A few weeks ago, a West Virginia University study touted the economic benefits of the Marcellus gas drilling boom to our state. The study got a lot of attention from the West Virginia media.
But another brief report, released last month by the West Virginia Center on Budget and Policy, doesn’t seem to have gotten nearly as much coverage. Perhaps that’s because the center’s preliminary findings offers some cautions about whether a big drilling boom will be the economic savior that some political leaders would have us believe.
Among other things, the center points out that during the time period when the natural gas industry was on the rise in West Virginia (since 2002), the counties that have dominated gas production in our state have nonetheless experienced population loss, lower incomes, higher poverty and less economic diversity.
The report offers some important cautions about the gas boom:
— Annual production from a shale well declines by about 50 percent in the first year alone, and economically recoverable gas production is uncertain beyond five years.
— A boom in activity has a different impact than a slower ramp-up, providing an economic spike that is unlikely to be sustainable in the longer term.
— Expectations of wealth from development of this sort works against diversification and increases the cost of doing business in other industries.
— After the initial boom and construction phase, few jobs remain.
The report advises that state policies that mitigate negative effects on local communities and deal with environmental impacts can help.
And, it concludes that a mineral trust fund that uses revenue from increased severance taxes to promote economic diversity would be a positive step.
The Legislature is still considering bills concerning the Marcellus boom … so stay tuned.