Review of Barthís ďThe Economic Impact of Shale Gas Development: Can New York Learn from Texas?ĒBy Zach Zoller and Matthew Rousu

†††††††††††††† This paper analyzes issues with gas drilling in Texas and attempts to bring insight into what New York can expect when drilling for Shale gas. Barth starts the paper off by citing a previous paper she wrote on the economic impact of shale development. Barth explains that New York does not have the skilled workers or machinery necessary to drill successfully, thus lowering the multiplier effect in New York. This paper doesnít attempt to place a monetary estimate on the economic impact of shale gas development, but instead tries to examine the issues that would make drilling in NY similar or different from Texas.

Next, Barth examines the four major drilling counties in Texas and compares them to the rest of the state. From 2003 to 2010 the median household income increased by 21.2% in the state of Texas but by only between 10% and 16% in the four counties of note.The unemployment rate increased by 2% in the four drilling counties and by 1.5% in the rest of the state. The next argument Barth employs is the depreciation of property values in areas within close proximity to drilling sites. The study estimated that drilling would decrease the value for the property between 3% and 14%. As for properties with wells on the land, she estimates it will decrease values by 75%.Barth also discusses the idea of the increase costs to maintain infrastructure due to damage caused by the industry. Finally, Barth discusses the potential health cost associated with natural gas drilling. She concludes the paper by asking if these negative impacts are worth the benefits to the gas firms and a few large landowners.

 

Our Comments

        It is worth thinking about all the areas where the economy could be impacted, like infrastructure spending, potential health costs, etc.We donít think this paper approaches these issues in the systematic way thatís necessary, however.

        Property values arenít that important in the scheme of economic impacts. The same physical amount of property is available whether it sells for lower or higher amounts.Thatís not to say that individuals arenít affected Ė they are.For those who own land and houses, higher property values make the person better off, but they should only realize these gains if theyíre renting land and/or sell their house to move elsewhere (where values havenít risen). For those who donít own but rent, higher property values make them worse off as rent prices should increase.

·        The fact that county incomes in the four Texas counties did not increase as much as the rest of the state, of course, does not mean that these income effects were caused by drilling. In fact, drilling may have helped those county incomes increase more than they would have otherwise increased.

        Is the comparison period for Texas appropriate?When did the gas drilling boom begin in Texas?No citation is given for us to examine this issue, but if it began prior to 2003, then any gains to these Texas counties could be understated.However, if thatís the case, the information could be useful in determining what might happen as gas drilling activity in a county slows down.(Either way Ė this information is inadequately defined.)

        It appears that Barth has an anti-drilling bias based on this paper and other papers sheís produced.Many statements in here arenít supported by facts and/or arenít cited well. The lack of citations prevents those who want to know more from doing their own research.Sometimes she makes statements (e.g., ďItís likely that the economic benefits to New York state from shale gas drilling will fall short of the benefits from shale gas drilling in TexasĒ) where the only defense are citations of her earlier papers.

        We donít place much value in this report.