Presentation Transcript

1. Updates to the NYSDEC September 2011 revised draft SGEIS: Community & Economic Impacts David Kay CaRDI dlk2@cornell.edu Presented by the Cornell University Community & Regional Development Institute November 9, 2011
2. Scope of Presentation The Economic Assessment Report http://www.dec.ny.gov/docs/materials_minerals_pdf/rdsgeisecon0811.pdf Portions of this report included in the Revised Draft SGEIS Most of sections 6.8 (Socioeconomic Impacts) and 7.8 (Socioeconomic Mitigation Measures) of the Revised Draft SGEIS are directly quoted from or derived from the Economic Assessment Report. Not included in this slide show Visual (6.9/7.9), Noise (6.10/7.10) and Transportation (6.11/7/11) Community Character (6.12/7.12)
3. Economic Assessment Report and the SGEIS Entire report is new Analysis driven by drilling scenarios (“low”, “average”, “high”) Topics considered Employment, income Population – not included Housing – not included Government revenues and expenditures Environmental Justice – not included
4. Statewide analysis plus a focus on three “representative” subregions Region A (Chemung, Tioga, and Broome counties) 50% of new wells assumed Region B (Otsego,Delaware, and Sullivan counties) 23% of new wells Region C (Chautauqua and Cattaraugus counties) 5% of new wells Rest of NYS (in shale gas region) 22% of new wells The three regions were selected to evaluate differences between them high, moderate, and low production potential areas that have/haven’t experienced gas development in the past differences in land use patterns C A B
5. Economic Assessment Report and the SGEIS Key Assumptions Amount of natural gas development that will occur Designed to provide order-of-magnitude estimates for the socioeconomic analysis, not to forecast actual well development Expected rate of development (number of wells per year) Length of time over which that development would occur Length of time and amount individual wells produce Distribution of development throughout the state
6. Socioeconomic Impacts: Assumptions Timeline Assumptions: 10 year “ramp-up” of new well development, then flat-line 30 year development period 60 year production period New wells assumed to have 30 year production life Number of productive wells assumed to peak in year 30
7. “It is unlikely that new well construction would occur under a steady, constant rate… The actual track of well construction would likely be much more cyclical in nature than as described.”
8. Socioeconomic Impacts: Other Development Assumptions DEC developed scenarios based in part on assumptions and information from IOGA- NY (a gas industry association) For the low rate of development, DEC assumed a rate of 25% of IOGA-NY‘s estimated average rate 67% of Marcellus and Utica Shale is assumed developable????????? 90% of all wells assumed to be horizontal, average 160 acres/horiz. well 10% of all wells assumed to be vertical, average 40 acres/vert. well Specific decline curves assumed (steeply declining rate of gas per well produced each year; the rate of decline affects profitability, total gas yield, etc.) Royalty payments, particularly in the initial stages of well production when natural gas production is at its peak, can result in significant increases in income. Signing bonuses/bonus bids also can provide significant additional income to property owners.
9. Socioeconomic Impacts: Other Development Assumptions According to a Marcellus Shale Education and Training Center analysis An average natural gas well using the high-volume hydraulic fracturing technique requires 410 individuals working in 150 different occupations. The manpower requirements to drill a single well were calculated to be 11.53 full-time equivalent (FTE) construction workers 1 FTE worker (approx.) is required to operate/maintain every 6 wells in production
10. The high development scenario not included in socioeconomic section of the SGEIS “in order to be conservative in assessing the positive potential economic benefits of high volume hydraulic fracturing”. “The high development scenario was used as the conservative assumption of activity for all other sections of this SGEIS.”
11. Socioeconomic Impacts: Scenario Summary Maximum build out completed in 30 years Low Development Scenario Viewed as lower boundary of possible development 9,461 horizontal wells at build out 1,071 vertical wells at build out 371 horizontal wells/yr 42 vertical wells/yr 25% of estimated average rate of development Average Development Scenario Viewed as upper boundary of possible development 37,842 horiz. wells at build out 4,284 vert. wells at build out 1,484 horizontal wells/yr 168 vertical wells/yr
12. Socioeconomic Impacts: DEC Conclusions “Expected to have a significant, positive impact on the economy of New York State…significant positive economic impact at the regional and local levels.”
13. Socioeconomic Impacts: DEC Conclusions “The majority of these indirect jobs would be concentrated in the construction, professional, scientific, and technical services; real estate and rental/leasing; administrative and waste management services; management of companies and enterprises; and manufacturing industries” Economic impacts based on estimated number of wells time of jobs per well
14. Socioeconomic Impacts: DEC Conclusions “Some industries in the regional economies may contract as a result of the proposed natural gas development. Negative externalities associated with the natural gas drilling and production could have a negative impact on some industries such as tourism and agriculture.” No further analysis of this topic.
15. Socioeconomic Impacts: DEC Conclusions “Significant increasesin property value are expected where the subsurface mineral rights and land are held jointly with land ownership and the exploitation of the subsurface resources is not limited in some way... Properties where the mineral rights are not held jointly with land ownership, or where there is some restriction on drilling, would not experience this increase in value.” “It is possible that… various impacts, particularly those associated with the construction phase, could reduce the value of properties close to the wells relative to similar properties not located close to wells.”
16. Socioeconomic Impacts: DEC Conclusions Given the uncertainty associated with the actual level of future development of these reserves….it is impossible to definitively quantify the fiscal impacts of this action [but…] Fiscal impacts on NY State Government Significant positive impact on revenues collected by New York State. State land revenues: not expected to be large relative to the total New York State budget. New York State would experience a large increase in its personal income tax receipts… some increase in its corporate tax receipts. Could result in significant added costs for New York State‘s government.
17. “Typical” Well Tax Property Tax Payments - Broome “The projected change in total assessed value and property tax receipts that would result under any of the development scenarios would be significant.” “local governments would also experience some significant negative fiscal impacts”
18. Socioeconomic Impacts: Proposed Mitigations Potential for “adverse impacts in regions with high drilling activity, particularly acute in the short term, including * localized impacts on the housing market caused by the in-migration of construction and production workforces and * an increase in demand for certain state and local government services, resulting in increased government expenditures. THEREFORE: Monitorthe pace and concentration of development throughout the state Consult with local jurisdictions, as well as applicants, to reconcile the timing of development with the needs of the communities. Encourage the hiring of local labor… a jobs training program or apprentice program should be developed through the SUNY system
19. My Critique of Study A number of useful elements but several major critiques: “Average” and possibly even “low” estimates may exaggerate potential gas extraction Effects of bonus and royalty payments ignored, leading to underestimate of benefits Tax revenues may well be overestimated even if drilling scenario is accurate Assumption of smooth rates of change in drilling levels “smooths out” the highs and lows that are most likely to stress community capacity to respond See more comments at: http://cce.cornell.edu/EnergyClimateChange/NaturalGasDev/Documents/PDFs/Cornell%20SGEIS%20Comments.pdf