In the last decade, unconventional natural gas development has transformed American energy — as well as communities across Pennsylvania’s Marcellus Shale region.
Often popularly referred to as “fracking,” this highly industrialized process is used to extract energy resources from underground geologies such as shale or sandstone.
In Pennsylvania and elsewhere, wells are often drilled a mile or more beneath the ground and a mile or more horizontally along the shale or sandstone. Water, sand, and chemicals are pumped underground at high volume, fracturing the energy-bearing rock, releasing the gas, which then flows to the surface and is then moved through pipelines for processing and consumption in regional, national, and global markets.
Since 2007, more than 10,000 unconventional gas wells have been drilled in Pennsylvania, mostly in the northern and southwestern parts of the state, with peak drilling occurring between 2010 and 2014.
Opponents of fracking have pointed to what they see as unacceptable environmental risks, including fracking fluid spills, methane leaks, disposal of wastewater, and groundwater contamination. Others cite uncertain economic benefits and the perils of boom-bust natural resource economies.
Meanwhile, industry advocates have argued that natural gas development creates needed jobs and economic development, especially in poorer and more rural parts of the state. As it happens, slightly more than a third of the state’s school districts are rural. Yet nearly two-thirds of the unconventional drilling occurred in those school districts, which also happen to be among the poorest in the state.
These debates have also factored into the campaigns of Democratic candidates in the 2020 U.S. presidential election, with both Sens. Elizabeth Warren and Bernie Sanders pledging to ban fracking if elected, largely because of environmental and climate change concerns.
As educational researchers at Penn State, we wanted to know how fracking had affected Pennsylvania school district finances. As institutions playing central social, educational, and economic roles to the communities they serve, to what extent has fracking resulted in an economic windfall for schools — and especially since a large proportion of schools with gas wells in their proverbial backyards are rural and economically underresourced?
Adjusting for a host of factors that can impact funding, we found that districts where fracking occurred between 2007 and 2015 had lower per-pupil incomes, real estate values, and property tax revenues. In total, school districts where unconventional drilling had taken place had $1,550.50 less per pupil in 2015 dollars, relative to otherwise similar districts that did not have unconventional drilling.
Although we found a modest increase in state and federal revenues wherever fracking occurred, these increases were not large enough to counterbalance the average negative effects.
Why is this the case?
First, Pennsylvania imposes an impact fee that collects revenue each time a well is drilled, as opposed to a severance tax that collects revenue based on the amount of the energy resource produced.
The Kleinman Center for Energy Policy at the University of Pennsylvania has estimated that the impact fee revenues are one-third the potential revenues of a severance tax proposed by Gov. Tom Wolf, whose 2015-16 budget proposal was developed with the intention of raising $2 billion for public education.
Second, in Pennsylvania, about 77% of local school district revenues came from property taxes in 2014-15, with most of the remainder generated from an earned income tax. But property values showed relatively little impact from shale gas development within Pennsylvania.
Gas development in Pennsylvania was sudden and intensive, with a highly mobile labor force comprised largely of non-Pennsylvania workers looking to rent rather than buy housing. While rental prices increased, often several-fold, real estate values overall did not show any dramatic change in association with shale gas development.
Similarly, some residents were able to benefit from gas leasing revenues when wells were drilled on their property, but those revenues don’t fall under “earned income.” As a consequence, they don’t contribute toward school revenues.
Economic inequality has risen sharply across the United States since the 1970s, and research strongly suggests that children living in rural communities have been disproportionately affected. Proposals to address poverty often focus on indirect alternatives to helping struggling families like promoting economic growth.
Despite the arguments of gas industry advocates, our work indicates an absence of clear economic benefits to affected school districts. Given research suggesting that school funding can be particularly important for long-term economic opportunities, our research suggests that unconventional drilling may help to maintain and reinforce inequalities across school districts. This is especially the case if school finance mechanisms and natural resource public policies don’t take into account what are often the profoundly uneven economic outcomes of natural resource development.