The development of the Marcellus Shale, a vast natural gas-bearing geological formation that stretches across much of Pennsylvania, has been one of the most significant economic stories in the state over the past 15 years. Advances in drilling technologies like hydraulic fracturing and horizontal drilling have unlocked immense natural gas resources from the shale, kicking off a boom in production that has reshaped local economies and generated billions of dollars in economic activity.
A New Energy Powerhouse Emerges
Before the Marcellus Shale boom began in earnest in the late 2000s, Pennsylvania was not a major player in the U.S. natural gas industry. But that changed rapidly as drilling accelerated across the state. Between 2007 and 2019, over 12,000 unconventional gas wells were drilled in Pennsylvania, with production soaring from just 0.1 billion cubic feet in 2007 to nearly 7 trillion cubic feet by 2019 – making Pennsylvania the second-largest natural gas producing state behind Texas.
This remarkable growth has turned Pennsylvania into an energy powerhouse. The state now accounts for over 20% of total U.S. natural gas production. And the Marcellus Shale is the driving force – it is now the largest natural gas producing formation in the United States, accounting for nearly 40% of total shale gas production.
Generating Jobs and Economic Opportunities
The rapid growth of the Marcellus Shale industry has been an economic boon for Pennsylvania, supporting tens of thousands of jobs and generating billions of dollars in economic activity. One study found that between 2007 and 2016, shale development generated an estimated $21 billion in economic benefits for Pennsylvania, Ohio and West Virginia.
Employment Impact
At the peak of the drilling boom in 2014, the shale industry supported an estimated 74,000 jobs across Pennsylvania, Ohio and West Virginia. While employment has fallen from that peak as drilling activity moderated, the industry remains a major employer. In 2019, the Marcellus Shale industry supported over 20,000 direct jobs in Pennsylvania, with average annual wages of $103,000 – nearly double the statewide average.
These direct industry jobs include a wide range of occupations, from drilling rig operators and truck drivers to engineers and environmental compliance specialists. And each direct job in the industry supports additional indirect and induced jobs across the supply chain and broader economy. Estimates suggest that for each direct job, 1-2 additional jobs are supported in industries like construction, manufacturing, retail, and hospitality.
Royalties and Lease Payments
For many landowners in drilling regions, one of the most significant economic impacts has been from royalties and lease payments. Companies typically pay landowners an upfront bonus to lease their mineral rights, and then provide royalty payments based on the value of the gas produced from wells on their property.
These payments can be substantial. One study estimated that between 2008 and 2017, Pennsylvania landowners received over $10 billion in royalties and lease payments. For some households, this has been truly life-changing. There are numerous stories of farmers, retirees and low-income families receiving six- and even seven-figure checks.
However, the distribution of these benefits has been uneven. Royalty and lease payments accrue to mineral rights owners, who are often not local residents, and can be determined by factors like acreage, well production, and negotiated lease terms. One analysis found that in some counties, as little as 7% of lease and royalty payments went to local residents.
Strengthening Local Businesses
The shale boom has also provided a major boost to businesses in drilling regions, especially in industries that directly support or benefit from drilling activity. Hotels, restaurants and retailers saw a surge in business from the influx of out-of-state workers during the drilling boom. Engineering companies, construction firms, equipment suppliers and logistics providers have seen demand soar.
The increase in business activity has gone beyond the drilling supply chain. As incomes have risen in the region, consumer spending has increased, lifting revenues for a wide range of local businesses. And the ripple effects have spread to industries like real estate, finance and even agriculture, as farmers have leased water rights and sold sand for use in fracking.
Concerns and Challenges
While the economic benefits of the shale boom have been significant, the rapid growth has also created strains and challenges for drilling regions. Local officials have had to grapple with impacts on infrastructure, housing, public services and the environment. And despite the economic opportunities created, unemployment and poverty remain stubborn problems in many communities.
Infrastructure Strains
The surge in heavy truck traffic from shale development has taken a toll on local roads and bridges, many of which were not built to handle the large vehicles used in drilling operations. The Pennsylvania Department of Transportation estimated that $3.5-$4 billion would be needed to repair damage to state roads from drilling activity.
Increased traffic has also created safety risks and generated noise and dust that have impacted residents’ quality of life. Localities have struggled to keep up with the need for increased spending on road maintenance and traffic enforcement. While impact fee revenues have helped fund infrastructure improvements, repairs and upgrades are still an ongoing challenge.
Housing Shortages and Price Spikes
The influx of out-of-state oil and gas workers strained housing stocks in many drilling communities, especially during the height of the boom. Some areas saw severe housing shortages, skyrocketing rental prices, and spikes in homelessness as low-income residents were priced out of the market.
In Bradford County, the average rent for a two-bedroom apartment rose from $300-$600 per month in 2007 to $2,000 or more by 2011. Campgrounds and hotels were routinely filled to capacity, and some residents resorted to living in campers or renting rooms in private homes. The housing crunch has eased as drilling activity slowed, but adequate affordable housing remains a challenge in many communities.
Uneven Local Impacts
The economic impacts of the shale boom have also been geographically uneven. While some communities have seen incomes rise and job opportunities increase, others have been left behind. The drilling rigs and wells are heavily concentrated in rural areas, while many of the skilled jobs are based in cities like Pittsburgh.
This has created a disconnect between where the economic activity is happening and where the jobs and income gains are flowing. One study found that the economic benefits have largely bypassed the small towns at the epicenter of drilling activity. Incomes and employment grew more slowly in the most heavily-drilled counties compared to the state as a whole.
Environmental and Health Concerns
Alongside the economic opportunities, the surge in drilling has also generated concerns about impacts on the environment and public health. Drilling operations have the potential to contaminate groundwater, release air pollutants, and create noise and light pollution. Wastewater from fracking contains toxic chemicals and radioactive material that create risks if not properly handled.
There have been numerous reports of water contamination near drilling sites in Pennsylvania, and some studies have found elevated levels of air pollutants in drilling areas. Health experts have raised concerns about potential risks including asthma, cancer, and birth defects. One study estimated that shale development was responsible for 1,200-4,600 premature deaths in Pennsylvania, Ohio and West Virginia between 2004 and 2016 due to air pollution.
Regulators and the industry maintain that shale development is safe when done properly, and that risks can be managed through strict regulations and best practices. But fears about health and environmental impacts have generated significant public concern and opposition to drilling in some communities.
An Ongoing Evolution
As drilling activity has slowed in recent years due to lower natural gas prices, the economic impacts of the shale industry in Pennsylvania have evolved. Job growth has moderated, and many businesses that saw a boom during the drilling surge have had to adjust to lower demand. But the industry remains a key driver of the state’s economy.
Looking ahead, the shale industry is expected to remain a major economic engine for Pennsylvania for decades to come. The state has immense shale gas resources, with estimates suggesting the Marcellus and Utica shales contain enough gas to power Pennsylvania for the next 100 years. And demand for natural gas is expected to grow steadily in the coming years, driven by rising exports and the continued shift away from coal for electricity generation.
At the same time, the industry will likely continue to face challenges, from volatile commodity prices to the need to maintain a social license to operate in local communities. Effectively managing the economic, social and environmental impacts will be critical to ensuring that the benefits of shale development are broadly shared and sustainable over the long term.
For policymakers and local leaders, the shale boom provides valuable lessons on how to manage rapid economic change. Investing in infrastructure, workforce training and economic diversification can help communities capitalize on the opportunities while mitigating the risks. Engaging stakeholders to craft smart regulations and maximize local benefits will be key. With the right strategies in place, the Marcellus Shale can continue to be a positive force for Pennsylvania’s economy for many years to come.
