By Christopher Briem, on September 6th, 2011
Wiz man… take a break. Grill a hot dog on that big NatGas grill or something. Give the 2nd shift the weekend off.
But if you insist on reading, the peanut gallery would be interested in your take on the WSJ’s: Obama Burns Gas Drillers on Ozone.
Always expect the unexpected eh? Don’t worry, I’m sure it will not abate the near term Marcellus (and Utica) rush, but it is the type of thing that will clearly have an impact on natural gas futures… which you would think would be capitalized into the value of the leases and eventually royalities.
Makes for some interesting politics in the Greater Appalachian Basin. When do gas politics outweigh coal politics?
By Christopher Briem, on September 2nd, 2011
This is fascinating, and is a great lesson in creating or just plain reading charts. Lots of buzz over a piece put out by the uber data wonks at the Energy Information Administration under the headline: Pennsylvania drives Northeast natural gas production growth. You just knew folks would obsess over that. The echo came first I think via NPR’s new Stateimpact site, but spread at least to places like the PG’s Pipeline, and of course was picked up by the Marcellus Shale Coalition and others by now I am sure.
As best I can tell, few bothered to read what the EIA had to say as much as obsess on this one graphic they put out there.
So you look at that chart and say OMG, look at all the net new natural gas is coming online! You have to believe that the storage capacity of the US is filling up quick and what I would really like to hear with winter approaching is that the price of natural gas must be collapsing. Soon they will be giving away the stuff. It’s not like there has been enough time for any meaningful new demand to soak up all that new gas production. Still a long way from fleets of natural gas cars on the roads and we have made it past the peak energy demand of the summer.
Of course, it isn’t the case just yet. Natural gas prices are relatively low, but have been stable for much of the last year or so. Natural gas in storage is not too far from normal parameters. So what gives?
If you looked at that graphic too quickly.. or didn’t bother to look into the context more you might have assumed that the graphic depicted all US natural gas production. Go look again, it clearly says it is just for Northeast production. Remember also that natrual gas is shipped around the country in pipelines so it really is a national, or probably best described as a continental market with the entire Northeast not exactly a big part of the production story. So it is the supply and demand cumulative across North America that really impacts the market prices.
Just for fun, here is a bar chart I made quickly of Pennsylvania’s natural gas production compared to the United States’ production as of June 2011. You will need to scroll down to get to Pennsylvania’s data:
And if you are still reading.. it might be good to go back and read the EIA’s (yes, the same EIA that made the first chart) current description of energy resources in Pennsylvania. In particular scroll down to the subsection titled “Natural Gas”. The state of things as they describe it for Pennsylvania is:
” Natural Gas: Although minor, Pennsylvania’s natural gas production has grown in recent years. The State’s Marcellus shale region, in particular, has experienced markedly increased new development over the past few years. However, compared to Pennsylvania’s total natural gas production, shale gas production remains minimal. “
Note they start out with the description ‘minor’.
Clearly the ‘minimal’ part is changing, but even with the big increases in the last year, Pennsylvania is still far from a big part of total US production and a small fraction of production in Texas. You might not think so reading all the hype. A few folks I have had conversations with recently really believe Pennsylvania is now, as in already, the biggest natural gas producer in the nation. Some PR folks out there somewhere really deserve bonuses.
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By Christopher Briem, on August 30th, 2011
Well, let’s wake Wiz up.
Now we have two specific numbers, both by Penn State researchers, with comprehensive economic impact analysis of the development of Marcellus Shale in Pennsylvania.
Just out and dated August 2011
Economic Impacts of Marcellus Shale in Pennsylvania: Employment and Income in 2009, by
Timothy W. Kelsey (Penn State), Martin Shields (Colorado State), James R. Ladlee (Penn State), and Melissa Ward (Penn State), in cooperation with Tracy L. Brundage (Penn College), Jeffrey F. Lorson (Penn College), Larry L. Michael (Penn College), and Thomas B. Murphy (Penn State)
and this from last month, dated July 20, 2011:
The Pennsylvania Marcellus Shale Gas Industry: Status, Economic Impacts and Future Potential, by Timothy J. Considine, Robert Watson and Seth Blumsack
The former said the 2009 employment impact in Pennsylvania was 24,000 net new jobs while the latter says 44,000. Future projections are always fraught with uncertainty, but with this being late 2011, these are both ex post numbers for the most part. Both use the same economic model (IMPLAN) and they both state they attempt to capture direct, indirect and induced economic impacts of all known Marcellus Shale related activity. It goes without saying that the differences must come from variation in what numbers are fed into the model to begin with.
By Christopher Briem, on August 24th, 2011
There is a new report via Penn State and some partners on the economic impact of Marcellus Shale development. According to the news coverage the report has some new data on the great Marcellus worker mystery. From Somerset County’s Daily American:
“The study also suggests that a large majority of industry employees are coming from out of state. While overall employment increased in about half of the municipalities, only 28 percent experienced lower unemployment rates in 2010.”
This all gets to just a small debate over whether the development of shale gas in Pennsylvania is generating jobs for folks residing in the state already, or for folks coming into the state from elsewhere. My version of that is that it makes a difference whether you are talking about folks who are flying in temporarily in stints, versus people moving into the state from elsewhere. If folks are actually moving into the state it clearly will have positive impacts on state-wide population trends as well as economic growth. If folks just fly in and fly out, but continue to make their permanent residences elsewhere, it makes the Pennsylvania T akin to a large North Sea oil platform. Or to use a US analogy.. maybe places like Altoona, or even Pittsburgh are the Port Fourhon’s of Midatlantic? If folks are not living here permanently, they will be buying their homes elsewhere. Making all of those home related purchases elsewhere and raising their families elsewhere and so forth and so on.
Clearly there are new jobs in Pennsylvania resulting from shale gas development. The scale of employment projections I have seen make it impossible that all the new jobs are being filled by folks in the parts of Pennsylvania where most of the drilling has been happening. The fundamental question is whether the folks are itinerant or permanent migrants into Pennsylvania.
So is this migration happening? It was brought up specifically recently by Brian O. in the PG. Brian isn’t the only one who has brought up this issue of Marcellus Shale induced migration… for some rather colorfully named “Tex-Pats” I learn. I thought I might try to find the migrants in the data. Has there been some shift in migration flows that correlates with the beginning of shale gas development in Pennsylvania is the question. Seemed the best place to start was to look specifically at migration flows between Texas and Pennsylvania. That is obviously just one particular migration flow, but since Texas is the place with the shale gas expertise, it is the place you would expect to see some of the specific shale gas talent diaspora. Here is what I get from the IRS migration data which will capture those who are telling the IRS they have moved in or out of Pennsylvania.. probably correlates pretty clsoely to where they are paying most of their taxes overall:
 So maybe there are a few net new migrants resulting from shale gas development, but I don’t think you will find much evidence of a change in trend in the data state-wide as shown there. At least from this data the answer to whether the the shale workers are moving to Pennsylvania is no.. but it may be it is too soon to measure the full migration flow that shale development may be inspiring. This data reflects moves that have happened in 2009 at the latest. So the better answer is at least through 2009 is ‘not yet’.
Still, look at the scale and for state-wide migration flows those are not the biggest of numbers. It will not take much new migration to really show some shift in the trend.. or any shift in trend. Seems to me that the argument that folks are moving into Pennsylvania because of shale development has been floating out there for a couple years now at least so you would see something by now in the IRS data. So we will keep watching. I would be surprised if you do not see some movement in this trend in subsequent years. Just an exogenous extra 1,000 migrants a year (roughly a total of 15 people per county in Pennsylvania… in other words just a few households) from Texas to anywhere in Pennsylvania would cut that net migration time series in half from where it has been recently. Given the scale of employment impacts that are floating out there, seems like it would be hard to hide any meaningful impact on migration flows.
For those who want more detail, this is the table that I made the graph from.
|
TX to PA
|
PA to TX
|
Net
|
| 2004-2005 |
5,204 |
6,488 |
-1,284 |
| 2005-2006 |
5,236 |
7,405 |
-2,169 |
| 2006-2007 |
5,220 |
7,452 |
-2,232 |
| 2007-2008 |
5,372 |
7,834 |
-2,462 |
| 2008-2009 |
5,488 |
7,637 |
-2,149 |
By Christopher Briem, on August 19th, 2011
I am a little far away so I don’t know if this is an error in the print edition or not. PG’s online headline on its main web page says “Regions’s unemployment rate rises“ (emphasis added). But the news out was just for the state’s labor force. The online story itself has the right title though.
*****
Obligatory Marcellus Shale coverage. We would retitle the big biz story today as ‘Voting with your shale’.
Speaking of Marcellus. I wonder what those who like to confuse correlation with causality have to say about the two main stories today: 1) Marcellus Shale natural gas output in Pennsylvania spiked (which Platts pointed out earlier in the week) this year and 2) state unemployment is up (see link earlier). But we are all to smart too be that superficial. Looking in depth into the numbers we see that jobs are indeed up in the state and by industry are being lead by job growth in health care and education services. Clearly Marcellus Shale development is getting people into the hospital more and pushing folks to enroll in higher education.
Joking aside I really am wondering more and more about the displacement of employment in other industries being caused by the demand for workers derived from Marcellus Shale development. Could be a part of the jobs story for the state.
*****
I see the headline about how the Mayor wants to return expanded parking meter hours to their traditional 6pm. They were expanded to 10pm as part of the great pension imbroglio (as short as I can put it). Two big things to me. In terms of sheer transparency, and easy transparency it would be… there must me a giginormous amount of data the Pittsburgh Parking Authority has that would be fun to play with. Wouldn’t it be fun to parse the changes in revenues and tickets since the hours were expanded. If you are reading here you might actually say yes to that, but think about what we could do if that data were available in aggregate or even by neighborhood or finer detail? Can you say ‘parking revenue elasticity’?
The bigger point on the parking story is that it is curious the relatively minor story of parking hours is in the news at all right now. The city is on the hook to deliver to the state very very soon the most important number relevant to all of this. Is the city really taking to the very last minute to produce the benchmark pension actuary report which will be the key datapoint in deciding if the state will take over the pension system?? That number will be the single most important factor impacting the city for the next decade and beyond. No way they don’t have that number already. Waiting to the last minute to actually deliver it is only going to make the state’s situation worse as they try to evaluate the numbers… oh, yeah….duh! Seems like that is the most important story all around is why we don’t know the ‘final’ numbers on that yet. Gonna be an interesting ride.
*****
And everyone is talking bees. Multiple stories in the PG and even Mike is into it. We be bees here from the beginning. Ha. I do wonder what happened to Bob’s bees.
By Christopher Briem, on August 17th, 2011
Worth a read by all from some (other) folks at Penn State: – Reverse Engineering the Economic Impacts of Pennsylvania Marcellus Natural Gas Industry.
Just to make sure the vanity surfers catch it.. we will just add the keyword here: “Marcellus Shale”. That always bumps up the readership here… for real.
Some key points in there. Look at how much of the economic impact they show there is coming from construction and related hotel/hospitality industries. When you do economic impact analysis, or lets be clear that when I (and most everyone I know for that matter) does economic impact analysis, you do not treat the up front construction employment associated with most any project the same as the net new jobs created for the long run.
You might also note that this Penn State study (I do wonder if some in the industry will ever refer to more than the one series of studies as being from Penn State researchers) make available their work product calculations.
By Christopher Briem, on August 16th, 2011
Out of West Virginia University is a new report focused directly on us and greater Westsylvania. See: Regional Pittsburgh: The New Energy Economy.
A lot of it focuses on some macro level energy issues for the US and really only gets to local issues at the margin. However, the new coverage of this report highlights the ‘quarter million’ jobs forecast for Marcellus Shale development in the US. I was curious if this meant there was some new independent validation of the big jobs forecast for shale gas development in Pennsylvania, but no.. the report states that number, but merely references one of the now many Penn State reports on Marcellus Shale. So it is the exact number as in the Considine et alia, reports in recent years. There is no new analysis of any jobs forecast in the report as best I can tell, it is just an echo of the one report as updated and does not mention at all any of the other controversies over the Marcellus job forecasts..
Mapophiles will note they discuss what the greater Pittsburgh region means geographically… they note on page 15 or so some maps with distances centered around Pittsburgh. The most curious thing about this is that it is a report out of West Virginia that really accepts a Pittsburgh-centrism you rarely see even here. It really represents a big step forward in a lot of projects promoting regionalism here (P32, Indicators among others) that such an idea would come out of WV.
I have a hard time characterizing the overall report. Is it a policy report, an economic report or something else? I say that because in the ‘The Opportunity’ section is this paragraph which I guess borders on political economy:
Sometime in the recent past, we became complacent; letting the good life lull us into a sense that all is well and someone else will handle all of the problems. This approach has clearly fallen short of the world leadership position that we grew accustomed to, leaving us lagging behind in technology, the value of the dollar, loss of the more technically based jobs and capabilities, and the disenfranchisement of our youth for the future that they will soon inherit.
It’s like a pep talk more than anything else and certainly has a magnum opus kind of feel. Curious.
By Christopher Briem, on August 11th, 2011
Beaten to the metric I am. Hard to blog at 36K feet. I note the news out of the BEA is that personal income growth in the Pittsburgh ranks pretty well. It all begs an interesting question where all this (relative) good economic news for the region is coming from.
To answer that, first read this: Pittsburgh’s Big Rank Jump
Then look at the date.
Go back and reread that every time you read some newly written story about how the economic story of Pittsburgh is something new or recent. I just am not a big believer in simple stories or ‘tipping points’ in most economic stories for the region. As Jim R. will point out, the mesofacts are closer to the real facts, but they don’t make such easy stories to tell.
But going back to the news today. The PG version compares Pittsburgh’s income growth to some of the smaller metro areas in Pennsylvania. Might be worth noting just now much smaller some of the noted metro areas are in comparsion to Pittsburgh. They note we have not grown as much as the Williamsport metro area. Is Williamsport half the size of the Pittsburgh region? A quarter? Looking at the income data of note today, Williamsport had $3.9 billion in annual personal income. The Pittsburgh region has over $103 billion. So you are talking about a region less than 1/25th the size of Pittsburgh. Statistically, the entire gain in income in Williamsport would not even be a blip if diluted across the larger Pittsburgh region.
Williamsport is itself an economic giant compared to some of the smaller areas of Pennsylvania that really are at the heart of the Marcellus Shale development that is said to be the cause of some of the the income growth in the state. You have to keep the scale of these numbers in mind when thinking about that. It goes back to a basic point that the Marcellus Shale story appears so outsized because in the places where the development is happening the economies are so small that new economic activity is inevitably very large in comparison to the status quo.
By Christopher Briem, on August 8th, 2011
Remember when the Trib reported that the Marcellus Shale Coalition threatened to boycott business within the city limits of Pittsburgh if they pushed ahead with legislation unsupportive of drilling within the city? Seems to me that since then City Council has pushed ahead much further than they were planning to back then with the proposed amendment to the city charter on all of this. The boycott must be on don’t you think? I mean, if they wanted to boycott the city before, they must really want to now?
Boycott is such a harsh word; makes me think of the Cuban Missile Crisis. To be fair the article says “industry officials said they could take their non-drilling business elsewhere”, so it is all hypothetical though still very threat-like.
At least to date, there does not seem to be much impact from a story today in the PG on local commerical real estate demand. While it gets into some suburban developments, the article focuses on the rapidly tightening Downtown real estate market. The irony is that I suspect many of the new property assessments for commercial property Downtown will actually be decreasing no matter. More some other time on the impact that is likely to have for residential property taxes.
But despite a lot of popular belief to the contrary, the ability of the City of Pittsburgh to attract and retain jobs has almost never been problematic. If you ever hear someone talk about folks taking business out of the city because of (fill in the blank: taxes, politicians, crime, traffic, ???, oh and don’t forget the potential of regulations on gas drilling that does not exist), you should call them on it. They may have an anecdotal example for sure, but for every job ‘fleeing’ the city for some suburban location, some job is being created elsewhere in the city.
I’ve said this before, but time series of jobs located in the City proper are about as stable as any economic metric in the region, or in any other Northeastern US urban core, over many decades. In 1958, the late Edgar Hoover and his team studying the Pittsburgh economy counted 294,000 jobs located in the city proper and 107,000 in the Golden Triangle specifically. 1960! So well before the collapse of heavy industry in town. Those numbers are virtually identical today which tells me there is a certain limit to how many jobs can efficiently be located in what are some relatively (very) constrained areas. So those jobs ‘forced’ out of the city are if anything, being forced out by the jobs that want to be located here, or are fairly immediately replaced. Not exactly a bad situation to have and one that has persisted through some very good and very bad economic times for the region.
More recently, and with some more specific data here are the trends in jobs located in the city of Pittsburgh this is what you get:
So there is not more recent data for that, but if you believe the story today the recent trends are as positive as they have been in decades so there is no reason to think the fundamental picture has changed.
If you think the city is retaining lower paying jobs while the ‘better’ jobs are the ones fleeing to the suburbs you would be wrong again. From the same data as that chart, the average annual income for jobs located in the city proper compared to the remainder of the MSA:
| Average Annual Pay |
|
|
|
|
|
|
|
Pgh (City) |
Rest of MSA |
Ratio |
| 1991 |
$35,119 |
$29,122 |
1.21 |
| 2007 |
$47,669 |
$35,715 |
1.33 |
It seems that the pay premium for jobs located in the city of Pittsburgh proper is well ahead of where it was 20 years ago. Go figure. Looking at the ratio should get you past any inflation factors which you would think would apply equally to city and suburb within a region. Again, I would just speculate that more recent data is only expanding the divergence of pay at city-proper and suburan jobs within the region.
So I dunno… since I don’t see any retraction of the MSC’s threat against the city, one might presume they have pushed ahead with their intent to dissuade members from business in the city. Maybe the annual Furry convention makes up for the lost business.
By Christopher Briem, on August 3rd, 2011
It’s like the Groundhog Day of economic impact reports released again yestersay. I guess this will be an annual event.
I guess I really need get back to my Marcellus Shale experiment from last week. Last week I had put up a chart, deliberately unlabeled in part with some data on employment. The horizontal/time axis was unlabeled because I had intentionally put the most recent data on the left. The purpose was to free the interpreter from some preconceptions and then see what they thought. I had said the data was the time series of ‘new hires’ in the industry which is a metric that had been in the news of late, but the data I pulled was inadvertently the total employment numbers which I then scaled incorrectly because I thought it was quarterly flow data. So I pulled the chart down to avoid confusing those who read it. At least I gave the social media gnomes on retainer something to read all weekend long.
Alas. Redone properly, and without the temporal inversion this is the trend in total employment statewide in NAICS code 21 industries (Mining, Quarrying, Oil and Gas Extraction), which should capture the direct employment resulting from new Marcellus Shale related activity.
 So the questions were how big a deal is this trend? Through 2009 the industry had not even regained the levels of employment of its recent past. Perspective on the scale is always essential and realize Pennsylvania total employment is roughly 5.9 million currently. Even this chart is not all Marcellus related of course. In fact you can’t even say most of it is Marcellus related since there was obviously there was employment before the first Marcellus well went in. Generously the Marcellus numbers are coming from just the delta, or change, since 2007 give or take. Even that I wonder about a bit since there is also this little industry related to coal mining that still exists in Pennsylvania and for those watching it, coal prices have been skyrocketing in recent years. It’s part of the story in there as well.
The data there only has full year data through 2009 thus far, but other data available for 2010 and into 2011 indicate the trend in employment is picking up. The current employment in this time series may be over 30K by now, so a gain of 10K over the last couple of years. 10K is a lot of jobs no doubt, but how big we can debate. For a ballpark comparison it is probably on par with the net gain in jobs at UPMC alone over that time.
The numbers you read about are often higher. Economic impact analysis the study of all the indirect and induced impacts new investment and economic activity can have. For sure Marcellus has those additional impacts, just as new investment in most any industry does. So the bigger numbers are not fiction, but their meaning is not always made clear. The report today has an oft quoted, or will be oft-quoted number of 250 thousand jobs. That isn’t an estimated impact now, but a potential (this time more clearly labeled as ‘potential’) total impact including all indirect and induced impacts.. The future is where this all becomes an interesting question as to what is real what is hype, a question that is being debated in a lot of places.
The 250K jobs projection is a really interesting number in a lot of untalked about ways. Even with the lingering employment recession inflating the unemployment rolls, the total unemployment count in PA right now is on the order of 470K and that includes a lot of folks in parts of the state with no palpable Marcellus Shale impact to date such as Philadelphia. Half of that state unemployment count alone comes from the Philadelphia MSA, even more if you include the Philadelphia exurban environs and then you probably then need to exclude unemployment in urban Pittsburgh since those folks have no means to get out to the jobs being created for the most part. So if that projection comes close to being true, where will those folks be coming from? That is one of the core questions in all of this. You would think there is a lot of permanent resident migration going on.. and unless they all get here at the last minute that flow must have started in earnest by now. Maybe that is going on, I dunno for now…. but the ‘man-camps’ don’t count as migration into the state for the most part.
Like everything else, it’s all a lot more complicated than that, and a lot more complicated than others want to make it seem. There was a good overview of some of the business dynamics in the nation’s natural gas industry in Seeking Alpha just the other day. The biggest things people are really talking about is what is going to happen with the infrastructure for all of this, the pipelines and compressor stations that are going to be needed in ever larger numbers if. That and this issue of a refinery or ‘cracker’ to process the gas being produced here. Keep an eye on that.
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