoestimatetotalindustryspendingthatyear.Toprovideasecondaryverification
source,weusedPennsylvaniaDepartmentofEnvironmentalProtectiondataonthenumberofwellsdrilledin2009toestimatetheperwellcostthattheirdataimpliesandfoundthatitwasapproximately$3.6millionperwell.Thisisconsistentwiththe$3to$4millionperwellcostthatcompanies
independentlyhavereportedinpublicpresentationsandpersonalconversations.
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Table1.NaturalGasCompanySpendinginPennsylvania,2009
LeaseandBonus $1,728,765,000Exploration $243,831,000
Upstream:DrillingandCompletion $1,700,435,000
Midstream:PipelineandProcessing $695,801,000Royalties $54,683,000
Other $111,787,000Source:Considine,WatsonandBlumsack,2010
WeusedIMPLAN’smodeledindustryproductionfunctionofpurchasingrelationshipsbetweenbusiness
sectors,whicharelargelybaseduponthelevelofgasdrillingactivityinPennsylvaniapriortoMarcellus.TheselikelyunderrepresentthenumberandtypeofsupportingbusinessesthathaveeitherexpandedormovedintotheCommonwealthduetoMarcellusactivity.Asaresult,ourestimatesoftheeconomic
impactsofgeneralspendingbythenaturalgascompaniesmayoverestimatetheamountofbusinessspendingleavingPennsylvania.
2. Workforce
Wagesandsalariespaidtonaturalgascompanyandsubcontractoremployeeshaveadditionaleconomic
impactsbecausetheseworkersspendtheirearningsonfood,housing,recreation,andotherhouseholdneeds.Thesizeofthesemultipliereffects,however,dependsuponwherethoseworkerslive,andthuswheretheyspendthosedollars.Thisdistinctioniscriticaltounderstandingthedegreeofeconomic
impactproducedbythedevelopmentoftheregion.Ifnaturalgascompanyemployeesmaintaintheirprimaryresidenceinthecommunitywherethedrillingisoccurring,orelsewhereinPennsylvania,workerswillbespendingasignificantamountoftheirwagesandsalarieswithintheCommonwealth,
resultinginadditionaleconomicimpactasthosedollarscirculatethroughtheeconomy.Iftheworkersarenon‐Pennsylvaniaresidents,someoftheirearningswillimmediatelyleavetheCommonwealthas
theysendwagesback‘home’tofamily.
Forthisstudy,theproportionofresidentandnon‐residentworkerswassetusingdatafromaMarcellusShaleEducation&TrainingCenteronlinesurveyofgascompaniesconductedin2010aspartofaworkforceneedsassessment(Brundageetal,2011).Theresponsesindicatedthat62.7percentofthe
workersarePennsylvaniaresidentsand37.3percentarenon‐residents.ThispercentagelikelyslightlyoverestimatestheactualpercentageofPennsylvaniaworkersin2009,andthusourresultslikelyslightlyoverestimatetheeconomicimpactofpayrollspending.
Totalcompanypayrollspendingin2009wasestimatedbytakingthe$66milliontotalpayrollin2008
reportedbyConsidineetal(2009)andadjustingitupwardsby40percent,basedupontheir2010reportthatcompanies’totalgasexpendituresincreasedbyabout40percentbetween2008and2009.Thistotalpayroll,includingbenefitsandtaxes,wasdividedbetweenPennsylvaniaandnon‐Pennsylvania
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laborusingtheproportionsfromtheonlinesurvey.ThepayrollgoingtoPennsylvaniaworkerswasaddedtoIMPLANasnewtax‐adjustedhouseholdincome.Becausespendingpatternsdifferby
householdincome,weassumedworkerstypicallywereinthemedianfamilyoffourincomecategory(whichisabout$72,000ayear).1
Wegeneratedtwoscenariosaboutpayrollgoingtonon‐Pennsylvanians,inrecognitionthatworkersfromoutofstatesendsomeoftheirincomebacktotheirhomestatecommunity.Weranthemodel
undertheassumptionthatnon‐Pennsylvaniaworkersspend50percentoftheirMarcellus‐earningsinsidePennsylvania,andalternativelythattheyspend75percentoftheirearningshere.Becausenon‐residentworkerslikelyhavedifferentlocalspendingpatternsthantypicalresidentworkers,we
estimatedtheimpactsoftheirspendingusingalowerincomecategoryintheIMPLANmodelmoretypicalofrentinghouseholds.
B.LeasingandRoyalties
Notallleasingandroyaltydollarsareimmediatelyspentinthelocalorstateeconomy,sincesomeofthedollarsgotonon‐Pennsylvaniaresidents(andthusimmediatelyleavethestate),andmineralrightownerstypicallysaveatleastaportionofsuchdollarsforuseinlateryears.Inaddition,howdollarsare
spenthasimportantimplicationsforthateconomicimpact.TheCommonwealthofPennsylvaniaitselfisasignificantmineralrightowner,andthusisreceivingsignificantleasingandroyaltydollars.Itsuseofthesedollarsdiffersfromhouseholds,soithasitsowneconomicimpactwhichmustbeanalyzed
separately
WeusedGISanalysisandasurveyofhouseholdsreceivingleasingandroyaltyincometoestimatehowmanyleasingandroyaltydollarswenttoPennsylvaniahouseholds,howmanywenttothe
Commonwealth,andhowhouseholdsspentthosefunds.Eachofthesewillbeexplainedinturn.
1.GISAnalysisofOwnership
InPennsylvania,asinmostotherstates,surfacelandownersdonotnecessarilyownthemineralrightsundertheirland.Surfaceandmineralrightscanbesevered,andbeowned(andsold)separatelyfrom
eachother.ThisisrelativelycommoninareasofPennsylvaniawhichhistoricallyhaveexperiencedcoalminingandnaturalgasorpetroleumdevelopment.Manyoftheserightswereseveredgenerationsago
1Perthesuggestionofanoutsidereviewer,weconductedsensitivityanalysisonthe“incometype”ofhouseholdthatreceivestheroyaltypayments.Were‐rantheanalysisprovidingidenticalincomeshockstoIMPLANhouseholdincomecohortsimmediatelybelow($35,000‐$50,000)andabove($75,000‐$100,000)themediancohort.Theresultingdifferencesintotalemploymentimpactswereverysmall(lessthan10jobs)comparedtotheresultswhenweusedthemedianincomecategory.
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whenresourcedevelopmentfirstbeganthere.Mineralrightscanbeownedbycompanies(suchascoalcompanies)orbyprivateindividuals.
Wecouldfindnopubliclyavailabledocumentationthattracksownershipofmineralrights,otherthanonadeed‐by‐deedbasis.Wetalkedwithseveralcountytaxassessors,andtheyconfirmedthattheywereunawareofanyresourcethatprovidesclearinformationaboutwhoownsmineralrights.Indeed,
thisiswhynaturalgascompaniesareconductingintensivedeedresearchoneachparceltheywanttolease.ThereisnoeasywaytoidentifywhatpercentageofmineralrightsareownedbytheCommonwealth,bycompanies,andbyprivateindividuals(muchlesswhatpercentageofthese
individualsareresidentsofthecounty,residentselsewhereinPennsylvania,orliveoutsidePennsylvania).
Unlikemineralrights,allcountygovernmentsmaintainactiverecordsofsurfaceownership,compiledsoitispossibletoclearlyandeasilyidentifyownersofparcelsandtoidentifyaggregatepatternsof
ownership.GISdataonlandownershipisavailableineachcountywithintheMarcellusregion,whichallowedustocalculatethepercentageoflandownedbythestateandbytheprivatesector.ForsixoftheprimaryMarcelluscounties(Bradford,Fayette,Greene,Lycoming,Tioga,andWashingtoncounties,
whichcollectivelyaccountedfor68percentofallPennsylvaniaMarcellusShalewellsdrilledfrom2007throughfall2010),availabledatafromtheConservationBiologyInstitute’sUnitedStatesProtectedAreasshapefileallowedustofurthersplitprivateownershippatternsintothepercentageofland
ownedbyresidentsofeachcounty,ownedbyresidentselsewhereinPennsylvania,andownedbypeoplelivinginotherstates.Weweightedthisinformationbyacreagetocalculateanaverageproportionalbreakdownofprivateownershippatternsandassumedthattheseproportionsappliedin
othercounties(seeTable2).
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Table2.PercentofAcresinMarcellusCounties,byOwnershipType
PercentPublic
PercentPrivate
PercentPrivate,OwnedinCounty
PercentPrivate,Owned
ElsewhereinPA
PercentPrivate,
OwnedOut‐of‐State
CalculationsBasedUponGISAnalysis
AllcountieswithMarcellus 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%
PrivateOwnershipEstimatesbasedupontheGISAnalysisWeightedestimateforallcountieswithMarcellus* 50.6% 24.7% 7.7%
*Numbersdonotaddtothe‘PercentPrivate’ownershipduetoroundingerror
Weassumedthatleasingandroyaltydollarsaredistributedacrosslandownersbaseduponthese
ownershippercentages,eventhoughtheproductivityofindividualwellswillvary,andactualleasevaluesandroyaltypercentagesvarybaseduponwhenmineralrightownerssignedandhowwelltheywereabletonegotiate.Thisshouldnotmakeadifferencefortheoverallimpactsofhousehold
spending,butitdoesmeanthatthestudylikelyoverestimatestheamountofdollarsgoingtosuchhouseholdsandunderestimatestheamountgoingtothestate,sincetheCommonwealthhasbeenabletonegotiatebetterleasingtermsthanmanymineralrightowners.
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2.SurveyofLandowners
Howleasingandroyaltydollarsarebeingspentwasestimatedthroughahouseholdsurveywesentto
1,000landownerslocatedwithinonethousandfeetofactiveMarcelluswellsinPennsylvania’sBradfordandTiogacounties.Inbothcounties,mostlandownersdoowntheirmineralrights,makingitpossibletouselandownershiprecordstocontactmineralrightowners.WeidentifiedthelandownersusingGIS
propertyrecordsanddrewa1,000footradiuscirclearoundactivewellsinthetwocountiesusingthewells’longitudeandlatitudeinformationlistedinPennsylvaniaDepartmentofEnvironmentalProtectionreports.Onethousandlandownerswererandomlyselectedfromthislist,andtheyweresentpaper
surveysinthefallof2010.Thesampleincluded516landownersfromBradfordCountyand484fromTiogaCounty.Twofollowupremindersweresenttonon‐responders.
Surveyswerereceivedbackfrom501landowners,foraresponserateof50.1percent.Surveyswerereturnedfrom23peoplewhosaidtheiroilandgasrightshadnotbeenleasedfornaturalgasdrillingin
theMarcellusShale;theiranswersweredroppedfromtheanalysis.Thefinalbreakdownofresponseswas254fromBradfordCounty,and224fromTiogaCounty.
i.WheretheOwnersLive
About71percentoftheBradfordCountylandwasownedbyrespondentswhoseprimaryresidencewasinthatcounty,and65percentoftheTiogaCountylandwasownedbyrespondentswhoseprimaryresidencewasinthatcounty.About6percentoftherespondentsreportedthattheirprimaryresidence
wasoutsideofPennsylvania,withthemostcommonstatesbeingNewJersey(10respondents),NewYork(6respondents),andFlorida(5respondents).Thepercentageoflocallandownersdiffersfromthecounty‐wideGISanalysisoflandownership,butitisn’tclearifthedifferenceisduetoresponsebias
(e.g.BradfordandTiogacountyresidentsweremorelikelytorespondtothesurveythanwereownerslivingoutsidethecounty),iftheownershippatternsaroundtheactivewellsinthosecountiesarenotrepresentativeofpatternsacrosseachcounty,orifnon‐countyresidentstendtoownlargerparcels
thanlocalresidents.
ii.DollarsReceivedforLeasing
Theamountofleasingdollarsreceivedperacrevarieddramaticallyamongstlandowners,rangingfrom
$1peracreto$5,750peracre.Equalpercentagesoflandownersreportedreceivingeitherlessthan$50peracreorfrom$1,000to$3,000peracre(about30percent,respectively).ThesepercentagesareaboutequalacrossbothBradfordandTiogacounties.Themajorityofthelessthan$50peracreleases
weresignedin2006,whilethemajorityofthe$1,000to$3,000peracreleasesweresignedin2008.About70percentoftheleasesreceivingover$3,000peracreweresignedin2009.
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iii.UseofLeasingandRoyaltyDollars
Fourhundredandtwelveoftherespondentshadleasedtheirlandfornaturalgasdrilling(ratherthana
priorownerhavingdoneso).Thevastmajorityreceivedtheirleasepaymentasaone‐timepayment,withonly15percentreceivingthepaymentsplitovermultipleyears.Ofthoselandownersleasingtheirrights,161respondentshadreceivedroyaltyincome,withthevastmajorityreceivingroyalties(73
percent)reportingtheyreceived$25,000orlesssofar.Abouttenpercentofrespondentsreportedreceiving$100,000ormoreinroyalties,andfour(2percent)saidtheyhadreceived$250,000ormoreinroyalties.Manyoftheparcelswhichhadbeenleasedbypriorownershadbeenleaseddecades
previously.
Whenweightedbytheamountofdollarseachlandownerwaspaid,about55percentofthetotalleasingdollarsweresavedintheyeartheywerereceived(seeTable3),ratherthanbeingimmediatelyspent.About66percentofalltheroyaltydollarsweresimilarlysavedforthefuture.Othercommonuses
includedpayingstateandfederaltaxes(17percentofleasingdollars),purchasingvehicles(9percentofleasingdollars),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/HomeImprovements $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.Suchspendingisconsistentwithanecdotesandwrittencommentsinthesurveythatmanyfarmersareusing
Marcellusdollarstobuynewtractors,fixbarns,andbuildnewstructures.
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WeestimatedtheimpactsofhouseholdspendingbyincreasinghouseholdexpendituresusingthecategoriesidentifiedinTable3.WesubsequentlyaggregatedtheIMPLANsectorsrepresentingeachof
thebroaderspendingcategories.WeapplieddefaultIMPLANmarginstotheconsumergoods,food,automotive,andhealthservicescategory.Forfarmspending,withinIMPLANweseparatedouthardexpenses(machineryandbuildings)fromoperatingexpensesandcalculatedtheratioofmachineryand
buildingexpensestooperatingexpenses,whichwasabout2:1.Wethenusedthisratiotoallocatefarmspendingbetweenthesetwocategoriesoffarminvestments.
Fromaneconomicimpactperspective,spendingon‘realestate’primarilyinvolvessimplyshifting
existingassetsbetweenownersratherthancreatingneweconomicvalue.Thecommissionspaidtorealtors,financingcosts,deedsearches,andothercostsassociatedwithbuyingandsellingrealestatedohaveaneconomicimpact,however,sincethesearepaymentsforservices.Forthisstudy,we
assumedthat10percentofthespendingonrealestatewentforsuchcommissionsandactivities,andtheremaining90percentwassimplyatransferofexistingassetsbetweenowners.Improvementstorealestate,suchasnewbuildingconstructionandhomeimprovements,alsohaveaneconomicimpact,
sincethesearespendingtocreateassets,butthiswasaseparatecategoryinthesurveyandwasincludeddirectlyintheanalysis.
3.AllocationofLeasingandRoyaltyDollarsintheStudy
WeallocatedleasingandroyaltydollarswithinthestudybasedupontheGISandsurveyanalysis.For
thepurposesofthisstudy,weassumedthatmineralrightownershippatternsareidenticaltolandownershippatterns,butwebelievethatthislikelyoverestimatestheamountofleasingandroyaltydollarsgoingtoPennsylvaniansandthustheeconomicimpactofsuchdollars.Manyoftheserights
wereseveredgenerationsagoandhavesubsequentlybeenpasseddownthroughfamilies,splinteringintomultipleownershipacrosschildrenandgrandchildren.Giventherelativelyhighamountof
outmigrationfromPennsylvaniaoverthepastdecades,itisexpectedthatmanyofthecurrentmineralrightownersdonotliveintheCommonwealth.
Becauseoftheuncertaintyabouthowmineralrightownershipvariesfromsurfacerightownership,weestimatedtwoscenariosabouttheimpactsofleasingandroyaltypaymentsonprivatepropertyowners.
ThefirstscenariousedtheGISanalysisaboutout‐of‐statelandownershiptoassumethat7.7percentofallleasingandroyaltypaymentsgotonon‐Pennsylvaniaresidents(asinTable2),whilethesecondscenarioassumedthat15.4percentofallthosepaymentsgoout‐of‐state.
TheGISanalysisindicatedthatseventeenpercentoflandinPennsylvaniacountieswithMarcellusisownedbythepublicsector,whichprimarilyistheCommonwealth.Intheanalysis,wethusallocated17percentofallleasingandroyaltydollarsdirectlytothestate.Weassumedthatthesedollarswent
directlyintotheGeneralFundandwerespentthesamewayasotherGeneralFundmonies.ThisassumptionoverestimatesthecurrenteconomicimpactoftheleasingandroyaltydollarstheCommonwealthisreceivingbecausemanyofthosedollarsareinsteadgoingintotheOilandGasFund,
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orsimilarsavingsfundsmanagedbythePennsylvaniaGameCommissionorotheragencies,andthuswerenotspentin2009.
Weestimatedtheimpactofleasingdollarsbyincreasinghouseholdexpendituresinthespendingcategoriesidentifiedfromthehouseholdsurvey.Incometherespondentssaidtheypaidintaxeswasallocatedbetweenfederalandstatetaxesbasedupontheratioofindividualfederalincometaxespaid
byPennsylvanians(InternalRevenueService)andpersonalincometaxcollectionsreportedbythePennsylvaniaDepartmentofRevenue.MostlocalmunicipalitiesandschooldistrictsinPennsylvanialevyanearnedincometax,butsinceleasingdollarsarenotsubjecttothattax,wedidnotincludeitinthe
ratio.Accordingtothesecalculations,about18percentoftotalpersonalincometaxespaidinPennsylvaniawenttotheCommonwealthwiththeremaindergoingtotheFederalgovernment.Wedividedstatetaxpaymentsbetweennon‐educationstategovernmentspendingandeducationstate
spendingusingtheactualproportionsofGeneralFundspendingin2009‐2010(63percentand37percent,respectively)(CommonwealthofPennsylvania,2009).BecausethespendingdetailfromthelandownersurveydoesnotmatchupwellwithaggregatedIMPLANspendingcategories,thescenario
hadtoberuninIMPLAN’sdisaggregatedmodel,whoselevelofdetailisdifficulttoincludeinareport.Wethusonlypresentthetotaleffectsratherthanallthedetail.
Surveyrespondentsindicatedthattheysavedabout66percentoftheroyaltydollarstheyreceived.Savingsgenerateaminoramountofneweconomicactivityforthefinancialfirmshandlingthefunds,so
inouranalysisweassumedthatsavingswouldgenerateservicefeesof1.5percent,generatingnewactivitywithinthefinancialservicessector.Forty‐tworespondentscompletedthequestionaboutthepercentageofroyaltyincometheyspentintheyeartheyreceivedthosedollars,butonly10completed
thedetailedquestionsaboutwheretheyactuallyspentthose34percentofroyaltydollars.Duetothisrelativelysmallnumberofresponses,weestimatedtheimpactoftheroyaltydollarsrespondentsspent
in2009byincreasinghouseholdincomeinthemedianincomehouseholdspendingcategoryforPennsylvania.
C.LocalBusinessEffects
IMPLANestimatesthesecondaryeconomicimpactsacrossalleconomicsectorsbyextrapolatingfrom
economicrelationshipswithinthemodel.Asameansofverifyingwhethersuchsecondaryimpactsareoccurring,aspartofthisstudywesurveyed1,000businessesinbothBradfordandWashingtoncounties(foratotalof2,000businesses).Businesseswererandomlyselectedusingacommerciallyavailablelist
ofactivebusinesseshavinganofficeorlocationphysicallywithinthecounty.BradfordCountywasselectedbecauseithasexperiencedthemostMarcellusdrillingactivityofanyPennsylvaniacountythroughtheendof2010,with482wellsdrilledsince2008(and355ofthesein2010).Washington
CountywasselectedbecauseithasexperiencedthethirdhighestamountofMarcellusdrillingactivityandthemostofanycountyinsouthwestPennsylvania.Thecountyhashad305Marcelluswellsdrilledsince2008,with135in2010.Becauseofthesignificantpopulationsizedifferencebetweenthetwo
counties(60,384residentsinBradfordCountyin2009,accordingtotheU.S.Census,comparedto
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200,505inWashingtoncounty),weexpectedthatbusinessimpactswouldbemorevisibleinBradfordCountythaninWashingtonCounty.
ThepapersurveywasmailedtobusinessownersorlocalbranchmanagersduringOctober2010,andtwofollow‐upremindersweresenttonon‐responders.Surveyswerereceivedbackfrom619businesses,foraresponserateof31percent.Thisincluded360responsesfromBradfordCountyand
259fromWashingtonCounty.Surveyswerereturnedfrom82peoplewhosaidtheydidnotownormanagethebusiness;theiranswersweredroppedfromtheanalysis.Theoverallresponsesweregenerallyconsistentwiththeactualbusinesscompositionofeachcounty’seconomy,sotheyare
representativeofactualconditions.
1.BusinessImpacts
One‐thirdofalltheBradfordCountybusinessessaidthattheirsaleshaveincreasedduetodrillingactivity,andonly3percentreportedthatsaleshaddeclined.About23percentoftheWashington
Countybusinessesreportedincreasedsales,andonly2percentreporteddecreasedsales.(SeeTable4)
Table4.ChangesinBusinessActivityPercent(number)responding“yes”
Allresponses BradfordCounty
WashingtonCounty
Haveyourbusinessactivitieschangedduetonaturalgasdrilling?
17%(89) 22%(70) 9%(19)
Haveyourannualsaleschangedduetonaturalgasdrilling?
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).EightypercentofthehotelsandcampgroundsinBradfordCountyreportedthattheirbusinessactivityhaschangedduetonaturalgasdrilling,and100percentreportedhighersales.Construction(35percent),transportation(30percent),
eatinganddrinkingplaces(29percent),andwholesaletradeandfinancialservicesfirms(both28percent)inBradfordCountysimilarlyweremorelikelytoreportchangesinbusinessactivitythanwereotherbusinesstypes.HalfofthefinancialbusinessesinBradfordCountyreportedhighersalesdueto
naturalgasactivity,asdid44percentofretailtrade,38percentofeatinganddrinkingplaces,and33percentofwholesaletradeandbusinessservicesestablishments.
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Table5.ChangesinBusinessActivitybyBusinessType
Haveyourbusinessactivitieschangeddueto
naturalgasdrilling?
Haveyourannualsalesincreasedduetonatural
gasdrilling?Percent(number)saying
“yes”Percent(number)saying
“yes”
BusinessTypeBradfordCounty
WashingtonCounty
BradfordCounty
WashingtonCounty
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,Utilities
30%(3) 0% 22%(2) 0%
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)
Thedifferencesbetweenthetwocountiessuggestthateconomicimpactsaremuchmorevisibleinsmallerthaninlargercommunities.BusinessesinBradfordCountytypicallyweremorelikelytoreportimpactsassociatedwithMarcellusactivitythanwerebusinessesinWashingtonCounty.Thoughwedid
notattempttoplacedollarvaluesonthesesurveyresponses,theresultsconfirmindependentlyfromIMPLANthatmanylocalbusinesses,irrespectiveofsector,areexperiencingsalesincreasesduetoMarcellusactivity.Naturalgascompany,worker,andmineralrightownerspendingrelatedtoMarcellus
ShaleisbroadlyaffectinglocaleconomiesinPennsylvania.
D.LocalGovernmentEffects
IMPLANcanestimatetheimpactofeconomicactivityonstateandlocaltaxcollections,andthissometimesisreportedwitheconomicanalysis.Yetwithinacademiccircles,theassumptionsand
methodIMPLANusestomakethesetaxestimatesisrecognizedaspotentiallyoverlystrong,particularlyrelatedtoindirectandinducedeffects,sosomeanalystschoosetonotuseorreportthisinformation.
Becauseoftheseconcerns,welikewisedidnotestimatestateorlocaltaximplicationsaspartofthisstudy. Asanalternative,wesurveyedmunicipalgovernmentsinPennsylvaniacountieswithMarcellusShaleactivitytoaskthemdirectlyhowtheirtaxrevenuesarebeingaffectedbygasdevelopment.We
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alsoaskedthemhowtheirservicesandcostshavechanged,becausenewtaxrevenuesmustbecomparedtonewcoststomorecompletelyunderstandtheimpactonlocalgovernments.
Thesurveyincludedalltownships,boroughs,andcitiesinBradford,Clinton,Fayette,Greene,Lycoming,Somerset,Sullivan,Susquehanna,Tioga,Washington,Westmoreland,andWyomingcounties,whichtotaled494jurisdictions(seeMap1).Atthetimeofthestudy,thesecountiesaccountedfor76percent
ofalltheMarcellusShalewellsthathaddrilledinPennsylvaniafrom2008untilfall2010.ApapersurveywassenttotheChairoftheTownshipSupervisorsorBoroughorCityCouncilPresidentineachmunicipalityduringfall2010,andafollowuppostcardandsubsequentletterweresenttonon‐
respondents.Responseswerereceivedfrom293ofthesemunicipalgovernmentsforanoverallresponserateof59percent.
Ofthe293responses,131reportedthatMarcellusdevelopmentactivityisoccurringwithintheir
jurisdiction.Suchactivityincludeddrilling,butcanincludepipelineconstruction,majortrucktraffic,pipeyardsorotherstagingareas,workerhousing,orotherMarcellus‐relatedactivity.Ofthesemunicipalitiesdirectlyexperiencingdevelopmentactivities,about75percentsaidthatMarcellusShale
developmenthadnotaffectedtheirtaxornon‐taxrevenue.About18percentsaidthatrevenueshadincreased,andonereportedrevenueshaddecreasedduetoMarcellusdevelopment.Another6percentdidnotknowhowrevenueshadchanged.
Thelevelofdrillingactivitydoesnotseemcloselyrelatedtowhetheramunicipalityreportedhigherrevenues(seeTable6).Thereweredifferencesbetweenmunicipalitiesbaseduponthenumberofwellsbeingdrilled,butduetotherelativelysmallnumbersinsomecategories,thesedifferencesarenot
significantandshouldbeviewedwithcaution.Ofthe23municipalitiesreportinghigherrevenues,only5
Map1.MunicipalGovernmentSurveyCounties
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saidtheirEarnedIncomeTaxcollectionshadincreased,5reportedhigherRealPropertyTaxcollections,and3reportedtheLocalServicesTaxhadincreased.Anadditionalfivereportedhigherpermitfee
collections.
Table6.MunicipalRevenuesandLevelofDrillingActivity
HasdevelopmentordrillingofMarcellusShaleaffectedthetaxornon‐taxrevenuesyourmunicipalityreceives?Percent(number)responding
DrillingActivityinMunicipality Nochange
RevenuesIncreasedOverall
RevenuesDecreasedOverall 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)
Thenumberofmunicipalitiesreportinghigherearnedincomeandlocalservicestaxcollectionsseemsunusuallylow,sincehigheremploymentinthesetownshipstodrillthewellsshouldincreasethenumberofworkersandresidentsowingbothtaxes.Thelowresponsesmaybeoccurringforseveral
reasons,includinghowtaxesarepaidwhenemployeesworkinmultiplemunicipalities,thatnotallmunicipalitieslevythesetaxes,orproblemswithwithholdingandsubmittingthetaxes.Theycouldalsooccurifthelocalofficials’perceptionswereinaccurate.
Statelawspecifiesthattaxpayersworkinginmultiplemunicipalitiesonlypaythesetwotaxesinonemunicipality,ratherthanineachmunicipalitywheretheywork.Earnedincometaxispaidtothemunicipalitywherethetaxpayerlives,regardlessofwheretheywork,unlesstheyworkinPhiladelphia
orunlessthatjurisdictiondoesnotlevythetax(inwhichcaseitispaidtothejurisdictionwheretheyprimarilywork),andtheLocalServicesTaxalsoispaidtotheirprimarilyplaceofoccupation.Becausenaturalgasdevelopmentworkmovesfrequentlyfromsitetosite,withoutregardformunicipal
boundaries,manycompanyemployeestypicallyworkinmanydifferentmunicipalitieseachyear.OnlyonewillreceivetheirEarnedIncomeTaxandLocalServicestaxpayments.Thelocaltaximpactsclearlyrequiremorestudytoclarifywhatisoccurringandwhy.Regardlessofthecause,thelownumbersof
municipalofficialsreportinghighertaxrevenuesindicatethatthemajorityofmunicipalitieswheredrillingisoccurringbelievetheyarenotreceivingmoretaxrevenuesasaresultoftheactivity.
Taxesareonlyonehalfofthepotentialfinancialimpactonlocalgovernments.Equallyimportantare
theimpactsonlocalservicesandonlocalgovernmentexpenditures.About67percentofthe131municipalitiesexperiencingMarcellusactivitysaidtheservicestheyprovidehavenotchanged.About28percentreportedtheirserviceshaveincreasedduetonaturalgasdevelopmentactivityand4percent
(5municipalities)saidtheirserviceshavedecreasedoverallduetoMarcellusdevelopmentactivity.Thesurveydidnotaskaboutthesizeofsuchincreasesordecreases,sowearenotabletodescribehow
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significantthesechangeswere.Allmunicipalitieswhohadtoincreaseservicesidentifiedroadsasbeingaffectedand13(10percentofallthe131municipalities)saidbuildingandcodeenforcementhad
increased.Fourpercentsaidpoliceserviceneedshadincreased,asdid2percentwhocitedfireandemergencyservices.Thelatterrelativelylowpercentagelikelyreflectsthatfewmunicipalitiesthemselvesdirectlyprovidefireandemergencyservicesandinsteadrelyuponvolunteers,sotheyeither
maybeunawareofsuchchangeorconsidersuchchangesasnotaffectingtheirlocalgovernment.
Ofthemunicipalitiesindicatingtheneedformunicipalserviceshaddecreased,foursaidthatmunicipalroadserviceshaddecreased,andonesaidtheneedforvegetationcontrolhaddecreased.Theroad
serviceresponseslikelyreflectthatgascompaniesarerepairingandrebuildingroadsinaffectedcommunities,andsotheneedforthemunicipalityitselftodosuchrepairsinthesefourjurisdictionshasdecreased.Thereareserviceneeddifferencesbetweenthemunicipalitiesbasedupontheamountof
drillingactivity(seeTable7),butthesedifferencesarenotsignificant.
Table7.MunicipalServicesandLevelofDrillingActivity
HasdevelopmentordrillingofMarcellusShaleaffectedtheservicesyourmunicipalityprovides?Percent(number)responding
DrillingActivityinMunicipality Nochange
ServicesProvidedHaveIncreased
Overall
ServicesProvidedHaveDecreased
Overall Don’tKnowNowells 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’stotalexpenditureshadnotbeenaffectedbythegasdevelopment.Twenty‐sixpercentsaidexpenditureshadincreasedoverall,andonereportedthatexpenditureshaddecreased.Threeofthemunicipalities(2
percent)didnotknowhowgasdevelopmenthadaffectedtheirexpenditures.Mostoftherespondentsreportinghigherexpenditurescitedgreaterroadmaintenancecosts,andindeed,thiswas22percentofallthemunicipalitieswithMarcellusactivity.Higherspendingonclericalservices(8percentofall
municipalities),permittingandcodeenforcement,legalservices(both3percent),andpolice(2percent)werealsomentionedbyrespondents.Therewerenoclearpatternsofexpenditureswhenanalyzedbythelevelofdrillingactivity(seeTable8).
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Table8.MunicipalExpendituresandLevelofDrillingActivity
HasdevelopmentordrillingofMarcellusShaleaffectedyourmunicipality’stotalexpenditures?Percent(number)responding
DrillingActivityinMunicipality Nochange
ExpendituresIncreasedOverall
ExpendituresDecreasedOverall 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
occurbecausedrillingisonlyoneofmultipleactivitiesrelatedtoMarcellusthatcanaffectmunicipalbudgets.Priortoawellbeingdrilled,significantworkmustbedoneconductingseismicandotherstudies,obtainingpermits,creatingaccessroadsandwellpads,andcreatingstagingareasfor
companiesandworkers.Theseoftenoccurinneighboringmunicipalities,ratherthandirectlywherethedrillingistakingplace.Inaddition,trafficandpipelinesbynecessitycrossmunicipalboundaries.The‘perwell’focusinTables6,7,and8thusmaybetoonarrowtoadequatelyrepresentthelevelof
Marcellusactivityinacommunityandthusitsimpactonthelocalgovernment.
IV.EconomicImpactResults
BelowwediscusstheresultsfromeachtypeofeconomicimpactfromMarcellusShaledevelopmentand
thenreporttheoverallestimatedeconomicimpact.DetailedtablesforeachappearintheAppendix.Itisimportanttonotethattheseimpactsarethoseestimatedtohaveoccurredin2009duetoactivitiesinthatyear,nottheoverallimpact,whichwilloccurinsubsequentyearsasdollarssavedin2009laterare
spent.
Thedirectimpactsrepresentthedirectincreaseinthenumberofjobsduetothespendingbynaturalgascompanies,includinglandmen,geologists,roustabouts,governmentrelationsspecialists,andother
companyemployees.TheindirectimpactsmeasuretheadditionaljobsandoutputgainedinthosesectorsfromwhomthenaturalgasindustrycontractsorpurchasestodevelopMarcellusShale,suchasseismicandwellcompletioncompanies,truckingandconstructioncompanies,gasprocessing,andeven
janitorialservices.Inducedimpactsmeasuretheadditionaljobsduetoanincreaseinhouseholdandgovernmentexpenditures.Thetotaleconomicimpactisthecombinationofthesedirect,indirect,andinducedeffects.
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Employmentisthenumberofjobscreatedasaresultoftheactivity.LaborIncome(sometimesreferredtoas“EmployeeCompensation”)inIMPLANistotalpayrollcostpaidbytheemployer,includingwages
andsalary,allbenefits,andpayrolltaxes.TotalOutputisthevalueofindustryproduction,whichissalesminusinventorychangesformanufacturers,totalsalesforservicesectors,andgrossmarginforretailandwholesaletrade.ValueAddedisthedifferencebetweentotaloutputandthecostofinputs,soin
manywaysisthebestmeasureofoveralleconomicimpact.
A.CompanySpendingandPayroll
Naturalgascompanyspendinghasimpactonbothgeneralspendingonpurchasesandservices,and
spendingontheworkforceviapayroll.Basedupontheamountofnon‐payrollindustryspendingin2009reportedbyConsidine(2010),weestimatethatthetotalemploymenteffectwas13,626jobs.Thisincluded6,741Pennsylvaniajobsdirectlywithinthemajorgascompaniesandanadditional6,885
indirectorinducedjobs(seeTable9).
Table9.EconomicImpactofNaturalGasCompanyNon‐PayrollSpending,2009ImpactType Employment LaborIncome ValueAdded OutputDirectEffect 6,741 $398,405,378 $626,335,174 $1,200,667,093IndirectEffect 2,631 $146,829,148 $250,664,416 $428,097,138InducedEffect 4,254 $184,097,066 $316,891,277 $517,027,001TotalEffect 13,626 $729,331,592 $1,193,890,867 $2,145,791,232
Spendingbytheseworkerscreatedanadditional704or817jobs,dependinguponhowmuchnon‐
PennsylvaniaworkersspendwithintheCommonwealthorsendhometotheirstateofresidence(seeTable10).
Table10.EconomicImpactofNaturalGasCompanyPayroll,2009
ImpactType Employment LaborIncome ValueAdded Output
If50percentofnon‐residentemployeeincomestaysinPATotalEffect 704 $30,955,834 $52,988,161 $86,952,840If75percentofnon‐residentemployeeincomestaysinPATotalEffect 817 $34,850,239 $59,674,181 $97,772,457
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B.LeasingandRoyalties
LeasingandroyaltydollarsbeingpaidbythegascompaniesasaresultofMarcellusShaledevelopment
inPennsylvaniaprimarilygototheCommonwealthofPennsylvaniaandtoprivatehouseholds.Wediscusstheestimatedimpactofeachinturn.
1.PennsylvaniaGovernment
LeasingdollarsreceivedbytheCommonwealthofPennsylvaniasupportedapproximately5,409total
jobsin2009(seeTable11).Thisincludedapproximately$268millionintotalwagesand$477millionintotaloutput.RoyaltydollarstotheCommonwealthwereestimatedtohavesupportedabout171totaljob,andalmost$16millionintotaloutput(seeTable11).Inreality,theseimpactsin2009likelywere
lowerbecausetheCommonwealthsavedsomeoftheseleasingandroyaltydollarsforfutureuse.
Table11.EconomicImpactofLeaseandRoyaltyPaymentstoStateGovernment,2009
LeasePaymentstoStateGovernment,2009ImpactType Employment LaborIncome ValueAdded OutputDirectEffect 3,718 $193,319,220 $227,647,326 $259,010,759IndirectEffect 203 $9,640,917 $15,046,706 $26,648,423InducedEffect 1,488 $64,765,566 $114,898,509 $191,686,833TotalEffect 5,409 $267,725,703 $357,592,541 $477,346,015
RoyaltyPaymentstoStateGovernment,2009ImpactType Employment LaborIncome ValueAdded OutputDirectEffect 118 $6,366,637 $7,497,164 $8,723,184IndirectEffect 6 $317,495 $495,519 $883,007InducedEffect 47 $2,132,939 $3,783,978 $6,302,518TotalEffect 171 $8,817,071 $11,776,661 $15,908,709
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2.PennsylvaniaHouseholds
TheleaseandroyaltydollarsreceivedbyPennsylvaniahouseholdssimilarlygeneratednewjobsand
greatereconomicoutput.Ourestimatesrangedfrom3,360to3,733newjobscreatedbyleasingdollarsreceivedin2009,dependingupontheassumptionaboutout‐of‐statemineralrightownership(seeTable12),andbetween114and127newjobscreatedbytheroyaltydollars.Sincenotmanywellswereon‐
lineduring2009,itwouldbeexpectedthattheamountofroyaltyincomegoingtohouseholdswillincreasesignificantlyinlateryears,andthusthenumberofjobswillincrease,whilejobscreatedduetoleasingwilldeclineasleasingactivitywanes.
Table12.EconomicImpactofLeaseandRoyaltyPaymentstoPennsylvaniaHouseholds,2009LeasePaymentstoPennsylvaniaHouseholds,2009
ImpactType Employment LaborIncome ValueAdded Output
If15.4percentofmineralrightsareownedout‐of‐state
DirectEffect 1,939 $97,098,174 $129,963,234 $213,731,744IndirectEffect 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 $128,546,689TotalEffect 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‐stateTotalEffect 127 $5,575,826 $9,585,000 $15,691,609
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C.OverallEconomicImpact
1.TotalImpact
TheestimatedtotaleconomicimpactofMarcellusShaledevelopmentactivityinPennsylvaniain2009
rangedbetween23,385and23,884jobsand$3.1and$3.2billion(seeTable13).Thisincludedabout$1.2billioninlaborincomeandalmost$1.9billionintotalvalueadded.WedidnotestimatetaximpactsofMarcellusShaleactivitybecausewewerenotcomfortablewiththereliabilityofIMPLAN’stax
analysis.
Table13.SummaryofEconomicImpactsandTotalEconomicImpact,2009
ImpactType Employment LaborIncome ValueAdded Output
SummaryofEconomicImpactsNaturalGasCompanyNon‐PayrollSpending 13,626 $729,331,592 $1,193,890,867 $2,145,791,232
NaturalGasCompanyPayroll
704–817
$30,955,834‐$34,850,239
$52,988,161‐$59,674,181
$86,952,840‐$97,772,457
LeasePaymentstoStateGovernment
5,409 $267,725,703 $357,592,541 $477,346,015
RoyaltyPaymentstoStateGovernment
171 $8,817,071 $11,776,661 $15,908,709
LeasePaymentstoPennsylvaniaHouseholds
3,360–3,733
$161,019,095‐$178,910,105
$238,436,143‐$264,929,048
$398,907,454‐$443,230,504
RoyaltyPaymentstoPennsylvaniaHouseholds
114–127
$5,006,261‐$5,575,826
$8,605,902‐$9,585,000
$14,088,728‐$15,691,609
TotalEconomicImpactLowerBound:if50%ofnon‐residentemployeeincomestaysinPAand15.4%ofmineralrightsareownedout‐of‐state
TotalEconomicImpact 23,385 $1,202,855,556 $1,863,290,275 $3,138,994,978
UpperBound:if75%ofnon‐residentemployeeincomestaysinPAand7.7%ofmineralrightsareownedout‐of‐state
TotalEconomicImpact 23,884 $1,225,210,536 $1,897,448,298 $3,195,740,526
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2.Multiplier
Theeconomicmultiplierweestimatedvariesbetweenthesetwoscenarios,rangingfrom1.86to1.90,
dependinguponnon‐residentworkerspendingandmineralrightownershippatterns.Ourresultssuggestthatforevery$1inMarcellusindustryspendinginthestatebetween$1.86and$1.90intotaleconomicoutputisgenerated.
3.EconomicImpactonaPerWellBasis
Thetotaleconomicimpactsin2009,dividedbythenumberofwellsdrilledin2009,suggestthateachnewMarcelluswellgenerated30jobsinPennsylvaniaduring2009andaround$4millionintotaloutputwithinPennsylvania’seconomy(seeTable14).Thisincludesthejobscreatedbydirectgasindustry
spendingandindirectlythroughthecompanieswithwhomtheycontract,byworkerspendingofearnings,andbymineralrightownerspendingofleasingandroyaltydollars.ThisestimatelikelywillchangeastheMarcellusplaydevelopsandtheproportionofleasingincomedeclineswhileroyalty
incomeincreases.TheestimateisconsistentwiththeBrundageetal.studiesofperwellworkforceneeds,whichsuggestapproximately13fulltimejobsarecreatedperwell.Unlikethoseworkforceneedstudies,thiseconomicimpactanalysisincludestheemploymentimpactsresultingfromleasingand
royaltyincome,andindirectandinducedemploymentoccurringfromworkerspendingwithinthelocaleconomy.
TheeconomicimpactswithinanyindividualPennsylvaniacountyorcommunitywillbemuchlessona
perwellbasisbecausealargershareofthebusinessspending,payroll,andleasingandroyaltyincomewillgooutsidethoseboundariesthanoccursatthestatelevel.OurGISanalysissuggeststhatanaverageofonly51percentoflandinMarcelluscountiesisownedbyresidentswithineachcounty,
whichmeansabouthalfofleasingandroyaltydollarsimmediatelyleavethecommunity.Yetassuggestedbythesurveyoflocalbusinesses,theeconomicactivitylikelywillbemuchmorevisibleinsmallcommunitiesduetothescaleandsizeofMarcellusdevelopmentactivity.
Table14.TotalEconomicImpactbyWell,2009
ImpactType Employment LaborIncome ValueAdded OutputLowerBound:if50%ofnon‐residentemployeeincomestaysinPAand15.4%ofmineralrightsareownedout‐of‐state
TotalEconomicImpact 30 $1,532,300 $2,373,618 $3,998,720
LowerBound:if75%ofnon‐residentemployeeincomestaysinPAand7.7%ofmineralrightsareownedout‐of‐stateTotalEconomicImpact 30 $1,560,778 $2,417,132 $4,071,007
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V.Discussion/Implications
ThestudyresultsindicatethatdevelopmentofMarcellusShaleinPennsylvaniaishavingsignificant
employmentandincomeeffectsinPennsylvania.Weexaminedtheimpactsin2009,asdrillingactivitybegantoincreasesubstantiallyintheCommonwealth,soitwouldbeexpectedthattheeconomicimpactsareevengreatertodayastheindustryactivityhasgrown.Atotalof785Marcelluswellswere
drilledin2009,andthisnumberincreasedby85percentto1,445newwellsin2010(PADEP).Iftheper‐welleconomicimpactsfrom2009areconsistentwiththeimpactsin2010,thiswouldsuggestthatthetotalemploymentimpactofMarcellusShaleactivityinPennsylvaniain2010wasaround44,000jobs
(thisnumberincludesthe23,000plusjobssupportedin2009).
TheeconomicimpactresultingfromMarcellusShaledevelopmentactivityin2009willbespreadovermultipleyears,ratherthanalloccurringin2009,becauseoursurveyofhouseholdsindicatedtheyaresavingmorethanhalfoftheirleaseandroyaltydollarsforlateruse.Ourestimatesfocusonlyonthe
economicimpactactuallyoccurringwithin2009duetodrillingactivityinthatyear.Howmuchimpactthesesaveddollarshadin2010andwillhaveinfutureyearsdependsuponhowquicklythehouseholdsspendthosedollarsandhowmanyofthosedollarsarespentinPennsylvania(forexample,ifsome
landownersaresavingthemoneytoretireinFlorida).TherehasbeensomeconcernthatMarcellusShaledevelopmentcouldbeaboom/bustcycle,similartowhatPennsylvaniaexperiencedwithpriornaturalresource‐basedeconomicdevelopment.Thefactthathouseholdsaresavingasignificant
portionoftheirleasingandroyaltydollarsshouldhelpspreadtheeconomicimpactsacrossmultipleyears,irrespectiveofdrillingactivity,helpingsomewhatreduceanyboom/bustphenomenon.
Theseresults,likeothereconomicimpactstudies,dependcriticallyupontheassumptionsusedinthe
analysis.Ourestimatesoftheeconomicimpactsofleasingandroyaltyincomemayoverestimatetheactualimpactsbecausedataisunavailableaboutwhospecificallyownsthemineralrights,andthuswhoisreceivingthosedollars.Weestimatedundertwoscenarios(7.7percentand15.4percentownership
outofstate),butbothcouldstillbesomewhatlow.Inaddition,anecdotalevidencesuggeststhatsomeofthemineralrightsinsouthwestPennsylvaniaareownedbycoalandothercompanies,sothoseleasingandroyaltydollarswouldnothavethesameimpactasiftheygotohouseholds.
OurresultsalsooverestimatetheimpactofthedollarstheCommonwealthitselfreceivesinleasingandroyaltydollars,sinceweassumedthatthestatespentallthosedollarsin2009.Thisassumptionhadalargeeffectontheoverallresultsbecausestateleasereceiptsaccountedforaround23percentofallthe
estimatedjobcreationandaround15percentoftotaleconomicoutput.Theactualeconomicimpactswillbelessintheyearthedollarsarereceived,dependingupontheextentthatthestateagenciesandcommissionsreceivingthosedollarssavethemforlateruse.
Wehadtomakeassumptionsabouttheproportionofwagesandsalarynon‐residentworkersspendin
Pennsylvaniaandrantheanalysisusingboth50percentand75percent.Thereweredifferencesintheresultsbetweenthescenarios,butonlyof113workers.Thisisanapproximate16percentdifferenceintotalpayroll‐relatedimpacts,sotheassumptionsdonotappeartohaveameaningfulimpactonour
overallresults.Ourresultslikelyunderstatetheimpactofgascompanynon‐payrollspendingsincewe
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couldnotaccuratelyreflecttheircurrentpurchasingpatternsandparticularlyhowthegrowthoftheindustryandsupportingbusinessesinPennsylvaniawillhaveincreasedtheamountofindustryspending
whichstayswithinPennsylvania.
Theresponsestothesurveyoflocalbusiness,witharelativelylargenumberoffirmssayingthattheyareexperiencinghighersalesduetoMarcellusShaledevelopment,supportstheIMPLANresultsthatgas
developmentactivityishavingbroadeffectsacrosstheeconomy.Thisincludesallsectors,notjustthosewithadirectrelationshiptothedrillingcompanies.
OurfindingsarelessthanwhatseveralpreviousstudieshaveestimatedastheeconomicimpactofMarcellusShaledevelopmentinPennsylvania,butthisisnotsurprisingbecausewewereabletouse
moredetailedinformationonwhereleasing,royalty,andpayrollweregoing,andthuswereabletodirectlyconsidertheassociatedleakage.Ouremploymentestimateofbetween23,385and23,884newjobsisabout52percentofthe44,098jobsConsidine,WatsonandBlumsack(2010)estimatedfor2009.
Weconductedsomesensitivityanalysisofourresultsanddeterminedthatroughlyhalfofthisdifferenceoccursduetoourmorespecificleasing,royalty,andpayrolldata.WewereabletobetteraccountforhowmanysuchdollarsactuallyremainwithinthePennsylvaniaeconomyandwerespentin
2009.WebelievethattheremainingdifferenceoccursbecauseoftheupdatestheywereabletomaketoIMPLANbaseduponthepurchasingdatacompaniesprovidedthem.Despitethesedifferencesinestimatedtotalimpact,theeconomicmultipliersweestimated(1.86and1.90,dependingupon
scenario)areconsistentwithwhattheyfound.
ThedifferenceinthefindingsbetweenthesestudiesindicatesthatwhereleasingandroyaltydollarsgosubstantiallyaffectstheeconomicimpactsofMarcellusactivity.Thiswillbeevenmoresignificant
whenconsideringeconomicimpactsatacountylevelorregionallevel.BecauseonlyabouthalfoflandinatypicalMarcelluscountyisownedbyresidentsofthatcounty,itwouldsuggestthatamajorportionoftheeconomicbenefitsimmediatelyleavethecommunitiesbeingimpactedbydrilling.
Importantly,ourfindingsareconsistentwithseveralotherrecentemploymentstudiesofMarcellusShalewhicheitherrelieduponcompanyinterviewsaboutemploymentneeds(Brundage,etal.2011)ordirectobservationofhiringandemploymenttrends(Herzenberg,2011,usingPennsylvaniaDepartment
ofLaborandIndustrydata).Brundage,etalestimatedthat8,752directandindirectjobswerecreatedasaresultofindustryspendingondrillingactivityinPennsylvaniaduring2009,whichcomparestoourestimateof6,741directjobsresultingfromindustryspendingandanadditional2,631indirectjobs,fora
totalof9,372jobs.Theiranalysisdidnotincludetheimpactsofleasingandroyaltyincomenorallindirectandinducedeconomicimpactsasindustry,worker,andmineralownerdollarsflowthroughtheeconomy,soisnotdirectlycomparabletoouroverallestimatedimpactofaround23,000jobs.
HerzenbergusedPennsylvaniaDepartmentofLaborandIndustrydataaboutnewjobcreationand
calculatedthatbetweenthefourthquarterof2007andthefourthquarterof2010,therewere9,288newjobswithintheMarcellusCoreindustry.Thisissomewhatlowerthanourestimateandspansseveralyearsratherthanjust2009.Butthedefinitionof‘MarcellusCore’industryisnarrowerthanthe
actualbusinessrelationshipsnaturalgascompanieshavewithinPennsylvaniacommunities,andwhich
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IMPLANmodels,sotheLaborandIndustrynumbersundercountrelatedemployment.Inaddition,thedataandHerzenberg’sanalysisdonotconsiderleasingandroyaltydollars,soisnotdirectlycomparable
toouroverallestimatedeconomicimpacts.
ThesurveyresponsesfrommunicipalgovernmentssimilarlysuggestthatthelocaltaximpactsofMarcellusShaledevelopmentaresignificantlylowerthanreportedinpriorstudies,whichhadsimply
estimatedthosetaximpactswithoutverifyingwhatisactuallyoccurring.Incontrast,oursurveyresultsprovidedirectinsightsfromlocalgovernmentofficialsthatarebasedontheiractualexperience,includingimpactsonbothrevenuesandexpenditures,whichareessentialtoconsidertogethertohave
acompletepictureoftheeffectsonlocalgovernments.
A.LimitationsofOurStudy
Wheninterpretingtheresultsofthisstudy,thereareimportantlimitationsthatmustbekeptinmind.Thisstudyestimatedimpactsin2009,veryearlyinthedevelopmentofMarcellus.Thepaceofdrilling
activityincreasedin2010,andallindicationsarethatitwillcontinuetoincreaseinfutureyears.ThelongruneconomicimpactsofMarcellusShaledevelopment,particularlyforresource‐dependentsectorsoftheeconomyliketourismandagriculture,likelywillbeverydifferentthanwhatoccursintheearly
yearsofdevelopmentduetocumulativeandscaleeffectsasthenumberofwellsdrilledandinoperationincrease.Somehavearguedthattourismwilldecline(eitherbecauseofactualphysicalchangestothelandscapeorbecausecontroversyoverdrillingscarestouristsaway),thoughothershave
arguedthattourismmayincreasebecauseaccessroadsandpipelinerightsofwayareopeninguppreviouslyinaccessiblehuntinglandsandcreatingbetterecosystemsforwhitetaileddeer,whichcouldattractmorehunters.
Inaddition,thecompositionofcompanyspendingwillchangesignificantlyastheplaydevelopswithleasingactivitydecliningandroyaltydollarsincreasing.TheproportionofworkerspendingremainingwithinPennsylvaniawillriseastheshareofPennsylvaniaworkersincreases.Likewise,astheMarcellus
playmatures,theproportionofgas‐relatedcompanieslocatedinPennsylvanialikelywillincrease,reducingleakageofdollarsoutoftheCommonwealthandincreasingtheeconomicimpact.Stateeconomicpolicycaninfluencethis.
Theeconomicimpactmodelweusedforconductingtheanalysis,IMPLAN,hasbeenwidelyusedbyeconomistsforawidevarietyofeconomicimpactstudiesandisgenerallyrecognizedasworkingwellwhenstudyingsmallchangeswithinaneconomy.Itswidespreaduseallowssomeconsistencyfor
comparingacrossdifferentstudiesonthesametopic.Inaddition,manyeconomistsarefamiliarwithitsstrengthsandweaknesses.Itdoeshavelimitationsforstudyingsignificantlylargeeconomicchangeswhichaffectcorerelationshipswithintheeconomybecausethemodelassumesthatthoserelationships
donotchange.ThisisthesituationwithMarcellusShale,whichmeanstheresultsofanyIMPLAN‐basedeconomicanalysisofMarcellusShaleneedtobeviewedwithcaution.Despitethislimitation,wechosetouseIMPLANforthestudybecausewewantedtoinvestigatetheinfluenceofleasingandroyalty
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dollars,andoutofstateworkers,anditsuseallowedustodirectlycompareourresultstopreviousstudiesofMarcelluswhichwerenotabletoconsiderthesefactors.
Mostimportantly,thisstudyonlyfocusedonthejobandincomeeffectsofgasindustryspending.Theseeconomicelementsmustbeunderstoodinbalancewithothersignificanteffects,suchasimpactsontheenvironment,humanhealth,society,localgovernment,andqualityoflife.Thefullextentofthese
impactsisnotyetknown(norlikelywillbeknownuntillaterintheplay),butcurrentexperiencesuggeststhatsuchchangeswillbeoccurring.Undoubtedly,theeffectofMarcellusdevelopmentontheenvironmentandtheseotherimportantissueswillhaveeconomicimplications,butitistooearlyinthe
developmentoftheplaytoreliablyidentifytheincidenceofsuchcostsandbenefits.
B.WhatNoOneKnows(ButShouldbeKnown)
Duringthecourseofthisstudy,webecameincreasinglyawareofseveralcriticaleconomicaspectsrelatedtoMarcellusShaledevelopmentthatareeithermisunderstoodorcompletelyunknown,butyet
areessentialforacompleteandcomprehensiveunderstandingoftheimplicationsandimpactsofMarcellusShale.Theseincludethecostsassociatedwithdevelopment,thedistributionofcostsandbenefits,thelong‐runimplications,andwhatisactuallyoccurringonareal‐timebasis.
1.Costs
ExistingeconomicimpactstudiesofMarcellusdevelopment,includingthisone,havefocusedalmostexclusivelyonjobandincomecreationresultingfromgasindustryspending,includingleasingand
royaltypayments,payroll,andpurchasesfromotherbusinesses.Incontrast,noeconomicstudyhasincludedthepotentialcostsofMarcellusShaledevelopment,suchastheimpactonexistingbusinesseslosingemployeesduetoMarcellusactivity,damageandcleanupcostsresultingfromaccidentsor
environmentaldegradation,orhigherstateandlocalgovernmentcostsduetoactivity.ThereclearlyareandwillbecostsassociatedwithMarcellusShaledevelopment,bothout‐of‐pocketandnon‐monetary(suchastheecosystemeffectsofforestfragmentationorwaterqualityimpacts).Theremayalsobe
opportunitycosts,suchasbusinesseswhomaychoosenottolocateorexpandwithinPennsylvaniaduetothechangesresultingfromMarcellusShaledevelopment.YetbecausePennsylvaniaisstillrelativelyearlyintheMarcellusplay,thesecurrentlycannotbefullyidentifiedorquantified.Somecostsmaynot
showupuntilmuchlaterinthedevelopmentoftheplay,suchaswhentheamountofactivitypassescurrentlyunknownthresholdsorachievesacriticalmass.Thatthecostscurrentlycannotbecomprehensivelymeasureddoesnotmeanthatsuchcostsdonotorwillnotexist,butrathermeansitis
vitaltoinvestigateandidentifythem.Tofocusonlyonjobs,income,ortaxrevenuewithoutputtingthoseintoabroadercontextcanbeverymisleadingandcostlyinthelongrun.
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2.WhoIsBenefitingandWhoIsBearingtheCosts
ThedistributionofthebenefitsandthecostsassociatedwithMarcellusShaledevelopmenthasnot
beenfullyinvestigated.EconomicInput‐Outputmodels,suchasIMPLAN,estimatetotaldollarsacrosssectorsandcategories,butdonotidentifyhowthosedollarsaredistributedwithinthosesectors.Inaddition,sincethemodelingignorescosts,studiesdonothelpunderstandhowcostsrelatetothe
benefits,andmostparticularly,whobearsthecostsandwhogetsthebenefits.YetmuchofthepubliclyexpressedconcernaboutMarcellusdevelopmentrelatesdirectlytosuchequityissues,whichsomewouldcharacterizeas‘socialjustice.’Thedistributionofbenefitsandcostsmatterstomany
Pennsylvanians.
Equityissues(andconflicts)aboutMarcellusShalecanoccuratmultiplelevels,includingwithinfamilieswhosemembersdisagreeonwhethertolease,betweenneighborswhohavedifferentvisionsforthecommunityandforqualityoflife,betweentheownerofthesubsurfacemineralrightsandtheownerof
thelandabovethatparcel,betweennewcomersandlong‐termresidents,betweentraffic‐impactedboroughswithfewwellsandsurroundingtownshipswithmanywells,betweenregionswithinPennsylvania(suchasbetweenPhiladelphiaandupstreamcommunitieswithMarcellus),andeven
betweencurrentandfuturegenerations.
WearenotarguingherefororagainstthefairnessofMarcellusactivity,butratherwearestressingthatdifferingviewpointsaboutitsfairnessdoexist.Indeed,judgmentsaboutequityandfairnessalready
underliemuchoftherhetoricandpublicpolicydebateabouttheMarcellusShalegasplay,suchaswhetheraseverancetaxisneeded(andifitis,howthedollarsshouldbedistributed),towhatextentlocalgovernmentsshouldbeallowedtoregulateandcontrolgasdevelopment,andwhethermineral
rightownersundersomecircumstancesshouldbeforcedtoallowdrilling(e.g.forcedpooling).ObjectiveinformationaboutthecostsANDthebenefitsofMarcellusShaledevelopment,andparticularlyhowthesearedistributed,shouldhelppeoplemakeinformedvaluejudgmentsabout
whetherorhowpolicyshouldchange.Currentlythesedistributionissuesarenotadequatelyknown.
3.Long‐RunImplications
MostoftheexistinguncertaintyaboutMarcellusShaledevelopmentrelatestoitspossiblelong‐term
effects,includingwaterquality,landuse,forest,health,andsocialimpacts.Inaddition,thereisuncertaintyaboutwhethertheeconomicactivitywillconformtotheboom/bustcyclesthathaveoccurredwithenergydevelopmentinthewestandwhichhavecharacterizedPennsylvania’sprior
experiencewithtimber,coal,andpetroleumdevelopment.Muchofthisdependsuponthescaleandpaceofthedevelopment,pluswhetherthereareunforeseencumulativeeffectsastheplayisdevelopedandthenumberofwells(andsupportingaccessroads,milesofpipeline,andotherinfrastructure)
increases.Inaddition,itdependsuponhowindividualsandcommunitiesrespond(forexample,towhatextentwillrecipientsofleasesandroyaltiessellthesurfacerightsandmoveawaywiththatstreamofincome,takingtheeconomicbenefitwiththem?Willcommunitiesusethecurrenteconomicbenefitsto
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strategicallyinvestforthefuture?)andwhetherthegasismostlyexportedandusedout‐of‐state,orifitinsteadisusedtoattractotherindustries,andthushelpsbuildamorediversifiedandstrongeconomyin
theCommonwealth.Nooneknowstheanswerstothesequestionsbecausemuchofthiswilloccurinthefuture,butitisimportanttobegatheringappropriateinformationnowsowecanpredictandanticipatetheseearlierratherthanlater.Inaddition,local,state,andfederalpolicywillinfluencethis
future.
4.WhatIsActuallyOccurring
AvarietyofsecondarydataisbeingcollectedthatprovidesinsightsintotheimpactsofMarcellusShale,
suchasatthestatelevelbytheDepartmentofEnvironmentalProtection,theDepartmentofRevenue,andtheDepartmentofLaborandIndustry,andatthefederallevelbytheU.S.CensusBureau.Suchdatacollectionandmonitoringiscriticaltoidentifyanyproblemsbeforetheygrowtoolargeandto
identifyopportunitieswhenthereistimetotakefulladvantageofthem.Yetexistingdatasetsoftenlagbyseveralyears,whichmeansourknowledgeisofthepastratherthanofthepresent,whichcanbemisleadingwithfast‐paceddevelopmentlikeMarcellus.Inaddition,therehasbeenlittleefforttodate
tobringthesedifferentdatasetstogethertoprovideacomprehensiveunderstanding(andmonitoring)ofactivities.
Ofgreaterconcernisthatsomeimportantdatacurrentlyarenotbeingcollectedoraggregated,whichmeanstherearesignificantthingswedonotknow,muchlesshaveameansofknowing.Thisincludes
howmuchleasinghasoccurred,andthuswhatpercentageoflandareapotentiallycouldbeaffectedbydrilling;whotheworkersareandhowmanyarePennsylvaniaresidentsversusfromout‐of‐state;baselineenvironmentalmonitoringofgroundwaterquality,forestecosystemdiversity,airquality,and
othernaturalresourcespotentiallybeingaffectedbydevelopment;baselinemonitoringofsocialandcommunityimpacts,suchaseffectsonrentersandlowincomeresidents,familywell‐being,housing
affordabilityandaccess,andsocialservices;andmonitoringofhumanandanimalhealthnearactivesites.
Mostimportantlyfortheeconomicdevelopmentimpacts,informationaboutwhoactuallyownsthemineralrightsisnotbeingcomprehensivelycollected,andthusnooneknowswhereleasingandroyalty
dollarsaregoing.NeithertheCommonwealthnorcountygovernmentstrackmineralrightownership,unlikeownershipofsurfacerights,whichcountiescompileintocomprehensiverecords.Theresultisthatinplaceswheresurfaceandmineralrightshavebeensevered,nooneknowswhereleasingand
royaltydollarsaregoing,bothbytypeofrecipient(e.g.privatehousehold,publicsector,orbusiness)andbylocation(e.g.livingwithinthecommunity,livingelsewhereinPennsylvania,orlivingoutsideoftheCommonwealth).Ownershipofsuchrightsisimportanttoknowfromeconomicdevelopmentand
equityperspectivesbecauseitaffectshowmuchoftheeconomicbenefitstayswithinthecommunitywheredrillingactivitiesareoccurring(andthustowhatextentthepeoplelivingwiththeinconveniencesarereceivingpositivebenefitsfromthatactivity).
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VI.Conclusions
OurstudyoftheeconomicimpactofMarcellusShaleindicatesthatithadmajorimpactwithin
Pennsylvaniaduring2009.AswithpriorstudiesofMarcellusShaleinPennsylvania,werelieduponthestandardInput‐OutputeconomicmodelIMPLANtoestimatethedirect,indirect,andinducedeffectsacrosstheeconomyandfoundthatMarcellusShale‐relatedactivityaccountedforapproximately24,000
newjobsand$3billionofeconomicoutputinPennsylvaniaduring2009.
TheseestimatesaresmallerthanprioreconomicstudiesofMarcellus,primarilybecausewewereabletoaccountforhowleasingandroyaltyincomearebeingused.OursurveyoflandownersandtheGISanalysisoflandownershippatternsallowedustoestimatehowmanyleasingandroyaltydollarsare
goingdirectlytoPennsylvaniaresidents,theCommonwealth,andtonon‐residentpropertyownersandhowthosedollarsareactuallybeingspent.OurresultsconfirmthatwhereleasingandroyaltydollarsaregoinghassignificanteffectontheoveralleconomicimpactsofMarcellusShaledevelopment,soitis
vitaltopaycloseattentiontosuchpaymentstohaveanaccurateviewonthedistributionofeconomicbenefitsandcostsfromMarcellusShaledevelopment.BecauseonlyabouthalfoflandinatypicalMarcelluscountyisownedbyresidentsofthatcounty,itwouldsuggestthatamajorportionofthe
economicbenefitsimmediatelyleavethecommunitiesbeingimpactedbydrilling.
Inaddition,weaccountedforhowmanyMarcellusworkersarenon‐Pennsylvanian,andthushowmuchpayrollisnotgoingtoPennsylvaniahouseholds.Suchworkersdospendsomeoftheirincomein
Pennsylvania,buttheytendtospenditdifferentlythandoresidents,whichaffectstheoveralleconomicimpacts.
Ourstudyincludedasurveyoflocalbusinesses,whichconfirmedtheIMPLANresultsthatpositiveeconomicimpactsareoccurringbroadlyacrosstheeconomyinthecommunitieswheredrillingisvery
activelyoccurring.Aboutone‐thirdofallthebusinessesinBradfordCounty,forexample,reportedthattheirsaleshadincreasedduetonaturalgasdevelopmentandonly3percentreportedsaleshad
declined.
WealsosurveyedPennsylvanialocalgovernmentsintheMarcellusShaleregiontoidentifywhethertheyareexperiencingnewtaxrevenues,newservicedemands,ornewcostsasaresultoftheearlystagesofMarcellusShaledevelopment.Anumberoflocalgovernmentsreportedthatthesehadincreased,but
therewaslittlepatterntotheirresponsesinrelationtotheamountofdrillingactivityoccurringwithintheirjurisdiction.Only18percentofthegovernmentsexperiencingMarcellusdevelopmentactivitysaidtheirtaxrevenueshadincreased,whichindicatesthatmostlocalgovernmentswithMarcellusactivity
arenotseeingmoretaxrevenueasaresult.Incomparison,26percentofthelocalgovernmentsindicatedthattheircostshadincreased,particularlyrelatedtoroadexpenses.Thisconfirmsthatconsideringbothrevenuesandcostsiscriticalforhavingacompleteunderstandingoftheimpactsof
MarcellusShale.
WedidnotattempttoquantifythecostsofMarcellusShaledevelopment,suchaseffectsontheenvironmentandhealth.Wehopethatfutureeconomicstudiescanconsidersuchcostsasbetter
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informationbecomesavailableabouttheincidenceandextentofsuchimpacts.Inaddition,wedidnotaddressthedistributionofbenefitsandcosts,eventhoughtheequityofhowthesearedistributed
underliesmuchofthecurrentpolicydebateaboutMarcellusShale.ThelongrunimplicationsofMarcellusShaledevelopmentarestillunknown.Jobsandincomeintheshortrunareimportant,butmanywouldarguethatotherfactorsareequally(ifnotmore)important,suchascleanwater,healthy
forestsandotherecosystems,cleanair,andgoodpublichealth.Inadditiontoaffectingqualityoflife,theseareimportantresourcesforthefutureofPennsylvaniacommunities,includingfutureeconomicopportunities,socialandphysicalinfrastructure,well‐functioninglocalgovernmentandinstitutions,and
communitywell‐being.Webelieveourresultsmustbeviewedasapreliminary,short‐runviewoftheeconomicimpactsofMarcellusShale,andbeplacedinabroadercontextoftheseotherimportantconcerns.
ThisworkwasfundedbythePennsylvaniaEconomicDevelopmentFinancingAuthority(PennsylvaniaDepartmentofCommunityandEconomicDevelopment)ContractNo.29‐000‐2222
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VII.References
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NaturalGasSeveranceTaxonthePennsylvaniaEconomy.”UniversityPark,PA:ThePennsylvaniaStateUniversity,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).“ProjectingtheEconomicImpactoftheFayettevilleShalePlayfor2008‐2012.”Fayetteville,AR:SamM.WaltonCollegeofBusiness.
CenterforWorkforceInformationandAnalysis.(2011).“MarcellusShaleFastFact.”Harrisburg,PA:
PennsylvaniaDepartmentofLaborandIndustry.April.
CommonwealthofPennsylvania.(2009).“2009‐2010BudgetinBrief.”Harrisburg,PA:CommonwealthofPennsylvania.
Considine,TimothyJ.,RobertWatson,RebeccaEntler,andJeffreySparks(2009)“AnEmergingGiant:
ProspectsandEconomicImpactsofDevelopingtheMarcellusShaleNaturalGasPlay.”UniversityPark,PA:ThePennsylvaniaStateUniversity,Dept.ofEnergyandMineralEngineering.August.
Considine,TimothyJ.,RobertWatson,andSethBlumsack(2010).“TheEconomicImpactsofthePennsylvaniaMarcellusShaleNaturalGasPlay:AnUpdate.”UniversityPark,PA:ThePennsylvaniaState
University,Dept.ofEnergyandMineralEngineering.May.
Costanzo,Charles,andTimothyW.Kelsey.(2011).“StateTaxImplicationsofMarcellusShale:WhatthePennsylvaniaDataSayin2010.”UniversityPark,PA:ThePennsylvaniaStateUniversity,PennState
Extension.
Herzenberg,Stephen.(2011).“DrillingDeeperintoJobClaims:TheActualContributionofMarcellusShaletoPennsylvaniaJobGrowth.”Harrisburg,PA:KeystoneResearchCenter.
Jacobson,Michael,andTimothyW.Kelsey(2011).“ImpactsofMarcellusShaleDevelopmenton
MunicipalGovernmentsinSusquehannaandWashingtonCounties,2010.”UniversityPark,PA:ThePennsylvaniaStateUniversity,PennStateExtension.
Kay,DavidL.(2011).“TheEconomicImpactofMarcellusShaleGasDrilling:WhatHaveWeLearned?
WhatAretheLimitations?”Ithaca,NY:CornellUniversity.
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Kinnaman,ThomasC.(2011).“TheEconomicImpactofShaleGasExtraction:AReviewofExistingStudies.”EcologicalEconomics70:1243‐1249.
NationalEnergyTechnologyLab(NETL).(2010).“ProjectingtheEconomicImpactofMarcellusShaleGasDevelopmentInWestVirginia:APreliminaryAnalysisUsingPubliclyAvailableData.”Morgantown,W.V.:U.S.DepartmentofEnergy.
Olson,DouglasC.“UsingSocialAccountstoEstimateTaxImpacts.”(1999).PaperpresentedattheMid‐
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PennsylvaniaDepartmentofEnvironmentalProtection.(2011).“2010WellsDrilledByCountyasof02/11/2011.”Harrisburg,PA.:PennsylvaniaDepartmentofEnvironmentalProtection.
PennsylvaniaDepartmentofRevenue.(2011).“DrillingIndustryPaidMoreThan$1BillioninStateTaxes
Since2006.”Harrisburg,PA.:PennsylvaniaDepartmentofRevenue.
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PA.:PennsylvaniaDepartmentofRevenue.
PennsylvaniaEconomyLeague.(2008).“TheEconomicImpactoftheOilandGasIndustryinPennsylvania.”Pittsburgh,PA:PennsylvaniaEconomyLeague.
Scott,LorenC.andAssociates.(2009).“TheEconomicImpactoftheHaynesvilleShaleontheLouisiana
Economyin2008.”BatonRouge,LA:LouisianaDepartmentofNaturalResources.
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Ward,MelissaandTimothyW.Kelsey.(2001).“LocalBusinessImpactsofMarcellusShaleDevelopment:TheExperienceinBradfordandWashingtonCounties,2010.”UniversityPark,PA:ThePennsylvania
StateUniversity,PennStateExtension.
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VIII.Appendices
Appendix1.MarcellusNaturalGasIndustrySpendingResultsOutput Sector Description Direct Indirect Induced Total
0 Total $1,200,667,093 $428,097,138 $517,027,001 $2,145,791,2331 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 $492,994,81633 22Utilities $5,675,796 $12,752,545 $12,038,327 $30,466,66834 23Construction $378,171,901 $6,242,481 $2,149,609 $386,563,99241 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 $253,836,441320 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 $80,379,079341 51Information $425,882 $20,771,076 $18,586,472 $39,783,430354 52Finance&insurance $572,142 $33,375,849 $66,491,790 $100,439,781360 53Realestate&rental $842,046 $54,479,472 $89,572,925 $144,894,443
36754Professional‐scientific&techservices $70,525,649 $76,160,148 $24,394,990 $171,080,787
381 55Managementofcompanies $0 $24,259,451 $5,698,687 $29,958,138382 56Administrative&wasteservices $9,794,052 $19,843,289 $12,200,535 $41,837,876391 61Educationalservices $1,309,237 $284,576 $12,227,617 $13,821,430394 62Health&socialservices $1,303,644 $39,703 $92,871,967 $94,215,314402 71Arts‐entertainment&recreation $579,029 $1,631,571 $7,829,442 $10,040,043411 72Accommodation&foodservices $717,045 $5,488,889 $24,271,390 $30,477,325414 81Otherservices $1,295,823 $8,021,215 $17,554,423 $26,871,460427 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 $1,193,890,8671 11Ag,Forestry,Fish&Hunting $1,553,659 $462,630 $382,295 $2,398,584
20 21Mining $226,303,866 $8,400,164 $500,203 $235,204,23233 22Utilities $3,279,844 $7,401,126 $6,986,619 $17,667,58834 23Construction $176,414,670 $3,009,539 $1,036,340 $180,460,54841 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 $170,302,629320 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 $42,639,182341 51Information $225,655 $11,058,350 $9,895,285 $21,179,290354 52Finance&insurance $326,404 $19,276,801 $38,403,488 $58,006,693360 53Realestate&rental $593,583 $38,147,930 $62,721,270 $101,462,784
36754Professional‐scientific&techservices $47,235,368 $52,500,219 $16,816,437 $116,552,023
381 55Managementofcompanies $0 $15,970,647 $3,751,598 $19,722,245
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382 56Administrative&wasteservices $6,084,957 $12,568,111 $7,727,433 $26,380,501391 61Educationalservices $767,889 $171,855 $7,384,237 $8,323,981394 62Health&socialservices $737,597 $23,031 $53,872,749 $54,633,377402 71Arts‐entertainment&recreation $339,804 $981,029 $4,707,677 $6,028,510411 72Accommodation&foodservices $361,707 $2,810,475 $12,427,675 $15,599,858414 81Otherservices $720,642 $4,545,952 $9,948,811 $15,215,405427 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 $729,331,5921 11Ag,Forestry,Fish&Hunting $1,243,058 $370,143 $305,868 $1,919,069
20 21Mining $102,756,963 $3,814,231 $227,125 $106,798,31933 22Utilities $950,784 $2,145,490 $2,025,330 $5,121,60334 23Construction $150,200,762 $2,562,344 $882,347 $153,645,45341 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 $99,199,132320 44‐45Retailtrade $4,764,601 $7,028,890 $23,680,119 $35,473,611332 48‐49Transportation&Warehousing $14,570,645 $11,425,045 $5,481,148 $31,476,839341 51Information $114,213 $5,597,050 $5,008,379 $10,719,642354 52Finance&insurance $164,397 $9,709,010 $19,342,413 $29,215,820360 53Realestate&rental $46,330 $2,977,484 $4,895,457 $7,919,270
36754Professional‐scientific&techservices $38,495,755 $42,786,489 $13,705,015 $94,987,259
381 55Managementofcompanies $0 $13,107,316 $3,078,985 $16,186,301382 56Administrative&wasteservices $4,741,450 $9,793,179 $6,021,281 $20,555,910391 61Educationalservices $728,465 $163,032 $7,005,119 $7,896,615394 62Health&socialservices $681,535 $21,280 $49,778,051 $50,480,866402 71Arts‐entertainment&recreation $232,351 $670,808 $3,219,014 $4,122,172411 72Accommodation&foodservices $253,111 $1,966,678 $8,696,480 $10,916,269414 81Otherservices $646,719 $4,079,632 $8,928,271 $13,654,622427 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 13,625.901 11Ag,Forestry,Fish&Hunting 69.6 20.5 16.9 107.1
20 21Mining 1,614.50 60.5 3.6 1,678.6033 22Utilities 6.8 15.6 14.7 37.134 23Construction 2,861.80 49.3 17 2,928.0041 31‐33Manufacturing 19.9 135.6 76.6 232.1
319 42WholesaleTrade 988.1 171.7 125.6 1,285.40320 44‐45Retailtrade 164.6 245.1 825.6 1,235.30332 48‐49Transportation&Warehousing 282.8 223.8 107.4 614341 51Information 1.4 70.5 63.1 135.1354 52Finance&insurance 2.4 140.7 280.2 423.2360 53Realestate&rental 2.6 169.3 278.4 450.3
36754Professional‐scientific&techservices 512.3 574.6 184.1 1,271.00
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381 55Managementofcompanies 0 110 25.8 135.9382 56Administrative&wasteservices 144.3 300.8 184.9 630391 61Educationalservices 17.4 3.9 168.9 190.2394 62Health&socialservices 13.1 0.4 965.6 979.1402 71Arts‐entertainment&recreation 9.5 27.8 133.5 170.8411 72Accommodation&foodservices 11.9 93.3 412.5 517.7414 81Otherservices 18.2 115.9 253.7 387.9427 92Government&nonNAICs 0 101.5 115.5 217.1
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Appendix2.MarcellusNaturalGasIndustryPayrollImpacts:Scenario1Scenario1:If50PercentofNon‐ResidentWorkerIncomeLeavesPennsylvania
Output Sector Description Direct Indirect Induced Total
0 Total $0 $0 $86,952,840 $86,952,8401 11Ag,Forestry,Fish&Hunting $0 $0 $200,818 $200,818
20 21Mining $0 $0 $182,838 $182,83833 22Utilities $0 $0 $2,156,805 $2,156,80534 23Construction $0 $0 $362,199 $362,19941 31‐33Manufacturing $0 $0 $5,925,582 $5,925,582
319 42WholesaleTrade $0 $0 $4,452,032 $4,452,032320 44‐45Retailtrade $0 $0 $6,732,106 $6,732,106
332 48‐49Transportation&Warehousing $0 $0 $2,264,402 $2,264,402341 51Information $0 $0 $3,161,565 $3,161,565354 52Finance&insurance $0 $0 $10,928,098 $10,928,098360 53Realestate&rental $0 $0 $15,020,759 $15,020,759
36754Professional‐scientific&techservices $0 $0 $4,166,232 $4,166,232
381 55Managementofcompanies $0 $0 $975,913 $975,913382 56Administrative&wasteservices $0 $0 $2,055,236 $2,055,236391 61Educationalservices $0 $0 $1,943,453 $1,943,453394 62Health&socialservices $0 $0 $16,603,941 $16,603,941402 71Arts‐entertainment&recreation $0 $0 $1,288,409 $1,288,409411 72Accommodation&foodservices $0 $0 $4,002,456 $4,002,456414 81Otherservices $0 $0 $3,014,620 $3,014,620427 92Government&nonNAICs $0 $0 $1,515,374 $1,515,374
Valueadded Sector Description Direct Indirect Induced Total
0 Total $0 $0$52,988,161
$52,988,1611 11Ag,Forestry,Fish&Hunting $0 $0 $66,291 $66,291
20 21Mining $0 $0 $87,658 $87,65833 22Utilities $0 $0 $1,251,733 $1,251,73334 23Construction $0 $0 $174,619 $174,61941 31‐33Manufacturing $0 $0 $1,665,248 $1,665,248
319 42WholesaleTrade $0 $0 $2,929,875 $2,929,875320 44‐45Retailtrade $0 $0 $5,677,302 $5,677,302332 48‐49Transportation&Warehousing $0 $0 $1,212,041 $1,212,041341 51Information $0 $0 $1,683,191 $1,683,191354 52Finance&insurance $0 $0 $6,311,713 $6,311,713360 53Realestate&rental $0 $0 $10,517,922 $10,517,922
36754Professional‐scientific&techservices $0 $0 $2,871,949 $2,871,949
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381 55Managementofcompanies $0 $0 $642,470 $642,470
382 56Administrative&wasteservices $0 $0 $1,301,722 $1,301,722391 61Educationalservices $0 $0 $1,173,648 $1,173,648394 62Health&socialservices $0 $0 $9,631,539 $9,631,539402 71Arts‐entertainment&recreation $0 $0 $774,693 $774,693411 72Accommodation&foodservices $0 $0 $2,049,377 $2,049,377414 81Otherservices $0 $0 $1,708,509 $1,708,509427 92Government&nonNAICs $0 $0 $1,256,663 $1,256,663
Laborincome Sector Description Direct Indirect Induced Total
0 Total $0 $0 $30,955,834 $30,955,8341 11Ag,Forestry,Fish&Hunting $0 $0 $53,038 $53,038
20 21Mining $0 $0 $39,802 $39,80233 22Utilities $0 $0 $362,861 $362,86134 23Construction $0 $0 $148,672 $148,67241 31‐33Manufacturing $0 $0 $914,892 $914,892
319 42WholesaleTrade $0 $0 $1,706,615 $1,706,615320 44‐45Retailtrade $0 $0 $3,416,307 $3,416,307
332 48‐49Transportation&Warehousing $0 $0 $894,746 $894,746341 51Information $0 $0 $851,927 $851,927354 52Finance&insurance $0 $0 $3,178,976 $3,178,976360 53Realestate&rental $0 $0 $820,934 $820,934
36754Professional‐scientific&techservices $0 $0 $2,340,574 $2,340,574
381 55Managementofcompanies $0 $0 $527,283 $527,283
382 56Administrative&wasteservices $0 $0 $1,014,313 $1,014,313391 61Educationalservices $0 $0 $1,113,391 $1,113,391394 62Health&socialservices $0 $0 $8,899,476 $8,899,476402 71Arts‐entertainment&recreation $0 $0 $529,719 $529,719411 72Accommodation&foodservices $0 $0 $1,434,087 $1,434,087414 81Otherservices $0 $0 $1,533,252 $1,533,252427 92Government&nonNAICs $0 $0 $1,174,968 $1,174,968
Employment Sector Description Direct Indirect Induced Total
0 Total 0 0 704.4 704.41 11Ag,Forestry,Fish&Hunting 0 0 2.9 2.9
20 21Mining 0 0 0.6 0.633 22Utilities 0 0 2.6 2.634 23Construction 0 0 2.9 2.941 31‐33Manufacturing 0 0 13.2 13.2
319 42WholesaleTrade 0 0 22.3 22.3320 44‐45Retailtrade 0 0 119.1 119.1
332 48‐49Transportation&Warehousing 0 0 17.5 17.5341 51Information 0 0 10.7 10.7354 52Finance&insurance 0 0 46.1 46.1360 53Realestate&rental 0 0 46.7 46.7
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36754Professional‐scientific&techservices 0 0 31.4 31.4
381 55Managementofcompanies 0 0 4.4 4.4
382 56Administrative&wasteservices 0 0 31.2 31.2391 61Educationalservices 0 0 26.8 26.8394 62Health&socialservices 0 0 172.6 172.6
402 71Arts‐entertainment&recreation 0 0 22 22411 72Accommodation&foodservices 0 0 68 68414 81Otherservices 0 0 43.6 43.6427 92Government&nonNAICs 0 0 19.7 19.7
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Appendix3.MarcellusNaturalGasIndustryPayrollImpacts:Scenario2Scenario2:If25PercentofNon‐ResidentWorkerIncomeLeavesPennsylvania Output Sector Description Direct Indirect Induced Total
0 Total $0 $0 $97,772,457 $97,772,4571 11Ag,Forestry,Fish&Hunting $0 $0 $225,661 $225,661
20 21Mining $0 $0 $203,541 $203,54133 22Utilities $0 $0 $2,378,908 $2,378,90834 23Construction $0 $0 $403,551 $403,55141 31‐33Manufacturing $0 $0 $6,653,629 $6,653,629
319 42WholesaleTrade $0 $0 $5,282,446 $5,282,446320 44‐45Retailtrade $0 $0 $7,970,945 $7,970,945332 48‐49Transportation&Warehousing $0 $0 $2,573,400 $2,573,400341 51Information $0 $0 $3,555,716 $3,555,716354 52Finance&insurance $0 $0 $12,384,450 $12,384,450360 53Realestate&rental $0 $0 $16,654,562 $16,654,562
36754Professional‐scientific&techservices $0 $0 $4,680,622 $4,680,622
381 55Managementofcompanies $0 $0 $1,098,486 $1,098,486382 56Administrative&wasteservices $0 $0 $2,299,910 $2,299,910391 61Educationalservices $0 $0 $2,099,477 $2,099,477394 62Health&socialservices $0 $0 $18,238,675 $18,238,675402 71Arts‐entertainment&recreation $0 $0 $1,442,831 $1,442,831411 72Accommodation&foodservices $0 $0 $4,537,129 $4,537,129414 81Otherservices $0 $0 $3,394,428 $3,394,428427 92Government&nonNAICs $0 $0 $1,694,089 $1,694,089
Valueadded Sector Description Direct Indirect Induced Total
0 Total $0 $0 $59,674,181 $59,674,1811 11Ag,Forestry,Fish&Hunting $0 $0 $74,492 $74,492
20 21Mining $0 $0 $97,583 $97,58333 22Utilities $0 $0 $1,380,634 $1,380,63434 23Construction $0 $0 $194,554 $194,55441 31‐33Manufacturing $0 $0 $1,869,848 $1,869,848
319 42WholesaleTrade $0 $0 $3,476,369 $3,476,369320 44‐45Retailtrade $0 $0 $6,722,036 $6,722,036332 48‐49Transportation&Warehousing $0 $0 $1,377,435 $1,377,435341 51Information $0 $0 $1,893,034 $1,893,034354 52Finance&insurance $0 $0 $7,152,854 $7,152,854360 53Realestate&rental $0 $0 $11,661,954 $11,661,954
36754Professional‐scientific&techservices $0 $0 $3,226,539 $3,226,539
381 55Managementofcompanies $0 $0 $723,163 $723,163382 56Administrative&wasteservices $0 $0 $1,456,690 $1,456,690
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391 61Educationalservices $0 $0 $1,267,871 $1,267,871394 62Health&socialservices $0 $0 $10,579,808 $10,579,808
402 71Arts‐entertainment&recreation $0 $0 $867,544 $867,544411 72Accommodation&foodservices $0 $0 $2,323,145 $2,323,145414 81Otherservices $0 $0 $1,923,761 $1,923,761427 92Government&nonNAICs $0 $0 $1,404,867 $1,404,867
Laborincome Sector Description Direct Indirect Induced Total
0 Total $0 $0 $34,850,239 $34,850,2391 11Ag,Forestry,Fish&Hunting $0 $0 $59,600 $59,600
20 21Mining $0 $0 $44,309 $44,30933 22Utilities $0 $0 $400,228 $400,22834 23Construction $0 $0 $165,645 $165,64541 31‐33Manufacturing $0 $0 $1,027,301 $1,027,301
319 42WholesaleTrade $0 $0 $2,024,941 $2,024,941320 44‐45Retailtrade $0 $0 $4,044,975 $4,044,975332 48‐49Transportation&Warehousing $0 $0 $1,016,842 $1,016,842341 51Information $0 $0 $958,136 $958,136354 52Finance&insurance $0 $0 $3,602,627 $3,602,627360 53Realestate&rental $0 $0 $910,227 $910,227
36754Professional‐scientific&techservices $0 $0 $2,629,556 $2,629,556
381 55Managementofcompanies $0 $0 $593,509 $593,509
382 56Administrative&wasteservices $0 $0 $1,135,065 $1,135,065391 61Educationalservices $0 $0 $1,202,776 $1,202,776394 62Health&socialservices $0 $0 $9,775,670 $9,775,670
402 71Arts‐entertainment&recreation $0 $0 $593,209 $593,209411 72Accommodation&foodservices $0 $0 $1,625,661 $1,625,661414 81Otherservices $0 $0 $1,726,424 $1,726,424427 92Government&nonNAICs $0 $0 $1,313,538 $1,313,538
Employment Sector Description Direct Indirect Induced Total
0 Total 0 0 794.9 794.91 11Ag,Forestry,Fish&Hunting 0 0 3.3 3.3
20 21Mining 0 0 0.7 0.733 22Utilities 0 0 2.9 2.934 23Construction 0 0 3.2 3.241 31‐33Manufacturing 0 0 14.8 14.8
319 42WholesaleTrade 0 0 26.4 26.4320 44‐45Retailtrade 0 0 141 141332 48‐49Transportation&Warehousing 0 0 19.9 19.9341 51Information 0 0 12.1 12.1354 52Finance&insurance 0 0 52.2 52.2360 53Realestate&rental 0 0 51.8 51.8
36754Professional‐scientific&techservices 0 0 35.3 35.3
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381 55Managementofcompanies 0 0 5 5382 56Administrative&wasteservices 0 0 34.9 34.9391 61Educationalservices 0 0 29 29394 62Health&socialservices 0 0 189.6 189.6402 71Arts‐entertainment&recreation 0 0 24.6 24.6411 72Accommodation&foodservices 0 0 77.1 77.1414 81Otherservices 0 0 49.1 49.1427 92Government&nonNAICs 0 0 22.1 22.1
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Appendix4.RoyaltyPaymentstoPrivateMineralRightOwnersScenario1:If7.7PercentofMineralRightsareOwnedOut‐of‐State Output Sector Description Direct Indirect Induced Total
0 Total $0 $0 $15,691,609 $15,691,6091 11Ag,Forestry,Fish&Hunting $0 $0 $35,264 $35,264
20 21Mining $0 $0 $31,994 $31,99433 22Utilities $0 $0 $374,205 $374,20534 23Construction $0 $0 $65,348 $65,34841 31‐33Manufacturing $0 $0 $1,043,014 $1,043,014
319 42WholesaleTrade $0 $0 $867,268 $867,268320 44‐45Retailtrade $0 $0 $1,256,269 $1,256,269
33248‐49Transportation&Warehousing $0 $0 $407,857 $407,857
341 51Information $0 $0 $570,032 $570,032354 52Finance&insurance $0 $0 $1,998,997 $1,998,997360 53Realestate&rental $0 $0 $2,723,444 $2,723,444
36754Professional‐scientific&techservices $0 $0 $745,767 $745,767
381 55Managementofcompanies $0 $0 $175,910 $175,910382 56Administrative&wasteservices $0 $0 $368,143 $368,143391 61Educationalservices $0 $0 $352,288 $352,288394 62Health&socialservices $0 $0 $2,909,503 $2,909,503
40271Arts‐entertainment&recreation $0 $0 $229,570 $229,570
411 72Accommodation&foodservices $0 $0 $738,610 $738,610414 81Otherservices $0 $0 $529,298 $529,298427 92Government&nonNAICs $0 $0 $268,827 $268,827
ValueAdded Sector Description Direct Indirect Induced Total
0 Total $0 $0 $9,585,000 $9,585,0001 11Ag,Forestry,Fish&Hunting $0 $0 $11,641 $11,641
20 21Mining $0 $0 $15,339 $15,33933 22Utilities $0 $0 $217,176 $217,17634 23Construction $0 $0 $31,504 $31,50441 31‐33Manufacturing $0 $0 $293,115 $293,115
319 42WholesaleTrade $0 $0 $570,748 $570,748320 44‐45Retailtrade $0 $0 $1,059,433 $1,059,433
33248‐49Transportation&Warehousing $0 $0 $218,309 $218,309
341 51Information $0 $0 $303,480 $303,480354 52Finance&insurance $0 $0 $1,154,556 $1,154,556360 53Realestate&rental $0 $0 $1,907,026 $1,907,026
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36754Professional‐scientific&techservices $0 $0 $514,087 $514,087
381 55Managementofcompanies $0 $0 $115,806 $115,806382 56Administrative&wasteservices $0 $0 $233,170 $233,170391 61Educationalservices $0 $0 $212,746 $212,746394 62Health&socialservices $0 $0 $1,687,731 $1,687,731
40271Arts‐entertainment&recreation $0 $0 $138,036 $138,036
411 72Accommodation&foodservices $0 $0 $378,190 $378,190414 81Otherservices $0 $0 $299,975 $299,975427 92Government&nonNAICs $0 $0 $222,932 $222,932
LaborIncome Sector Description Direct Indirect Induced Total
0 Total $0 $0 $5,575,826 $5,575,8261 11Ag,Forestry,Fish&Hunting $0 $0 $9,314 $9,314
20 21Mining $0 $0 $6,965 $6,96533 22Utilities $0 $0 $62,956 $62,95634 23Construction $0 $0 $26,823 $26,82341 31‐33Manufacturing $0 $0 $161,038 $161,038
319 42WholesaleTrade $0 $0 $332,453 $332,453320 44‐45Retailtrade $0 $0 $637,512 $637,512
33248‐49Transportation&Warehousing $0 $0 $161,159 $161,159
341 51Information $0 $0 $153,603 $153,603354 52Finance&insurance $0 $0 $581,507 $581,507360 53Realestate&rental $0 $0 $148,845 $148,845
36754Professional‐scientific&techservices $0 $0 $418,969 $418,969
381 55Managementofcompanies $0 $0 $95,044 $95,044382 56Administrative&wasteservices $0 $0 $181,688 $181,688391 61Educationalservices $0 $0 $201,823 $201,823394 62Health&socialservices $0 $0 $1,559,452 $1,559,452
40271Arts‐entertainment&recreation $0 $0 $94,386 $94,386
411 72Accommodation&foodservices $0 $0 $264,645 $264,645414 81Otherservices $0 $0 $269,204 $269,204427 92Government&nonNAICs $0 $0 $208,439 $208,439
Employment Sector Description Direct Indirect Induced Total
0 Total 0 0 127.2 127.21 11Ag,Forestry,Fish&Hunting 0 0 0.5 0.5
20 21Mining 0 0 0.1 0.133 22Utilities 0 0 0.5 0.534 23Construction 0 0 0.5 0.541 31‐33Manufacturing 0 0 2.3 2.3
319 42WholesaleTrade 0 0 4.3 4.3320 44‐45Retailtrade 0 0 22.2 22.2
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33248‐49Transportation&Warehousing 0 0 3.2 3.2
341 51Information 0 0 1.9 1.9354 52Finance&insurance 0 0 8.4 8.4360 53Realestate&rental 0 0 8.5 8.5
36754Professional‐scientific&techservices 0 0 5.6 5.6
381 55Managementofcompanies 0 0 0.8 0.8
382 56Administrative&wasteservices 0 0 5.6 5.6391 61Educationalservices 0 0 4.9 4.9394 62Health&socialservices 0 0 30.3 30.3
40271Arts‐entertainment&recreation 0 0 3.9 3.9
411 72Accommodation&foodservices 0 0 12.6 12.6414 81Otherservices 0 0 7.7 7.7427 92Government&nonNAICs 0 0 3.5 3.5
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Appendix5.PaymentstoPrivateMineralRightOwnersScenario2:If15.4PercentofMineralRightsareOwnedOut‐of‐State Output Sector Description Direct Indirect Induced Total
0 Total $0 $0 $14,088,728 $14,088,7281 11Ag,Forestry,Fish&Hunting $0 $0 $31,662 $31,662
20 21Mining $0 $0 $28,726 $28,72633 22Utilities $0 $0 $335,981 $335,98134 23Construction $0 $0 $58,672 $58,67241 31‐33Manufacturing $0 $0 $936,471 $936,471
319 42WholesaleTrade $0 $0 $778,677 $778,677320 44‐45Retailtrade $0 $0 $1,127,942 $1,127,942
33248‐49Transportation&Warehousing $0 $0 $366,195 $366,195
341 51Information $0 $0 $511,804 $511,804354 52Finance&insurance $0 $0 $1,794,802 $1,794,802360 53Realestate&rental $0 $0 $2,445,247 $2,445,247
36754Professional‐scientific&techservices $0 $0 $669,588 $669,588
381 55Managementofcompanies $0 $0 $157,941 $157,941382 56Administrative&wasteservices $0 $0 $330,537 $330,537391 61Educationalservices $0 $0 $316,302 $316,302394 62Health&socialservices $0 $0 $2,612,300 $2,612,300
40271Arts‐entertainment&recreation $0 $0 $206,120 $206,120
411 72Accommodation&foodservices $0 $0 $663,162 $663,162414 81Otherservices $0 $0 $475,231 $475,231427 92Government&nonNAICs $0 $0 $241,367 $241,367
ValueAdded Sector Description Direct Indirect Induced Total
0 Total $0 $0 $8,605,902 $8,605,9021 11Ag,Forestry,Fish&Hunting $0 $0 $10,452 $10,452
20 21Mining $0 $0 $13,772 $13,77233 22Utilities $0 $0 $194,991 $194,99134 23Construction $0 $0 $28,286 $28,28641 31‐33Manufacturing $0 $0 $263,174 $263,174
319 42WholesaleTrade $0 $0 $512,446 $512,446320 44‐45Retailtrade $0 $0 $951,213 $951,213
33248‐49Transportation&Warehousing $0 $0 $196,009 $196,009
341 51Information $0 $0 $272,480 $272,480354 52Finance&insurance $0 $0 $1,036,619 $1,036,619360 53Realestate&rental $0 $0 $1,712,225 $1,712,225
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36754Professional‐scientific&techservices $0 $0 $461,574 $461,574
381 55Managementofcompanies $0 $0 $103,977 $103,977382 56Administrative&wasteservices $0 $0 $209,352 $209,352391 61Educationalservices $0 $0 $191,014 $191,014394 62Health&socialservices $0 $0 $1,515,331 $1,515,331
40271Arts‐entertainment&recreation $0 $0 $123,935 $123,935
411 72Accommodation&foodservices $0 $0 $339,559 $339,559414 81Otherservices $0 $0 $269,333 $269,333427 92Government&nonNAICs $0 $0 $200,159 $200,159
LaborIncome Sector Description Direct Indirect Induced Total
0 Total $0 $0 $5,006,261 $5,006,2611 11Ag,Forestry,Fish&Hunting $0 $0 $8,362 $8,362
20 21Mining $0 $0 $6,253 $6,25333 22Utilities $0 $0 $56,525 $56,52534 23Construction $0 $0 $24,083 $24,08341 31‐33Manufacturing $0 $0 $144,588 $144,588
319 42WholesaleTrade $0 $0 $298,494 $298,494320 44‐45Retailtrade $0 $0 $572,391 $572,391
33248‐49Transportation&Warehousing $0 $0 $144,697 $144,697
341 51Information $0 $0 $137,912 $137,912354 52Finance&insurance $0 $0 $522,107 $522,107360 53Realestate&rental $0 $0 $133,641 $133,641
36754Professional‐scientific&techservices $0 $0 $376,172 $376,172
381 55Managementofcompanies $0 $0 $85,335 $85,335382 56Administrative&wasteservices $0 $0 $163,129 $163,129391 61Educationalservices $0 $0 $181,207 $181,207394 62Health&socialservices $0 $0 $1,400,156 $1,400,156
40271Arts‐entertainment&recreation $0 $0 $84,744 $84,744
411 72Accommodation&foodservices $0 $0 $237,612 $237,612414 81Otherservices $0 $0 $241,705 $241,705427 92Government&nonNAICs $0 $0 $187,147 $187,147
Employment Sector Description Direct Indirect Induced Total
0 Total 0 0 114.2 114.21 11Ag,Forestry,Fish&Hunting 0 0 0.5 0.5
20 21Mining 0 0 0.1 0.133 22Utilities 0 0 0.4 0.434 23Construction 0 0 0.5 0.541 31‐33Manufacturing 0 0 2.1 2.1
319 42WholesaleTrade 0 0 3.9 3.9320 44‐45Retailtrade 0 0 20 20
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33248‐49Transportation&Warehousing 0 0 2.8 2.8
341 51Information 0 0 1.7 1.7354 52Finance&insurance 0 0 7.6 7.6360 53Realestate&rental 0 0 7.6 7.6
36754Professional‐scientific&techservices 0 0 5.1 5.1
381 55Managementofcompanies 0 0 0.7 0.7
382 56Administrative&wasteservices 0 0 5 5391 61Educationalservices 0 0 4.4 4.4394 62Health&socialservices 0 0 27.2 27.2
40271Arts‐entertainment&recreation 0 0 3.5 3.5
411 72Accommodation&foodservices 0 0 11.3 11.3414 81Otherservices 0 0 6.9 6.9427 92Government&nonNAICs 0 0 3.1 3.1
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Appendix6.MethodologyandDefinitions
Methodology
Inthisanalysis,weuseaneconomicimpactsoftwareprogramknownasIMPLAN(ImpactAnalysisforPlanning).OriginallydevelopedbytheUSForestService,IMPLANisaninput‐outputmodelthatiswidelyusedtoquantifyhowbusinessesusetechnology,laborandmaterials(i.e.,inputs)toproduceaproduct
(i.e.,output).TheIMPLANsoftwareanddatabase(www.implan.com)establishesthecharacteristicsofeconomicactivityintermsofmorethan450sectors.Inpractice,theIMPLANmodelisusedinevery
stateandhundredsofcommunitiesacrossthenationtocatalogeconomicactivityandpredicttheeffectofalternativepoliciesandvariouseconomicchanges.
Definitions
Multipliers
Input‐outputmodelsaredrivenbyfinalconsumption(orfinaldemand).Industriesrespondtomeet
demandsdirectlyorindirectly(bysupplyinggoodsandservicestoindustriesrespondingdirectly).Eachindustrythatproducesgoodsandservicesgeneratesdemandforothergoodsandservicesandsoon,roundbyround.Thesesocalledrippleeffectsaredescribedbymultipliers.Amultiplierexamineshow
muchspinoffeconomicactivityisgeneratedbyamarginalchangeinanindustry.Forexample,multiplierscandescribehowmanytotaljobsintheeconomyarecreatedwhenanindustryaddsonenewjob.Ingeneral,input‐outputmodelersdescribethreetypesofmultipliereffectswhenexamining
theroleofanindustryinthecountyeconomy.
1. Thedirecteffectisthecontributionoftheindustryitself.Itmayrepresentthetotalrevenue(output),employment,oremployeecompensation.Thevalueofthedirecteffectmultiplierisalways1.
2. Theindirecteffectsareeffectsoftheindustryonitssuppliers.Thismultipliercapturesthe
additionalactivityinbusinessesthatprovideinputstotheindustryofinterest.
3. Theinducedeffectscapturetheimpactsofchangesinspendingfromhouseholdsasincomechangesduetothedirecteffect.Thiseffectcapturestheimpactofspendingbya)employeesofthe
industrybeingstudied,andb)employeesoftheinputsupplyingbusinesses.Theseeffectsusuallyshowupinretailandserviceindustries.Inthestudyhere,thesecondaryeffectsarethesumoftheindirectandinducedeffects.
InthisstudyweusetheIMPLANtypeSAMmultipliers.TheTypeSAMmultiplierisobtainedaccordingtothefollowingformula:
TypeSAMmultiplier=(directeffect+indirecteffect+inducedeffect)÷directeffect
EconomicImpactsofMarcellusShaleinPennsylvania:EmploymentandIncomein2009
©2011PennStateExtensionandPennCollegewww.msetc.org62
Input‐outputanalysisisameansofexaminingtherelationshipswithinaneconomybothbetweenbusinessesandbetweenbusinessesandfinalconsumers.Itcapturesallmonetarytransactionsfor
consumptioninagiventimeperiod.Theresultingmathematicalformulaeallowonetoexaminetheeffectsofchangeinoneorseveraleconomicactivitiesonanentireeconomy.
Industryoutputisasinglenumberindollarforeachindustry.Thedollarsrepresentthevalueofan
industry’stotalproduction.InIMPLAN,theoutputdataarederivedfromanumberofsourcesincludingBureauofCensuseconomiccensusesandtheBureauofLaborStatisticsemploymentprojections.Anotherwaytothinkaboutindustryoutputisasthetotalrevenuegeneratedbyanindustry.
Employmentistotalnumberofwageandsalaryemployeesandself‐employedjobsinaregion.It
includesbothfull‐timeandpart‐timeworkersandismeasuredintotaljobs.ThedatasetsusedtoderiveemploymenttotalsintheIMPLANmodelaretheES‐202data,CountyBusinessPatterns,andtheRegionalEconomicInformationSystem(REIS)data.
Whileoutputcapturesthetotaldollarvalueofeconomicactivity,itsuseasameasureofeconomicactivitycanbeovercountedinthatitcapturesthevalueofallintermediatestagesoftheproductionprocessaswell.Forexample,thepriceonepaysforacaratthelocalautodealershipinlargepart
representseconomicactivitythatoccurredintheproductionprocess.Ifoneweretoconsiderthepriceonepaidforacarasthecontributiontothelocaleconomy,thenonewouldlikelybeoverstatingitsimpact.Thisiscalleddoublecounting.Toavoiddoublecounting,economistsusuallyexamineeconomic
contributionsintermsofValueAdded.Atthelocallevel,valueaddedisequivalenttotheconceptofGrossDomesticProductinthatitexaminestheuniquecontributionofanindustrytotheoveralleconomy.Ininput‐outputanalysis,valueaddedconsistsoffourcomponents.
1. Employeecompensationiswageandsalarypaymentsaswellasbenefitsincludinghealthand
lifeinsurance,retirementpayment,andanyothernon‐cashcompensation.Itincludesallincometoworkerspaidbyemployers.
2. Proprietaryincomeconsistsofpaymentsreceivedbyself‐employedindividualsasincome.This
isincomerecordedonFederalTaxForm1040C.Thisincludesincomereceivedbyprivatebusinessowners,doctors,lawyers,andsoforth.Anyincomeapersonreceivesforpaymentofself‐employedworkiscountedhere.Note:laborincomeisthesumofemployeecompensationandproprietary
income.
3. Otherpropertytypeincomeconsistsofpaymentsforinterest,rent,royalties,dividends,andprofits.Thisincludespaymentstoindividualsintheformofrentsreceivedonproperty,royaltiesfrom
contracts,anddividendspaidbycorporations.Thisalsoincludescorporateprofitsearnedbycorporations.
4. Indirectbusinesstaxesconsistprimarilyofexciseandsalestaxespaidbyindividualstobusinesses.Thesetaxesoccurduringthenormaloperationofthesebusinessesbutdonotincludetaxes
onincomeorprofit.
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