Schafft Marcellus Slides

Marcellus Shale Natural Gas Development and the Implications

for Pennsylvania SchoolsKai A. Schafft

Department of Education Policy StudiesCenter on Rural Education and Communities

Penn State University

Potential Impacts of Hydro-Fracking: What School Districts Need to Know

January 9, 2013Alfred University, Alfred, NY

Why is Marcellus Shale natural gas development an issue for schools?

Rapid pace and scale of development;

Alfred, NY

By June, 2012, over 5,500 wells were drilled Total projected: 60,000-100,000.

Alfred, NY


Bradford County


Tioga County


Rapid pace and scale of development;Uncertainties regarding school impacts (e.g., costs, funding, curricula, student demographics, staffing);


Rapid pace and scale of development;Uncertainties regarding school impacts (e.g., costs, funding, curricula, student demographics, staffing);The role of schools in helping to effectively manage change.

Framing of Marcellus Development: Massive Opportunity or Massive Risk?

Opportunity

• Economic Develop-ment

• Revitalized Communities

• Local Job Creation• Opportunities for

Youth

Risk

• Economic Exploitation• Boom-Bust

Communities• Low Skill Job Creation• Environmental Damage

& Industrialized Landscapes

Map of Pennsylvania School Districts Showing Marcellus Shale Coverage, Area of Survey Administration, and Marcellus Wells

* Greyscale = Area of Survey Administration* Diagonal Hatching = Marcellus Shale coverage

Penn State Extension Fact Sheets

Marcellus Shale gas development and Pennsylvania school districts:

What are the implications for school expenditures and tax revenues?

http://pubs.cas.psu.edu/FreePubs/PDFs/ee0022.pdf

Marcellus Shale gas development: What does it mean for Pennsylvania

schools? http://pubs.cas.psu.edu/freepubs/pdfs/ee0019.pdf



http://pubs.cas.psu.edu/freepubs/pdfs/ee0019.pdf

http://pubs.cas.psu.edu/freepubs/pdfs/ee0019.pdf

Opportunities and Challenges

Economic Development & Fiscal Impacts;

Local Demographic Change; Housing Impacts; Physical Infrastructure and

Environment; Curricular Change & Workforce

Development.

Marcellus-related economic development in economically lagging areas…

PENNSYLVANIA SCHOOL DISTRICTS

50 Wealthiest 50 Poorest# of all SDs with Marcellus drilling

4 out of 50 32 out of 50

Total # of wells 322 2113

Economic Development

Respondents from High Drilling Activity Districts

Only All Others N% reporting significant activity as a result of gas industry development

Job creation 35.6 6.6 316Local wealth creation 32.2 6.3 311Business start-up 20.0 4.3 308

Economic Development

Respondents from High Drilling Activity Districts

Only All Others N% reporting significant activity as a result of gas industry development

Job creation 35.6 6.6 316Local wealth creation 32.2 6.3 311Business start-up 20.0 4.3 308

“Although there is some economic development from the Marcellus gas industry I am not seeing how the school districts can benefit from this.”

- Survey respondent

What About Act 13?

What About Act 13?The Impact Fee

unfortunately has no fiscal “impact” for school

districts

What About Act 13?The Impact Fee

unfortunately has no fiscal “impact” for school

districts

IMPACT FEE

local-level – counties and municipalities hosting wells

various state agencies

60%

40%

What About Local Tax Revenues?


Heavy reliance on local funding for schools in Pennsylvania –

Pennsylvania relies more on local property taxes to fund public schools than all but 4 other states; a total 57% of school funding

comes from local sources.*

* See PA Budget and Policy Center (2009), “Pennsylvania Relies Heavily on Local Taxes to Fund Education”


98% of total SD tax

revenues

Real estate tax

Earned income tax


98% of total SD tax

revenues

Real estate tax

Earned income tax

• Oil & gas reserves exempt from property tax;

• Potential devaluation of property values?


98% of total SD tax

revenues

Real estate tax

Earned income tax

• Oil & gas reserves exempt from property tax;

• Potential devaluation of property values?

• Levied on wages and salaries, but non-residents will not be taxed locally;

• Royalties and lease payments constitute UNearned income and are not taxable


• Royalties and lease payments DO however contribute towards the wealth measure used by the state to distribute state aid to school districts


• Royalties and lease payments DO however contribute towards the wealth measure used by the state to distribute state aid to school districts…

…Increases in unearned income (e.g. from leasing and royalties) within a district can increase the measured wealth of a district and consequently result in potentially LESS state aid (even though this new wealth will not increase a district’s tax base).

As SD wealth increases…

…decreases in state aid are likely

Amount of Marcellus Shale Drilling Activity, 2007-2008 to 2010-11 (Number of Wells)

Tax Revenues 0 Wells 1-4 Wells 5-19 Wells 20-66 Wells 67+ Wells

Earned Income Tax

6.9%(71)

3.6%(51)

5.6%(56)

6.5%(62)

13.0%(59)

Per Capita Tax -4.0%(47)

-3.6%(29)

-1.9%(36)

-5.0%(38)

-5.6%(39)

Real Estate Transfer Tax

-25.4%(69)

-20.6%(50)

-9.2%(57)

-5.3%(62)

-3.6%(61)

Collected Real Estate Tax

3.1%(73)

0.5%(53)

0.3%(58)

-0.8%(62)

1.4%(62)

Total Local Revenue

-4.6%(60)

-7.9%(46)

-6.2%(44)

-5.9%(45)

-6.4%(44)

Percent Change in Marcellus Region School District Finances by Level of Marcellus Drilling Activity, 2007-08 to 2010-11 (Number of Wells)



Earned Income Tax

6.9%(71)

3.6%(51)

5.6%(56)

6.5%(62)

13.0%(59)


-3.6%(29)

-1.9%(36)

-5.0%(38)

-5.6%(39)


-25.4%(69)

-20.6%(50)

-9.2%(57)

-5.3%(62)

-3.6%(61)


3.1%(73)

0.5%(53)

0.3%(58)

-0.8%(62)

1.4%(62)

Total Local Revenue

-4.6%(60)

-7.9%(46)

-6.2%(44)

-5.9%(45)

-6.4%(44)




Earned Income Tax

6.9%(71)

3.6%(51)

5.6%(56)

6.5%(62)

13.0%(59)


-3.6%(29)

-1.9%(36)

-5.0%(38)

-5.6%(39)


-25.4%(69)

-20.6%(50)

-9.2%(57)

-5.3%(62)

-3.6%(61)


3.1%(73)

0.5%(53)

0.3%(58)

-0.8%(62)

1.4%(62)

Total Local Revenue

-4.6%(60)

-7.9%(46)

-6.2%(44)

-5.9%(45)

-6.4%(44)




Earned Income Tax

6.9%(71)

3.6%(51)

5.6%(56)

6.5%(62)

13.0%(59)


-3.6%(29)

-1.9%(36)

-5.0%(38)

-5.6%(39)


-25.4%(69)

-20.6%(50)

-9.2%(57)

-5.3%(62)

-3.6%(61)


3.1%(73)

0.5%(53)

0.3%(58)

-0.8%(62)

1.4%(62)

Total Local Revenue

-4.6%(60)

-7.9%(46)

-6.2%(44)

-5.9%(45)

-6.4%(44)


Shale gas development and dropouts?

% agreeing or strongly agreeing

Respondents from High Drilling Activity

Districts OnlyAll

Others NMarcellus-related workforce demands has increased dropout likelihood 17.4 11.0 319

Average Dropout Rate

(Percent)0 Wells23.6%

1-4 Wells17.5%

5-19 Wells18.8%

20-66 Wells 20.1%

67+ Wells 20.1%

07-08 1.07%(73)

1.21%(53)

0.84%(58)

1.21%(62)

1.52%(62)

08-09 0.97%(73)

1.17%(53)

0.82%(58)

1.07%(62)

1.31%(62)

09-10 0.97%(60)

1.08%(47)

0.86%(44)

1.03%(45)

1.45%(44)

10-11 0.90%(60)

0.98%(47)

0.76%(44)

0.93%(45)

1.40%(44)

Mean Differences(calculated by cases)07-08 to 10-11

-.12 -.21 -.12 -.23 -.07

Has there been a change in Marcellus Region dropout rates since development began?

Average Dropout Rate

(Percent)0 Wells23.6%

1-4 Wells17.5%

5-19 Wells18.8%

20-66 Wells 20.1%

67+ Wells 20.1%

07-08 1.07%(73)

1.21%(53)

0.84%(58)

1.21%(62)

1.52%(62)

08-09 0.97%(73)

1.17%(53)

0.82%(58)

1.07%(62)

1.31%(62)

09-10 0.97%(60)

1.08%(47)

0.86%(44)

1.03%(45)

1.45%(44)

10-11 0.90%(60)

0.98%(47)

0.76%(44)

0.93%(45)

1.40%(44)

Mean Differences(calculated by cases)07-08 to 10-11

-.12 -.21 -.12 -.23 -.07

Has there been a change in Marcellus Region dropout rates since development began?

Local Demographic Change

Respondents from High Drilling

Activity Districts Only

All Others N

% reporting significant activity as a result of gas industry development

New in-migrants 24.1 3.8 318Enrollment increases 4.3 1.8 318

Amount of Marcellus Shale Drilling Activity

0 Wells23.6%

1-4 Wells17.5%

5-19 Wells18.8%

20-66 Wells 20.1%

67+ Wells 20.1%

Change in Student

Enrollment Grades 7-12

-7.15%(60)

-8.46%(46)

-8.01%(44)

-7.28%(45)

-5.98%(44)

Average Change Student Enrollment in Marcellus Region School Districts, by Level of Marcellus Drilling Activity,

2007-08 to 2010-11

Has there been a change in enrollment since development began in Marcellus Region schools?

Marcellus drilling activity and changes in student enrollment in school districts through the end of the 2009–2010 academic year

Local Housing Impacts


Districts OnlyAll

Others N% reporting significant activity as a result of gas industry development

Increased rents 40.0 7.1 288Housing shortage 35.1 5.0 295Increased property values 29.1 6.7 290Displacement of low/fixed income residents 20.0 2.4 308

Physical Infrastructure and Environment


Districts OnlyAll


Road congestion/wear & tear 53.3 16.2 319Water and/or environmental problems 33.3 9.6 288

Physical Infrastructure and Environment


Districts OnlyAll


Road congestion/wear & tear 53.3 16.2 319Water and/or environmental problems 33.3 9.6 288

Road Safety Concerns

“The biggest thing we want to do is work with these truck companies ... work with the gas companies, work with everybody that’s hauling — to educate them, to let them know when we’re out there, look out for the kids”

- BEASD Business Office staff person

Opportunities and Challenges

Note that road surface is flush with bottom of guard rail!

Curricular Change and Workforce Development

School District Respondents CTCs

% agreeing or strongly agreeing:

High Drilling Activity Districts

High Drilling Activity Districts

Lack sufficient info about workforce needs to make curricular changes

61.4 76.8 41.6Investing in workforce development is risky given uncertain time horizon of Marcellus jobs 47.1 47.5 30.4

“What happens after the shale is depleted of natural gas? Does the industry leave us high and dry like the coal barons did?”

- survey respondent

Three Phases of Natural Gas DevelopmentDevelopment 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

Jonah/Anticline Fields Direct Workforce Through The Three Phases:

Graph: Ecosystem Research Group/Jacquet

Summing Up

Housing Impacts & Residential Displacement;

New Issues in Recruiting and Retaining Staff;

Unevenness of Impacts depending on location and drilling activity;

Physical Infrastructure and Environment;

Conclusions• Rapidly changing conditions – environmentally,

economically, politically – make outcomes highly unpredictable;

• How can Marcellus development be part of a longer term strategy for economic (and environmental) sustainability in PA communities?

• How can schools as educational institutions (and not simply providers of workforce development) help to manage the challenges and opportunities associated with rapid gas development?

Documents

Schafft Marcellus Slides