Examining boom and bust of Pennsylvania gas cycle

Oilfield worker
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A new study released by Washington & Jefferson College’s (W&J) Center for Energy Policy & Management (CEPM) and the Environmental Law Institute (ELI) confirms that the gas boom in Pennsylvania is still underway, and explores best practices to forestall or mitigate a subsequent economic downturn or “bust.”

The shale gas development that has vaulted Pennsylvania’s Marcellus Shale formation to the top of current U.S. natural gas production has raised concerns that local governments might be entering a “boom and bust” cycle, similar to previous resource extraction experiences in Pennsylvania’s history.

Researchers focused on southwestern Pennsylvania, centre of the “wet gas” portion of the formation, and concluded that there are opportunities to plan ahead to preserve community and environmental health and to assure longer-lasting economic benefits.

“We looked at how the nearly 7,000 unconventional gas wells drilled in Pennsylvania since 2004 affect housing values, municipal tax bases, roads, job creation and retention, community health and the environment,” said Diana Stares, director of the Washington & Jefferson College CEPM.

“Communities seeking to avoid adverse effects can employ a number of best practices based on monitoring the pace and impacts of development on their local residents, water supplies and roads,” said ELI’s James McElfish, study co-leader.

“These include use of carefully crafted land use ordinances to address compatible and incompatible land uses, consulting with gas development companies in advance of their drilling activities to preserve community features, and planning for and funding community infrastructure needs with impact fees.”

A key focus of the study was the distribution and expenditure of state impact fees assessed on the gas industry under Act 13, Pennsylvania’s law governing natural gas development. While county and local governments have begun to expect these fees, the amounts available are not likely to increase greatly, because of the declining formula set forth in the law, McElfish observed.

“More than a thousand new unconventional wells would have to be drilled each year just to maintain the levels of funding currently distributed to local governments,” he said.

Stares also emphasized the importance of reinvestment and wise expenditure of the impact fees received by southwestern Pennsylvania’s municipalities, especially for durable infrastructure that can support economic development.

The study, “Getting the Boom Without the Bust: Guiding Southwestern Pennsylvania Through Shale Gas Development,” discusses the December 2013 decision in which the Pennsylvania Supreme Court struck down portions of Act 13 because limitations on the zoning powers of local governments violated Pennsylvania’s Constitution.

ELI and the Washington & Jefferson College CEPM are also releasing a practical guidebook to inform local officials and community organizations of some of their options under Act 13, “Navigating Shale Gas Development: A Guidebook for Local Government Officials in Pennsylvania.”

The Washington & Jefferson College CEPM is also releasing a survey of municipal and county officials in Washington and Greene Counties —“Research Survey on Effects of Marcellus Shale Development on Communities.” This survey revealed that early results of the gas boom showed that while many communities experienced job creation and increased revenues associated with Marcellus Shale development, they also experience such adverse impacts as road damage, increased traffic and noise from compressor stations.

These new publications, including information on health studies, water use, air quality, jobs and tax policy, should be useful elsewhere as other states and communities make legal and policy decisions that will affect both the energy landscape and communities for years to come.

The research was supported by grants from the Heinz Endowments, but ELI and the CEPM are solely responsible for the findings and publications.

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