July 20, 2011 / 9:39 PM / 8 years ago

Industry study: Penn benefits from natgas drilling

* Industry-funded report touts impact of shale gas

* Avoids accounting for environmental impact

By Dave Warner

PHILADELPHIA, July 20 (Reuters) - A study funded by the natural gas drilling industry on Wednesday said Pennsylvania’s economy will get a $12.8 billion boost from drilling this year, more than double the amount from 2009, while reaping nearly 140,000 jobs.

The study by current and former Pennsylvania State University researchers avoided two contentious gas drilling issues — lack of a state tax on extracted gas and possible water pollution. One industry critic said the study vastly overstated job creation and economic benefits.

Pennsylvania sits above the gas-rich Marcellus shale formation that could meet U.S. gas demand for decades. The state has become the flash point for a U.S. debate on the extraction method hydraulic fracturing, or fracking.

Fracking involves blasting shale rock with chemical-laced water and sand to release trapped gas. Some environmental and public health activists say it taints drinking water supplies.

The study, funded by the industry group Marcellus Shale Coalition, measured investment and expenditures minus salaries at $4.7 billion in 2009 and $11.1 billion last year, forecasting a rise to $14.5 billion in 2012.

Pennsylvania does not tax gas from the well, but the report shows the industry paid $573 million in other state and local taxes in 2009, and just over $1 billion last year.

Penn State professor Seth Blumsack said the study “was conducted in accordance with good academic practice.”

Kathryn Klaber, president of the industry coalition, called the results “dramatic” but added the industry needs to address environmental and safety issues.

Sharon Ward, executive director of the Pennsylvania Budget and Policy Center, a major state think tank, disputed claims the $1 billion tax revenue figure from last year. She said state Department of Revenue figures show it to be about $219 million.

She also disputed the contention that the industry has created 139,889 jobs. She noted that number includes ancillary workers, such as restaurant wait staff and lawyers. She said the industry’s core group employment was about 19,000.

The report found that Pennsylvania, until recently a net importer of natural gas, could surpass Texas as the top exporting state within the next decade.

It said 1,405 wells were producing 2 billion cubic feet of gas per day by the end of 2010 and forecast that 2,300 wells could produce nearly 3.5 billion cubic feet per day this year — roughly 5.4 percent of total U.S. production.

A well belonging to one of the state’s largest drillers, Chesapeake Energy (CHK.N), blew out in the town of LeRoy in April, spilling thousands of gallons of toxic drilling fluid and causing anxiety among local residents.

For an index of shale gas companies, double-click on TRSHALEGAS.

The state’s legislature has deadlocked on issues of taxation and regulation, but an opening is expected on Friday with the final report of Gov. Tom Corbett’s Marcellus Shale Advisory Commission.

Corbett, who according to the website Marcellus Money has received $1.6 million in industry campaign contributions, is opposed to a severance tax on gas drilling. Pennsylvania is the only gas-producing state without such a tax.

The commission is likely to recommend some form of a state impact fee to help towns cope with expenses such road repair and help for volunteer fire companies.

The impact fee would be targeted to affected areas whereas a more controversial wellhead tax, which has failed to pass the legislature, would put levy on gas as it leaves the ground. (Editing by Daniel Trotta and David Gregorio)

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