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In this edition of our newsletter, we introduce groundbreaking new research conducted by the Stockholm Environmental Institute and published by ORVI on the financial risks of new natural gas development in Appalachia. An analysis of 200 prospective gas projects in Pennsylvania, Ohio, and West Virginia reveals that new gas development in the Ohio River Valley may face a bleak financial future.
A new blog post by ORVI Senior Researcher Ted Boettner makes the case for an adequately-funded federal abandoned well program to plug and restore the nation’s estimated 2.1 million unplugged abandoned wells, and Research Fellow Eric Dixon points to the true cost of Abandoned Mine Land (AML) reclamation, which is likely two to three times larger than official estimates. We also share a summary of our first forum, Critical Condition: “The Shale Crescent” and the Dream of an Appalachian Petrochemical Boom and a recent article from Senior Researcher Sean O’Leary on how we are misled by the natural gas boom’s economic impacts.
Our featured Ohio River Valley Institute Advisory Council member is Dr. Mark Partridge, the Swank Chair of Rural-Urban Policy at Ohio State University. Dr. Partridge is a prolific scholar in regional economics and economic development, publishing on topics ranging from spatial economics to poverty in America. His recent work includes a policy brief titled “Immigration, Jobs, Crime, and Workforce Availability: How Does Immigration Affect Ohio and the USA?” examining existing evidence of the effect of immigration on socioeconomic outcomes for those born in the U.S.
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| Advisor’s Corner: Meet Advisory Council Member Mark Partridge |
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Mark Partridge, Ph.D., is the Swank Chair of Rural-Urban Policy at Ohio State University and is affiliated with GSSI in Italy and Jinan University in China. He served twelve years as Co-Editor of the Journal of Regional Science, is co-editor of Springer Briefs in Regional Science, and serves on a dozen other editorial boards. He has published nearly 150 academic journal papers and 60 other book chapters, briefs, and reports.
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Dr. Partridge is one of the world’s most published scholars in the fields of community and regional economics, regional economic development and growth, poverty and spatial modeling of the rural-urban interface. He has published in leading journals such as the American Economic Review, Journal of Economic Geography, Journal of International Economics, Journal of Urban Economics, and Review of Economics and Statistics. He also co-authored the book The Geography of American Poverty: Is there a Role for Place-Based Policy? Partridge has received research funding from many sources, including European Commission, U.S. National Science Foundation, and Canadian SSHRC. He is a Fellow and President of the Regional Science Association International and has received the prestigious NARSC Isard and Boyce Awards, as well as serving as NARSC Chair and NARSC President. Dr. Partridge is also a Fellow and previous President of the Southern Regional Science Association.
Partridge’s recent publication, The Effects of State and Local Economic Incentives on Business Start-Ups in the United States: County-Level Evidence, shows that state and local tax incentives “crowd out” new business start-ups that would have occurred otherwise, which is a key factor in supporting local growth.
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NEW RESEARCH: Risks for New Natural Gas Development in Appalachia
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A groundbreaking new report from the Stockholm Environmental Institute and published by ORVI reveals that gas projects in Pennsylvania, Ohio, and West Virginia face some serious financial risks for investors. By assessing the capital and operating costs of 200 prospective gas projects as well as the gas prices necessary to keep those fields profitable, this report finds that the gas industry in the Ohio River Valley may face a bleak financial future.
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Decarbonization (a reduction in carbon emissions) is happening all over the world. This means declining profits from fossil fuels in the Appalachian region of Pennsylvania, Ohio, and West Virginia (Ohio River Valley). Already, Wall Street investors and credit ratings agencies have soured on the gas industry based on its inability to generate reliable profits. And sustained, low prices of domestic gas and natural gas liquids are a real possibility for the local gas industry. Recent and predicted prices simply do not support widespread investments in gas and NGL infrastructure — including new gas fields, pipelines, and export terminals.
If gas production declines, so will NGL production. This could mean continued investment in cracker plants and storage hubs is questionable at best, if not outright ill-advised.
As this report shows, financial metrics alone — leaving aside public health risk factors — debunk the case for new gas development in Pennsylvania, Ohio, and West Virginia. In the midst of an ongoing pandemic and an urgent economic crisis, federal and national leaders and policymakers would be wise to invest in an ambitious national transition program that supports the people and places hit hardest by the changing economy.
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The true cost of cleaning up historic damage from the coal industry
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A recent Congressional hearing on a slew of Abandoned Mine Land (AML) reclamation bills rightly highlighted the urgency of reauthorizing fees on coal production that fund cleanup, writes ORVI Research Fellow Eric Dixon. According to forthcoming ORVI data, the extent of remaining damage from coal production is likely two to three times larger than the official estimate of $11.4 billion.
This “official” estimate comes from the inventory of Abandoned Mine Lands (AMLs) managed by the federal government. But it is commonly understood among AML officials that the real cost is significantly higher. Why? Three main reasons:
- The inventory is decades old and many estimates are not updated for inflation.
- The inventory includes only construction costs, not engineering design or administration costs.
- The inventory does not include all of the remaining AMLs in the field.
The forthcoming report develops cost estimates that adjust for these deficiencies and provides more reasonable estimates for the cleanup costs of unreclaimed AML damage in the 25 states and 3 tribes where they remain: between $21.0 and $32.4 billion by 2050 (low and high scenarios). Calculations and assumptions can be found in the study’s Technical Note (Working Paper).
The longer that Congress allows thousands of acres of AML-damaged land and water to linger, the more these sites will cause direct and indirect casualties among coalfield communities, downstream residents, and across the planet. The need to repair mine-scarred damage is larger than previously understood, but it’s not just about more cleanup funding.
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A federal solution is needed to address hazardous abandoned wells
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Across the nation, millions of unplugged abandoned oil and gas wells are leaching hazardous pollutants into the air and water, including greenhouse gases like methane. Many of these abandoned wells also pose serious public safety concerns, such as dangerous explosions from leaking gas.
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| States allocate funds to plug and restore abandoned wells, but the scale and cost of the problem is far beyond their reach. At the current rate of spending, it would take 965 years to plug and restore the nation’s estimated 2.1 million unplugged abandoned wells. |
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| ORVI Senior Researcher Ted Boettner makes the case for a federal abandoned well program to help states create a better inventory of wells, a monitoring and risk assessment system for wells, provide research and development to establish best practices in plugging and restoration, and boost jobs in rural areas that are often economically distressed.
A forthcoming ORVI report will expand upon how a federal program to plug and reclaim well sites could benefit the states in the mid and upper Ohio River Valley region. Stay tuned! |
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Misdirection: How we’re misled about the natural gas boom’s economic impacts
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The Ohio River Valley Institute’s recent report on the nearly complete failure of the Appalachian natural gas boom to deliver on promises of jobs and prosperity in the region’s major gas-producing counties triggered a great deal of blowback from the industry and its defenders. Industry lobbyists and advocacy groups and their allies in congress castigated the report, calling it “fake news” and a case of statistical cherry-picking.
What they did not and could not do, however, was dispute the report’s finding that, despite skyrocketing economic output (GDP), the Appalachian natural gas boom yielded anemic income growth, almost no growth in jobs, and was accompanied by an absolute decline in population.
Instead, they grasped for alternative statistics, desperately attempting to deflect attention from the facts. Still, the alternative statistics with which industry defenders try to distract us are worthy of examination because they provide an anatomy lesson in how they have, often successfully, misled the public and policymakers.
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Forum Summary: Critical Condition: “The Shale Crescent” and the Dream of an Appalachian Petrochemical Boom
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Last month, the Ohio River Valley Institute convened a forum of experts from finance, policymaking, and the petrochemical industry to assess the future prospects for the creation of a petrochemical hub in the greater Ohio Valley. Their prognosis? Due to stiff market headwinds, excess ethylene and polyethylene capacity, and threats to fossil fuel and plastic demand, the envisioned Appalachian buildout is unlikely to go forward.
“It’s difficult to sit on a natural resource and not think it’s a ticket to economic development,” said panelist Kathy Hipple, a finance professor at Bard College and former financial analyst with the Institute for Energy Economics and Financial Analysis, “but it’s important to step back and take a cold hard look at the realities of the economics. Simply put, the natural gas industry has not delivered the promised benefits for producers, investors—or local communities.”
Watch a recording of the forum here.
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ORVI in the News
Opinion: Local communities have seen little trickle-down effect from natural gas (The Columbus Dispatch)
Since the beginning of the natural gas boom, the seven counties in eastern Ohio that produce more than 90% of the state’s output have lost more than 6,000 jobs and almost 14,000 residents. Local communities haven’t seen the economic prosperity promised by the oil and gas industry, asserts ORVI Senior Researcher Sean O’Leary. “The bottom line is that the counties are getting a bad deal. And no one — not even those who support the industry — should be in favor of a bad deal,” O’Leary writes.
U.S. House Hearing on Reauthorizing Federal Abandoned Mine Lands Program: We Don’t Deserve to Wait Any Longer for Clean Streams, Diversified Economies (Pennsylvania Environment Digest Blog)
During a recent U.S. House hearing, Department of Environmental Protection Deputy Secretary for Active and Abandoned Mine Operations John Stefanko said reauthorizing the federal mine reclamation fee, which is due to expire in September, is the top legislative priority for DEP, Pennsylvania and the IMCC. “Without this stable and consistent source of funding, the AML programs will be unable to continue their vital work, which includes addressing the 250-300 AML emergencies that occur across the nation’s coalfields each year,” he said. A new blog post by ORVI Research Fellow Eric Dixon argues that the extent of remaining AML damage is likely much larger than previously understood, estimating the total cost of cleaning up unreclaimed coal mine land and treating discharges to be between $21 billion and $32.4 billion.
Sean O’Leary: Reining in WV’s skyrocketing electricity costs (Charleston Post-Gazette)
Between 2009 and 2019, the average West Virginian energy bill shot up by 38%, nearly quadruple the national rate of growth. ORVI Senior Researcher Sean O’Leary makes the case for “well-funded, aggressive” energy efficiency programs to mitigate rising electricity costs, reduce greenhouse gas emissions, and create local jobs and prosperity.
Will PA shrug off new fracking horror stories? | Will Bunch Newsletter (Philadelphia Inquirer)
Inquirer columnist Will Bunch surveys the spate of recent coverage of nightmarish public health problems linked to fracking development. “In an industrial society, we often talk about the health risks from pollution as a trade-off,” he writes, “to be weighed against the high-paying, blue-collar jobs that are created. Well, about that…” Citing ORVI’s latest report, Bunch notes that job creation in Pennsylvania, Ohio, and West Virginia’s natural gas producing counties was actually weaker than counties with little or no fracking. Populations fell faster, too.
Twin Ohio bills could thwart solar and wind development (Energy News Network)
A pair of bills under consideration at the Ohio Statehouse would allow 8% of voters in an area demand a referendum on Ohio Power Siting Board approval of any new solar or wind projects or modifications, effectively discouraging renewable energy investments in the state. Conversely, Ohio allows residents and local governments almost no say on siting for natural gas operations, the state’s largest source of power generation. According to Senior Researcher Sean O’Leary, “the glaring discrepancy between the way the legislature proposes to regulate clean energy and the way in which it allows local government and property owner rights to be overridden by the fracking industry makes nonsense of supporters’ claims that this is anything but an attempt to protect natural gas and coal interests. Fracking for natural gas inflicts toxic emissions, noise, dust and truck traffic that have far more damaging effects on communities, peoples’ health and quality of life than anything associated with wind turbines or solar panels.”
Ohio advocates want equity on the agenda as state, county cuts carbon (Energy News Network)
As national decarbonization initiatives continue to take shape, Ohio groups like Reimagine Appalachia are pushing blueprints to ensure a just transition for communities whose economies have historically been reliant on extractive industries. Between 2008 and 2019, Ohio’s major natural gas producing counties saw net job losses of 8% and population decreases of roughly 5%. “It’s hard to imagine a scenario in which the results would be better,” said ORVI Senior Research Sean O’Leary. “If nothing else does, that fact alone should persuade the region’s policymakers that they need to explore other, more sustainable economic development opportunities.”
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What We’re Reading at ORVI
Coverage of the serious health problems associated with oil and gas development underscores the hypocrisy of industry promises to deliver prosperity to fracking communities. Here are the stories we’re reading this week:
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When the Kids Started Getting Sick (The New Yorker) Cecil, Pennsylvania, a tight-knit community of 12,000 in the heart of the state’s fracking country, has been devastated by four diagnoses of Ewing’s sarcoma since 2008. At least 27 cases of the virulent and extremely rare form of bone cancer have been documented in southwestern Pennsylvania since the first shale gas wells were drilled. Calls for a full-fledged investigation into the public health effects of fracking have been nominally addressed, but research has yet to commence.
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UN says environmental racism in Louisiana’s Cancer Alley must end (Grist) The United Nations issued a report this month condemning environmental racism along Louisiana’s petrochemical corridor, where the largely Black population suffers an outsized risk of cancer, diabetes, and respiratory diseases from air and water pollution. “This form of environmental racism poses serious and disproportionate threats to the enjoyment of several human rights of its largely African American residents, including the right to equality and non-discrimination, the right to life, the right to health, right to an adequate standard of living and cultural rights,” U.N. experts said in the report.
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The $21 Billion Reason to Clean Up Abandoned Oil Wells (Gizmodo) The remediation of America’s estimated 3.2 million abandoned oil and gas wells could prevent methane leaks and groundwater contamination and deliver up to $21 billion in benefits from agriculture and carbon sequestration, according to a new study published in Nature Sustainability. A program to clean up oil and gas wells could also provide thousands of just transition jobs to oil and gas communities.
- A Pennsylvania county went from bust to boom times with natural gas. Now, it’s nearly broke. (Spotlight PA) A bursted fracking bubble casts dark shadows over Greene County’s economic future. Nearly 10 years and more than 1,000 natural gas wells later, the county appears to be no better off financially than it was at the start of the natural gas boom, having spent through $37.2 million in impact fees without setting aside money to plan for the day the work would inevitably slow.
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Study: 500K people at health risk from living near gas flaring (EnergyWire) Nearly 536,000 Americans live within 3 miles of natural gas flares. New research links proximity to flaring and other oil and gas operation to elevated risks of asthma and premature births.
- Chesapeake agrees to settle natural gas royalty dispute in Pennsylvania (Pittsburgh Post-Gazette) Pennsylvania’s attorney general has reached a $5.3 million settlement agreement with Chesapeake Energy Corporation in a 5-year-old case that alleged the natural gas company underpaid royalties and used deceptive practices to secure leases with Pennsylvania landowners. The settlement includes payments ranging from about $350 to $700 for thousands of affected property owners. At a recent news conference in Wyoming County, Attorney General Josh Shapiro said the settlement ends Chesapeake’s “long-standing business practices that took advantage of landowners.”
- Joe Manchin will decide whether Biden succeeds on climate change. (Vox) Establishing a clean energy standard to curb carbon emissions in the US electricity sector is the backbone of Biden’s climate policy plan, writes David Roberts. Its success could depend on West Virginia’s Joe Manchin.
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