Fracking’s Overlooked Local Benefits

The economy-wide, macro-scale benefits of hydraulic fracturing have been well-documented and are indeed palpable in our everyday experiences in the form of noticeably more affordable energy. With the influx of shale oil on the market, for example, we’re seeing lower gasoline prices this summer than we have in over a decade. The national average is currently around $2.25-per-gallon—$1.30 less than it was three years ago. Multiplied by the 140 billion barrels of gasoline American drivers use each year, this means a total savings of $180 billion than can be put to use elsewhere in our economy.

Nevertheless, fracking remains a misunderstood and maligned technique for energy development. Earlier this year Maryland became the third state to ban fracking outright, with Governor Larry Hogan signing the bill in April.

“The possible environmental risks of fracking simply outweigh any potential benefits,” Hogan said. “This legislation, I believe, is an important initiative to safeguard our environment.”

Taken at face value, Hogan’s statement portends care and concern for the people of Maryland. As with any technology, we should absolutely evaluate the potential risks and weigh them against the potential benefits. The problem is that Hogan’s calculation doesn’t pass muster.

Any risks that fracking poses, it stands to reason, would be felt most intensely by those who live, work, and play closest to fracking infrastructure. Those same people, however, have the most to gain from fracking.

As other states’ experiences have shown, the value of fracking accrues most directly to the people closest to it who benefit not only from the economy-wide impact, but from leasing contracts, royalties, and private sector investments. While Marylanders will continue to experience fracking’s positives that resonate throughout our economy—lower prices—they’ll miss out on a great deal.

In Texas, for instance, a new study from the Academy of Medicine, Engineering, and Science of Texas, titled Environmental and Community Impacts of Shale Development in Texas, yielded the following findings:

  • In 2014, shale development in the Permian, Eagle Ford, and Haynesville plays accounted for $27 billion in royalties paid to private landowners.
  • Oil and natural gas production generated over $1.5 billion in property tax revenue for Texas schools in FY2014.
  • The Permanent School Fund—a state education endowment supporting K-12 public schools—received $676 million in FY2014 from oil and natural gas revenues.
  • Roughly 230 independent school districts are located in areas where oil and natural gas producing properties generated at least $1 million in property tax revenue in FY2014.
  • The Permanent University Fund—an endowment supporting the University of Texas and the Texas A&M University systems through oil and gas royalties on certain state-owned lands—was at the time valued at $21.8 billion.

These are the sorts of benefits that Maryland’s politicians are denying to its citizens—particularly those in the rural, less developed western portion of the state. If Texas seems too distant and incomparable, Maryland need only look north to its neighbor Pennsylvania to see another state reaping the benefits of fracking.

While the rural counties of western Maryland languish, counties just 200 miles away in eastern Pennsylvania are seeing the rewards that come with shale development.

In its decade of operation in the Keystone State, Cabot Oil & Gas—just one company—has now paid over $1 billion in royalties and nearly $500 million in lease bonuses to landowners in Wyoming County and Susquehanna County. Rightfully, the people of Pennsylvania recognize the relationship as a win-win.

“A billion dollars flowing into our rural economy is an extremely big deal,” said Pennsylvania State Representative Jonathan Fritz. “Being pro-jobs and pro-business, I extend my appreciation to Cabot Oil & Gas. The energy industry has been a blessing to our area and I look forward to Cabot’s continued success and the widespread economic benefit that comes along with it.”

Cabot’s investment has indeed been massive, with $4.6 billion put into the region to build its network of 557 wells.

“Royalties from natural gas development have provided additional income during tough economic times,” said State Senator Gene Yaw. “Whether it’s expanding a farming operation, supporting area businesses or simply putting money away for a child’s college fund, royalties have greatly benefited rural Pennsylvanians.”

“Let’s face it, most municipalities and the county government, they live paycheck to paycheck,” Susquehanna County Commissioner Alan Hall said. “When you start breaking down all the municipalities, and the money that they’ve been able to use without borrowing money, that’s all a savings to the taxpayer.”

When Larry Hogan signed Maryland’s fracking ban in April these are the opportunities he threw away. Sadly, the people of Maryland are worse off economically than they should be, all because state politicians failed to account for these real and direct benefits.

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