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There aren’t nearly as many frac sand trucks running through our town as there were a year ago. The price for oil has dropped by half since then and so drilling activity in the nearby Eagle Ford Shale formation in south central Texas has slowed. Hotels have vacancies again, and the trailer camps set up quickly during the time of $100 oil have thinned out.
Slower times are good for reflection, and two sets of economists have recently issued studies that try to assess the impact of the fracking boom. One examines the effect of the oil boom on local governments. The other counts the impact on employment and income.
Both papers conclude that the fracking revolution was generally good for rural counties. There were problems, mostly as local governments in smaller counties failed to troll in enough tax revenue to keep up with the roads broken down by oilfield traffic. But fracking production provided tremendous numbers of jobs and large amounts of new income just as the nation was falling into recession.
And one paper found that the fracking revolution did not lead to increases in crime rates in oilfield counties.
Three Dartmouth College economics, led by James Feyrer, conducted the analysis of jobs and income. They found that the new oil and gas activity led to an increase in aggregate national employment of 725,000 and a half-a-percentage point decline in the unemployment rate, all coming in the midst of a steep recession.
Much of that gain stayed in the counties where the wells were drilled, the Dartmouth professors found. The bigger the population of the county, the more benefits stayed close by. (Counties with more than 8,000 workers saw “significantly larger” effects from new production than smaller counties, likely because wells drilled in small-population counties drew more workers from farther away.)
The economists calculated that 13 percent of the total value of oil and gas production stayed within the county in the form of higher incomes. Half of that benefit came from wages; half came from royalties.
The regional effects were stronger. Some 36 percent of the value production stayed within 100 miles of the well. Two thirds of that came in the form of higher wages and one third came in royalties.
“We find substantial increases in regional employment due to fracking,” the economists wrote. “Each million dollar of new production generates an increase in employment of 0.78 workers at the county level, 2.49 within 100 miles, and 3.34 within the state.”
Nationally, 725,000 new jobs resulted from fracking, reducing the national unemployment rate by half a percent.
And while there have been a number of newspaper articles describing increases in crime in fracking boomtowns, the Dartmouth economists could find “no significant increase in crime in any category.”
The second study comes from two economists at Duke University, Richard Newell and Daniel Raimi. Their paper examines how local governments in eight states fared in capturing tax dollars from oil and gas production. The eight states are Arkansas, Colorado, Louisiana, Montana, North Dakota, Texas, Pennsylvania, and Wyoming.
State laws vary and so local revenues from oil and gas production vary, too. Louisiana local governments get the lowest share of oil and gas revenue of the states in the survey. Local governments in Wyoming receive the largest share.
The authors conclude that
… [M]ost local governments in these states have experienced net positive fiscal effects from recently increased oil and gas development. However, most counties and municipalities in the Bakken region of North Dakota, municipalities in eastern Montana, and certain counties in Texas are currently facing fiscal challenges managing oil- and gas- related growth.
The greatest pressure falls on the most rural counties. “Broadly speaking, large-scale oil and gas development tends to create the greatest fiscal needs in very rural areas with limited existing infrastructure. … In most regions, this has been managed through increased government revenue and/or collaboration with industry.
A recurring theme in the report is that taxes from oil and gas production are not sufficient to repair and build roads. In North Dakota, local governments “are not receiving sufficient revenue to manage the infrastructure demands associated with Bakken development.” In Pennsylvania, however, local governments have “experienced net positive fiscal impacts from Marcellus shale development.”
Bill Bishop is contributing editor and a founder of the Daily Yonder.
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