The central claim of the Heritage Foundation’s special report that, because of New York’s ban on fracking, counties in the Marcellus region “lost out on around $11,000 per resident or $27,000 per household” is simply wrong. Why? Because . . .
Very little of the money invested in or earned by fracking ever lands in local economies, leaving them as poor or nearly as poor as they were before fracking.
The report claims that growth in gross domestic product (GDP) is the most accurate indicator of economic prosperity. But the report doesn’t explain that little of the GDP growth that results from fracking lands in local economies. In fact, the bulk of the income generated by fracking goes instead to investors, bankers, service providers, and shareholders from outside the region. That’s why, as fracking increased from 1% of GDP in the Pennsylvania counties featured in the report to over 30%, the share of GDP that landed as income for residents plummeted from just over 100% of GDP to less than 70%, effectively wiping out any net increase.
This result is illustrated in the following chart in which you can see how, in 2002, before the fracking boom, the Mining sector (the blue line), which consists primarily of natural gas, contributed just over 1% of GDP in the relevant Pennsylvania counties [1]. At the same time, incomes in the region were actually greater than total GDP at nearly 103% [2]. But, as fracking grew, the share of GDP that landed as income for local residents plummeted to less than 68%.
Economists call this phenomenon “the resource curse” and the curse’s result is that nearly all of the incremental income generated by fracking gets exported to people in other places. That’s why residents in New York would have received almost none of the $27,000 per household the report says they “lost out on”.
The issue isn’t whether one side of the state line did slightly better or worse than the other, It’s how badly both sides are doing and how little difference fracking makes.
The report dismisses jobs as a measure of prosperity. That should be jarring to policymakers and the public, which has become accustomed to hearing job creation cited as the principal benefit of all economic development efforts. But the report’s dismissal of jobs as a measure of prosperity makes sense when it is revealed that communities on both sides of the state line were suffering from job loss before the fracking boom and the trend has only worsened since. With declines in jobs of 10% and 13% respectively, both the Pennsylvania and New York Counties are on long-term downward trajectories, which was only briefly interrupted between 2008 and 2012.
To put these losses in context, it’s helpful to consider that, during the period 2002 – 2023, the number of jobs in the US economy grew from 128 million to more than 153 million, an increase of nearly 20%. Jobs in Pennsylvania grew by 8%, which means that Pennsylvania’s natural gas counties, far from being contributors to job growth, actually dragged it down.
It’s also not clear that natural gas will help going forward. The number of natural gas jobs has fallen by 40% in the last five years. And statewide, Pennsylvania’s fracking industry provides fewer than 20,000 jobs out of more than 5 million in Pennsylvania’s economy.
The report purports to be an apples-to-apples comparison. It’s not.
Any differences found in the Heritage Foundation report between New York’s Marcellus counties and Pennsylvania’s northeast Marcellus counties are as likely to be explained by pre-existing differences in their economies as they are by the natural gas industry. 
While the regions on either side of the state line are of similar size geographically, the New York counties are more than two and a half times as heavily populated as the Pennsylvania counties. They include cities, such as Binghamton and Elmira. Also the supposedly more prosperous Pennsylvania counties are depopulating faster than the New York Counties.
As a consequence, even if New York were to allow fracking, the industry’s already negligible economic impact would be diluted further in the much larger economies of the New York counties.
As pointed out above, the small differences in economic outcomes between the two regions are far less important than the fact that both regions are suffering mightily. And, although natural gas has grown from 1% of the Pennsylvania counties’ economy to 30%, it has done little or nothing to change their economic trajectory. There is no reason to imagine that the results of embracing fracking in New York would be different.
Look out for the upcoming “Frackalachia Update.”
The Ohio River Valley Institute’s upcoming “Frackalachia Update” will explore in greater detail the economic impacts of natural gas development for all 30 major gas-producing counties in Ohio, Pennsylvania, and West Virginia. The update will show that the job and population losses described in this report for Pennsylvania’s northeastern gas-producing counties are typical of the impact natural gas production has in the northeast United States. And, looking ahead, it will discuss the possible implications for the industry, the region, and the region’s economic development strategies of growing demand for energy.
[1] As defined by the US Bureau of Labor Statistics, the Mining sector includes “Mining, Quarrying, and Oil & Gas Extraction.”
[2] The total income of an area can exceed total GDP as a result of government transfer payments, such as Social Security and AFDC benefits which add to the income generated by economic output.