• October 23, 2019

    Shale Revolution Transforming Pennsylvania into an Energy and Industrial Powerhouse

    Dan Byers

This week, Pennsylvania is in the spotlight, as energy industry leaders participate in the Shale Insight conference in downtown Pittsburgh. Little more than a decade ago, the thought of Pennsylvania as an energy powerhouse would have been met with derision. In 2008, the state was producing less than 200 billion cubic feet (Bcf) of natural gas annually—barely 1% of the national total. Since then, output has skyrocketed 35-fold to an annual rate of approximately 7,000 Bcf, and the state is producing about one-fifth of all U.S. natural gas—second only to Texas.

It’s difficult to comprehend the speed and scale with which Pennsylvania has risen to energy prominence, so we created the following animated chart illustrating the state’s incredible growth over the last decade (keep your eye on the yellow bar):
 

 

As impressive as this chart is, it arguably understates the true impact of the shale gas revolution on Pennsylvania’s economy and citizens. That's because the growth in upstream energy production is only the beginning of the beginning of the story. 

Consider these important examples that illustrate the depth and breadth of positive change underway in the state:

  • Good-paying jobs. A 2017 study by PricewaterhouseCoopers found that natural gas and oil account for over 320,000 direct and indirect jobs in Pennsylvania, and contribute $45 billion to the state’s economy. Another recent study projects that, with the right policies in place, the state could add another 100,000 new jobs and $60 billion in gross domestic product growth over the next 10 years. 

In the words of Pennsylvania Chamber of Business and Industry president Gene Barr, “Thanks to natural gas, we are welcoming a wave of manufacturing expansion and union halls are at full employment…Focusing on policies that make Pennsylvania more attractive for continued investment and don’t interfere with free market growth will be crucial to maximizing shale’s shared benefits for all — more jobs, consumer energy savings, cleaner air and a regional manufacturing rebirth that could pay dividends for generations.”

  • Consumer energy savings. According to Marcellus Shale Coalition president David Spigelmyer, Pennsylvania’s energy abundance is saving consumers money: “Compared to a decade ago, residential natural gas costs have fallen from 57 percent to 81 percent, depending on which utility serves your household, resulting in $1,200 on average in annual household savings, according to the Public Utility Commission…In 2016, Pennsylvania consumers realized $16.2 billion in natural gas and electricity savings, compared to 2008 rates. Pennsylvania families saved $9.1 billion on natural gas and $7.1 billion on electricity thanks in large part to locally produced natural gas.”
  • Manufacturing renaissance. With its newfound supplies of low-cost natural gas, Pennsylvania is poised to become a shale-based manufacturing hub. The poster child for this renaissance is Shell’s $6.5 billion ethane cracker in Beaver County, about 25 miles west of Pittsburgh. The project is currently employing over 6,000 construction workers, and upon completion will be home to 600 full time employees involved in manufacturing polyethylene for use in chemicals and other plastics. This is one example—several more crackers are in the works in the region, and countless other manufacturing and industrial activities are also benefiting from abundant and affordable shale gas.
  • Midstream investment and exports. A key challenge to continued shale-related economic growth in Pennsylvania and the Appalachian region is building out the energy infrastructure necessary to deliver abundant energy supplies to markets near and far. This challenge is being met with massive investment in new pipelines. According to Energy in Depth, more than two dozen pipeline projects totaling nearly $33 billion in investment are underway across the Appalachian Basin. This capital infusion is expected to result in roughly 3,500 miles of new pipelines across Ohio, Pennsylvania and West Virginia and generate more than 124,000 jobs. 

While much of this natural gas will supply domestic power and industrial customers, it is also being exported around the world. In particular, ethane—a natural gas liquid used in the manufacturing of a wide array of plastics and consumer chemical products—is being shipped to chemical plants in Europe, Brazil, India and China. These plentiful supplies are only beginning to grow--between 2013 and 2025, ethane supplies in Appalachia are expected to grow more than 20-fold.

  • State and local tax revenue. All unconventional shale production in Pennsylvania is assessed with an impact fees that are then distributed to state conservation and emergency management agencies as well as each of the state’s 67 counties for activities such as parks and recreation and road and bridge repairs. Since 2012, natural gas production has generated an incredible $1.7 billion in revenue for the state, providing relief to constrained government budgets and an important advantage compared to states such as New York that have banned fracking and unable to benefit from such revenues.  

As Susquehanna County Commissioner Alan Hall describes it, the fees are simply indispensable: “We are doing things in our county that we never could before. The county’s pension plan is 100 percent funded with no increase in county taxes since 2005. [Without the impact fee] Our county would be depressed, and most of our people would be very poor as they were before. We’ve done things that have improved the quality of life for our people.”

  • Environmental Progress. Finally, while perhaps surprising to some, Pennsylvania’s energy renaissance is also driving continued environmental progress. According to the Energy Information Administration, carbon dioxide emissions in Pennsylvania declined 22% between 2005 and 2016. When accounting for economic growth, the carbon intensity of PA’s economy fell by more than 33% during the same time period. Driven by sound regulatory policies and a marked increase in the use of natural gas for electricity generation, traditional pollutants are also on the decline. According to a Marcellus Shale Coalition summary of state regulatory data, between 1995 and 2015, emissions of volatile organic compounds, sulfur dioxide, and nitrogen oxide from stationary sources are down 51%, 82%, and 72%, respectively.

Pennsylvania’s shale gas turnaround is dramatic, undeniable, and emblematic of how American energy is making America Cleaner and Stronger. The best news is, they’re just getting started. With sensible policies at all levels of government, the next decade is sure to bring even more prosperity and opportunity to the state and its citizens.