Fracking industry failing to contribute to broader regional growth in Appalachia, study finds

While natural gas production has continued to expand throughout the Appalachian region, the surrounding communities have yet to experience the economic and social benefits that were initially seen as surefire byproducts of the natural gas industry’s growing footprint within the area, according to a new report. The newly released study by the Ohio River Valley Institute weighs the impact natural gas production has had on the national economy against the continuing decline of jobs, income, and population levels throughout the Appalachian region.

In their report, the Ohio River Valley Institute explores the economic and social impacts that the natural gas industry, and more specifically the industry’s use of hydraulic fracturing, has had on 22 counties within West Virginia, Pennsylvania and Ohio. While these counties experienced an increase in their contribution to the U.S. gross domestic product between 2008 and 2019, local economic prosperity within the region declined. This included a decrease in the counties’ share of the national population, their share of the nation’s personal income, and the area’s share of national jobs.

The authors make note of several factors that have contributed to this economic imbalance, including the large amount of material and labor that is sourced from outside the region, particularly from the Gulf Coast area, to install the fracking infrastructure. Additionally, following the initial installation, the share of natural gas revenue that is allocated towards labor wages and salaries was found to be lower than in traditional industries. Persistently low prices for natural gas have also contributed to the lack of broader regional economic growth as companies weigh the high costs of fracking installation and drilling against the diminished retail value of the product.

The opportunities for down-stream industries to grow out of the fracking expansion have also been shown to be far from what was initially estimated by organizations such as the American Petroleum Institute, the study notes. While a plethora of petrochemical plants, designed to transform ethane into plastic resins, were initially slated for development throughout the Appalachian region, only one has materialized.  The uncertainty surrounding the viability of the fracking industry has limited the prospects for related development projects throughout the region, the authors say, lowering the opportunities for local economic growth.   

Ohio River Valley Institute’s full report can be accessed here.