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Jon LaughnerMarcellus Shale Team

Penn State Cooperative ExtensionJune 1, 2010

State Representative Mark Mustio

Workforce and Community Impacts

A Few Background Concepts

• Scale of this may be BIG

• Resource-based economic development; when it’s gone, it’s gone.

• Local impact- multiplier effects if dollars are kept local.

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Economic Development Challenge

• Help local businesses and workers compete for these new opportunities.

• Encourage businesses, workers, and royalty owners to spend dollars locally.

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Value?

• $1.2 trillion dollars of recoverable natural gas in PA.*

• Pennsylvania Estimates;

– 2010 - Could exceed 88,000 jobs created.

– 2010 – 110,000 new employment.

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* At $4.00 mcf

The Economic Impacts of the Pennsylvania Marcellus Natural Gas Play; May 2010

Things to Remember:

• The play is in its infancy

• Marcellus Gas Infrastructure is being developed

– Businesses are still moving in

– Extreme amount of complexity with overall industry , ie; Supply Chain

• Other Unconventional Plays have provided a guide to occupations.

• Estimates on the number of wells to be drilled.

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Three Phases of Natural Gas Development

Development Phase (Short Lived/Labor Intensive)

• Well-pad and Access Road Construction• Local collection pipeline Construction• Drilling of the Well• Fracturing of the Well• Reclaiming some Disturbance

Production Phase (Long lived/Small & Steady Labor Force)

•Trucking Water and condensate from Well Site• Monitoring Production • Occasional Well Work-Overs (partially re-drill/re-frac)

Reclamation Phase•Dismantle and Reclaim well-sites

Source: Jacquet 6

Jonah/Anticline Fields Direct WorkforceThrough The Three Phases:

Graph: Ecosystem Research Group/Jacquet

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What Specific Jobs are Required?

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General Office, 24%

CDL

10%

Gen. Labor

20%Heavy Equipment

17%

Geologists

3%

Lawyers

4%

Paralegal

1%

Cartog/GIS

1%

Timber Logging

1%

Welders

1%

Welders-Helpers

1%

X-Ray

0%X-Ray Tech

0%

Engineers

3%Inspectors

1%

Supervisors

5%

Landmen/Realty

8%

Semi-Skilled Tech.

6%

Barnett Shale (TX)-Which Industries Benefit?Share of Annual Impact on Business Activity

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Business Sector Personal income

Employment

Crude Petroleum & Natural Gas

21% 7%

Retail Trade 16% 27%

New Construction 10% 9%

Maintenance & repair 7% 7%

Business services 6% 4%

Health services 6% 6%

Eating & drinking places 5% 15%

Transportation 4% 3%

Opportunities/challenges in Pennsylvania:

Economic & Workforce

• Businesses– Existing local businesses benefit?– ‘New’ local businesses?– Attract outside businesses?

• Workers & Residents– Local residents/workers HAVE the skills?– Locals LEARN the skills?– Youth LEARN the skills & stay?– Newcomers to move into county?

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• Biggest recruitment challenge is finding experience, work ethic, basic skills, and basic knowledge of industry.

• Local education and training represents a smaller, yet important, challenge to recruitment .

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What Do We Need?

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Local Education and training providers will need to address natural gas specific skills for “blue collar” jobs.

Local Education and training providers have existing programming in place for “white collar” occupations found in the industry, but may need to expand current capacity.

Career and Technical Education Programs are currently teaching some related skills – Some now expanding to providing natural gas industry specific programming.

Educational Capacityl

Major Economic Impacts from…

1. Business activity

– Gas industry

– Supporting businesses

– Other local spending by employees & companies

2. Royalty income to landowners

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1. Business Activity Impacts

• Drilling each Marcellus well requires:

– More than 410 individuals

– Almost 150 different occupations

– 11.5 full time direct jobs

• Once drilled, every 100 wells generates 17 long-term full-time jobs

• Estimates: 165,000 – 250,000 wells ? ? ?

• + Indirect employment impactsSource: MSETC/CPWDCWorkforce Needs Assessment 2009

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2. Pennsylvania ActivityRoyalty Income (per well)

• 3 to 4 mmcf per day in Marcellus

• Estimated 2.5 bcf lifetime per well

• Mineral right owner gets minimum 1/8th share • $2.25 million over lifetime ($4 mcf)

• $2.80 million ($5 mcf)

• (spacing is one well every 80 acres or so)

• Provide opportunities for the money to be spent locally

• Local business activities & spending?• Charitable contributions?

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Range Resources 2008

2. Pennsylvania Activity

• 52+ energy companies and increasing.

• Estimated collective $55B by 2014.

• Some selling other assets to reposition here.

• Large “Majors” investing in Marcellus and its technology.

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2. PA Spending by Marcellus Industry2009

• Industry spending $2,751,854,000

• Payment to Landowners 1,783,448,000

• Payroll - 2008 66,000,000

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*The Economic Impacts of the Pennsylvania Marcellus

Natural Gas Play – May 2010

Taking Action Locally to Shape Impacts

Opportunities and Challenges

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Could transform our communities – but for the better or worse?

Requires careful decision-making about:

1. Thinking long term, not just short term gain– Monitoring, understanding & mitigating environmental

impacts

– How can this be used to improve Pennsylvania in long run? Other industries this could attract?

2. Encouraging dollars to stay local– Workforce training

– Business development

– Housing

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Could transform our communities – but for the better or worse?

3. Manage the ‘Boom’ without having a ‘Bust?– “Short term” housing & worker needs?

– Plan NOW for when the gas no longer flows

4. Need for monitoring, adapting regulations and recommended practices– Social and cultural change

– Revenue sharing

– Environmental remediation and use of conservation practices

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Could transform our communities – but for the better or worse?

5. Balancing private gain and public good

– Local control & voice?

– Quality of life impacts?

– Effects on other businesses?

– Who pays for public service impacts (and how)?

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Resources

• www.naturalgas.psu.edu

• www.WPSU.org/gasrush

• Written MaterialsLandowner Guide

– Local Government Primer

– Natural Resource Primer (spring)

– Financial Management Primer (spring)

– Fact Sheet seriesIncludes “Organizing a Community Task Force”

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23Thank You. www.naturalgas.psu.edu