The Appalachian shale boom might be crowding out other types of economic development in drilling counties, according to a recent study co-authored by a University of Akron professor.

The paper in the Journal of Resources Policy was written by Amanda Weinstein of the University of Akron and Mark D. Partridge and Alexandra Tsvetkova of Ohio State University.

The authors looked at earnings in oil and gas extraction and mining support activities in four regions comprising 26 states between 2001 and 2013.

Growth in the oil and gas sector generally boosted earnings and employment in drilling counties. In nonmetro counties, every additional dollar earned in oil and gas boosted earnings in other industries by 30 cents. Metro counties saw a bump of 10 cents per dollar.

The study didn’t consider the impact of oil and gas royalty or lease payments, and noted that the quality of data might be lower in counties where the oil and gas sector was small.

 

Impacts vary

The impact on earnings varied from region to region. In the Marcellus Shale region, including Ohio, oil and gas development had crowded out other economic activity, the study found.

Weinstein said there were a couple of reasons. To start with, for every $5 in oil and gas earnings, $1 left Marcellus communities.

“Part of the benefit leaks out when you have workers come from a neighboring county or a neighboring state and they come, do the work but then take those earnings back to wherever they live,” Weinstein said.

That can mean less money in the drilling county for industry-related costs, such as roads or expanded emergency services.

Even when workers live in the county where they drill, they can’t spend all of their money there.

“There are only so many places where you can spend your money in Belmont County, Ohio, for example, and if you want to buy a new car, if you want to go to a casino, whatever it is, you go to a different county,” Weinstein said.

Oil and gas development in the Marcellus region also came at the cost of other economic activity. For example, some workers opt for well-paying oil and gas jobs instead of starting their own businesses, Weinstein said.

 

Invest in communities

She said communities shouldn’t rely too much on energy as an economic engine, and should invest in things like schools, broadband, small businesses and infrastructure to diversify their economies.

“Our argument would be, at least initially, don’t resist it, let this new economic activity come in but realize that it may not be forever,” she said.

Mike Chadsey, a spokesman for the Ohio Oil and Gas Association, criticized the report as an example of academics not understanding the industry.

He noted that in Ohio, the average wage for core shale-related jobs is $93,448 and $68,577 for ancillary industries, while the average wage across all Ohio industries is $49,795.

“From their lofty heights it’s all about economic modeling and estimates, while to the good folks working day and night to provide the energy that keeps our economy moving, it's about dance lessons and ball gloves,” Chadsey said. “These opportunities are more than just a wage, it’s an opportunity to provide for their family and their communities.”