Producing natural gas from shale will support 870,000 U.S. jobs and add $118 billion to economic growth in the next four years, according to a report from IHS Global Insight.

Gas from shale, which accounts for 34 percent of U.S. output, also will contribute $57 billion in federal, state and local taxes by 2035, or $933 billion in the next 25 years, according to today’s IHS report, commissioned by America’s Natural Gas Alliance, a Washington-based industry group.

Shale gas is extracted using hydraulic fracturing, a process in which millions of gallons of chemically treated water and sand is forced underground, breaking up the rock to free trapped gas. Industry expansion is adding jobs in an otherwise disappointing economy, said John Larson, a vice president at Lexington, Massachusetts-based IHS, a management consulting company for the energy industry.

“Shale gas combines a capital-intensive industry with a broad domestic supply chain,” Larson said in an interview. “We think that these jobs through 2015 are net new jobs because of high unemployment.”

Environmental groups have said the process, also called fracking, has tainted drinking water in states such as Pennsylvania, where 4,100 wells have been drilled. About 1,900 people, most opposed to fracking, attended a New York City hearing on Nov. 30 to consider state rules for drilling.

Conclusions Questioned

Food and Water Watch, which advocates a ban on fracking, said IHS didn’t provide a detailed methodology, making it impossible to validate the projections. The report also ignores potential job losses, Emily Wurth, the Washington-based group’s water policy director, said today in an e-mail.

“The analysis fails to account for the job losses to agriculture and tourism caused by intensive shale gas development,” Wurth said.

Financial forecasts by IHS include direct jobs in the drilling industry plus an “employment multiplier.” For every direct job added, more than three indirect and induced jobs are created, according to the report.
The forecast excluded potential drilling in New York, which has placed a moratorium on fracking while it develops drilling regulations, or the impact of U.S. service companies supplying drilling in Canada, Larson said.

“Given those sort of factors, we feel that what we’ve presented here is a very conservative estimate,” Larson said.

Cost Cuts

The shale-gas contribution to U.S. gross domestic product will triple to $231 billion in 2036 from $76 billion last year, the report found. Lower natural gas prices as shale boosts supply will cut U.S. electricity costs by an average of 10 percent, the report found. Lower prices will raise industrial production 2.9 percent by 2017 and 4.7 percent by 2035.


“IHS appears to have included payments to landowners as capital expenditures by the gas industry that create direct jobs,” Wurth said. “Lease and royalty payments do not create direct jobs and do not lead to any indirect jobs.”

Food and Water Watch found in a November report that projections for the number of shale-industry jobs in New York led to a “gross exaggeration” of the gains, Wurth said.

A 2011 report by the Public Policy Institute of New York State, an Albany-based research group, found that by 2018, developing 500 shale gas wells a year in five counties would create 62,620 jobs. After correcting the “flawed” job multiplier, the number was closer to 6,656 jobs, Wurth said.

“Very few people have analyzed these reports,” Wurth said. “That’s unfortunate because a lot of elected officials take these studies as factually based.”

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After Scott Ely and his father talked with salesmen from an energy company about signing the lease allowing gas drilling on their land in northeastern Pennsylvania, he said he felt certain it required the company to leave the property as good as new.

So Mr. Ely said he was surprised several years later when the drilling company, Cabot Oil and Gas, informed them that rather than draining and hauling away the toxic drilling sludge stored in large waste ponds on the property, it would leave the waste, cover it with dirt and seed the area with grass. He knew that waste pond liners can leak, seeping contaminated waste. 

“I guess our terms should have been clearer” about requiring the company to remove the waste pits after drilling, said Mr. Ely, of Dimock, Pa., who sued Cabot after his drinking water from a separate property was contaminated. “We learned that the hard way.”

Americans have signed millions of leases allowing companies to drill for oil and natural gas on their land in recent years. But some of these landowners — often in rural areas, and eager for quick payouts — are finding out too late what is, and what is not, in the fine print.

Energy company officials say that standard leases include language that protects landowners. But a review of more than 111,000 leases, addenda and related documents by The New York Times suggests otherwise:

• Fewer than half the leases require companies to compensate landowners for water contamination after drilling begins. And only about half the documents have language that lawyers suggest should be included to require payment for damages to livestock or crops. 
• Most leases grant gas companies broad rights to decide where they can cut down trees, store chemicals, build roads and drill. Companies are also permitted to operate generators and spotlights through the night near homes during drilling.
• In the leases, drilling companies rarely describe to landowners the potential environmental and other risks that federal laws require them to disclose in filings to investors.
• Most leases are for three or five years, but at least two-thirds of those reviewed by The Times allow extensions without additional approval from landowners. If landowners have second thoughts about drilling on their land or want to negotiate for more money, they may be out of luck.

The leases — obtained through open records requests — are mostly from gas-rich areas in Texas, but also in Maryland, New York, Ohio, Pennsylvania and West Virginia.

In Pennsylvania, Colorado and West Virginia, some landowners have had to spend hundreds of dollars a month to buy bottled water or maintain large tanks, known as water buffaloes, for drinking water in their front yards. They said they learned only after the fact that the leases did not require gas companies to pay for replacement drinking water if their wells were contaminated, and despite state regulations, not all costs were covered.

Thousands of landowners in Virginia, Pennsylvania and Texas have joined class action lawsuits claiming that they were paid less than they expected because gas companies deducted costs like hauling chemicals to the well site or transporting the gas to market.

Some industry officials say the criticism of their business practices is misguided. Asked about the waste pits on Mr. Ely’s land in Pennsylvania, for example, George Stark, a Cabot spokesman, said the company’s cleanup measures met or exceeded state requirements. And the door-to-door salesmen, commonly known as landmen, who pitch the leases on behalf of the drilling companies also dismiss similar complaints from landowners, and say they do not mislead anyone.

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