Impacts of oil and gas development on nearby communities are getting more attention. Some are obvious, such as demand for more services from a suddenly bigger population before tax revenue starts to flow into formerly rural counties and towns. So are others, including longer lines at grocery stores and heavier traffic on two-lane roads.
But closer examinations of what's happened as hydraulic fracturing and horizontal drilling has brought oil and gas activity into new areas domestically has revealed a few surprises, experts said at an Apr. 10 seminar at Resources for the Future (RFF).
Local manufacturing has historically tracked resource booms and busts, according to Hunt Allcott, an assistant economics professor at New York University and a faculty research fellow at the National Bureau of Economic Research.
"It's not just manufacturers of oil and gas equipment, but also nonenergy product manufacturers serving local communities' demands," he said. "We learned a lot from what happened in the 1970s that we're applying now."
When Pennsylvania lawmakers realized Marcellus shale gas's significant potential in 2012, they enacted an impact fee to provide earlier revenue to counties, townships, and communities, said James M. McElfish Jr., a senior attorney at the Environmental Law Institute.
'Heavily front-loaded'
The fee is charged per well for 15 years, with the heaviest collections the first year "so it's pretty heavily front-loaded," he noted. "It's also affected by gas prices, so it's similar to a severance tax. As the first wells move beyond the initial heavy expense, the total amount could go down if more wells aren't added."
Local governments decide how the money is used, so several used much of what they received on additional rock salt during the recent hard winter, McElfish said. "Almost none used any of their shares for delivery of social services," he added.
Heavier traffic, meanwhile, came from each fraced well requiring about 1,000 truck trips to deliver stimulation fluids and remove flowback for disposal elsewhere, said Lucija Muehlenbachs, a University of Calgary assistant professor who's also an RFF university fellow.
Pennsylvania's oil and gas industry quickly highlighted road congestion as a major concern, she indicated. "There also were changes in the general type of drivers, with more young males tending to drive bigger vehicles fast," Muehlenbachs said. "We're finding impacts on emergency medical services and long-term rehabilitation."
The state's supreme court struck down part of these impact fees in December, and local governments are having to adjust, McElfish said. "Several also say Marcellus shale development is having positive revenue impacts, even though they can't tax oil and gas workers' waves, because they're buying more goods and services locally," he indicated.
