Report: Despite big output, northern Appalachian states with fracking projects reap fewer rewards than expected

Frackalachia residents don't earn 'higher than average incomes'
from regional fracking projects. (Graph by S. O'Malley, ORVI)

Residents in heavily fracked northern Appalachian states haven't seen the job creation gains oil and gas companies promised, according to a new research report from the Ohio River Valley Institute. "The report uses the term ​'Frackalachia' to describe 30 top oil- and gas-producing counties in Ohio, Pennsylvania, and West Virginia," reports Kathiann M. Kowalski of Canary Media. 

Despite the region's surging output, which "increased their share of the country’s gross domestic product by 6%" over the course of 15 years, Kowalski writes, Appalachia residents living near natural shale-gas fracking sites did not benefit from "higher-than-average incomes. . . . [The area's] income growth was 25% below that of the nation as a whole."

Part of the dilemma for communities with shale deposits is that extraction doesn't require a constant workforce, but it does require financial backing and expensive machinery. Kowalski reports, "Most earnings go to shareholders, investors, and suppliers based far from where fossil fuels are extracted, so only a small share of project income stays in the community to stimulate more economic activity."

Transferring employees into a region with extraction is another reason oil and gas companies don't generate jobs for residents. "From 2012 through 2022, the Ohio Department of Job and Family Services issued annual reports about the economic impact of the state’s oil and gas industry, including data for ​'core' jobs," Kowalski adds. "More than half of the new hires for the core industry jobs in 2021 came from outside Ohio, according to the state data."

When actual employment data from the Ohio Department of Job and Family Services was compared to those predicted by the fossil fuel industry, the number of new jobs the industry created in the region fell short. Kowalski writes, "The agency numbers are also far lower than the 79,000 direct and 375,000 total jobs the American Petroleum Institute cited in a 2021 report based on data from 2019."

The report's author, Sean O’Leary, told Kowalski, "Whatever else it is, the natural-gas boom is not an engine for economic prosperity." Kowalski adds, "He thinks the gas industry is ​'structurally incapable' of delivering lasting growth in jobs and income for the people living in heavily fracked areas."

Decline in output of nation's largest oil region signals the fracking-driven U.S. oil boom is at its peak, or just past it

Wikipedia map, adapted, highlights Culbertson County

The U.S. oil boom created by horizontal hydraulic fracturing of deep shale beds "is nearing its peak" if it hasn't passed it already, report Collin Eaton and Benoit Morenne of The Wall Street Journal.

"Frackers are hitting fewer big gushers in the Permian Basin, America’s busiest oil patch, the latest sign they have drained their catalog of good wells. Shale companies’ biggest and best wells are producing less oil," the Journal reports. "The average well put out 6% less oil than the prior year, according to an analysis of data from analytics firm Novi Labs."

More recent results from the basin, which stretches across New Mexico and west Texas, "are mimicking the onset of a production plateau that has taken place at other, more mature U.S. shale plays," the Journal reports. "Chevron, one of the largest landholders in the Permian, drilled some of the region’s most prolific wells in Culberson County, Texas, but some of its newer wells there have seen productivity decline. . . . Chevron executives said last week the company missed its oil-production target" in the richest section of the basin. . . Chevron Chief Executive Mike Wirth said last week the rate of production growth and drilling activity the U.S. shale industry saw a decade ago 'is unlikely to be repeated,' though the Permian still has areas that haven’t been developed."

Webinar at 3 p.m. ET Thursday will offer information about new federal grants for plugging orphan oil and gas wells

Environmental Defense Fund map locates abandoned oil wells. To enlarge any image, click on it.

The National Conference of State Legislatures is hosting a webinar series that can help you study up on policy issues that can affect your readers (along with its target audience of state legislators). The webinars are free, and will be recorded for those unable to attend. The series kicks off at 3 p.m. E.T. on Thursday, April 7 with "Orphaned No More: Federal Oil and Gas Well Reclamation."

From the website: "States across the country face a backlog of orphaned oil and gas wells, which can continue to emit methane and other pollutants if left unaddressed or improperly sealed." They also pose safety risks. "However, the costs of plugging and reclaiming oil and gas well sites often exceeds the amount available for reclamation. Further, many older wells have long been abandoned, and their owners no longer exist. It is often unclear who can or should be responsible for paying the plugging and reclamation costs. Recognizing these challenges, Congress included $4.7 billion for orphaned well plugging, remediation and restoration in the federal infrastructure bill. This webinar will educate state legislators on this new program, how their states can obtain funding and their options for directing these funds to meet their states’ needs and reclamation priorities."

NCSL Associate Director Aaron Ray will moderate a panel of speakers who include:

• Dave Andrews, orphan well program manager of Colorado Department of Natural Resources' Oil and Gas Conservation Commission.
• Sarah Solomon, senior program associate at the American Association for the Advancement of Science's Center for Scientific Evidence in Public Issues.
• Steve Tryon, director at the Department of the Interior's Office of Environmental Policy and Compliance.
• Steve Feldgus, the Interior's deputy assistant secretary of land and minerals management.

Register here.

USDA's Rural America at a Glance report shows disparities among urban, rural, and persistently poor rural counties

Broadband availability in nonmetropolitan counties by persistent poverty status as of 2019
(USDA map; click the image to enlarge it)

The U.S. Department of Agriculture's Economic Research Service has released the 2021 edition of its Rural America at a Glance report, a summary of broad rural trends in population, employment, poverty and income. This edition focuses on factors affecting the resiliency and recovery of rural communities in the wake of the coronavirus pandemic, including population and employment change, intensity of infection, vaccination rates, and broadband internet availability and adoption.

The report also highlights differences between persistently impoverished counties and counties that aren't persistently poor. A county is deemed persistently poor if at least 20 percent or more of the population has lived at or below the federal poverty line during four consecutive decennial censuses since 1980. Except in Appalachia, such counties tend to be more ethnically diverse and are often less resilient in the face of economic and social stress because they generally have fewer resources.

Here are some of the topline findings from the report:

• 46 million Americans lived in rural areas in 2020, making up 14 percent of the population.
• The typical rural county had less than one-tenth of the population of the typical metropolitan county: 23,000 compared to 245,000.
• The rural population fell by 0.6% since 2010 while the urban population grew by 8.8%.
• The U.S. population as a whole grew more slowly in the past decade than in previous decades, in part because of declining birth rates and decreased immigration to the U.S.
• Rural counties that aren't persistently poor increased their population by 0.1%, while the population of persistently poor rural counties fell by 5.7%.
• The local economy is also a factor in rural population trends. The five states with the fastest-growing rural populations over the past decade were in the West. Four of them (Utah, Idaho, Montana and Washington) have been attracting rural residents—especially retirees—with outdoor recreation and tourism amenities for decades.
• North Dakota had the highest percentage of rural population gain over the past decade because its booming shale oil and gas sector attracted many workers.
• The states with the highest levels of rural population decline relied on farming (Kansas and Illinois), manufacturing (Pennsylvania and New York) and resource extraction (Louisiana and West Virginia).
• Poverty was a strong indicator in high rural coronavirus infection and mortality rates at the county level. Persistently poor rural counties have led the nation in percentage of cumulative coronavirus cases since September 2020.
• Coronavirus vaccination rates in rural counties have consistently lagged metro rates throughout the pandemic; persistently poor rural counties have lagged even more.
• Rural unemployment declined for nearly a decade before the pandemic, hitting a low of 3.5% in Sept. 2019. But by April 2020 the rural unemployment rate hit 13.6%, the highest rate since the 1930s. The pattern hints that persistently poor counties may have had higher coronavirus infection rates because more people in such counties were working, and such counties tended to rely on one industry, such as meatpacking.
• Rural counties lost fewer jobs than metro counties during the first year of the pandemic. Employment in consistently poor rural counties fell 2.9% from Jan. 2020 to Jan. 2021, while employment in other rural counties fell 3.1% during the same time period. Consistently poor metro counties fell 9.0%, while other metro counties fell 5.7%.
• 15.3% of rural residents living in poverty were unable to afford a home internet subscription in 2020.
• More than 90% of Americans had broadband internet as of June 2019, but only 72% of rural residents had access to it in their census blocks, and only 63% of rural residents in poverty had access.
• 83.3% of metro residents lived in census blocks with broadband access, compared to 62.7% of rural residents.
• Only 58.3% of residents in consistently poor rural counties lived in census blocks with broadband access, compared to 71.8% of residents in other rural counties.
• Broadband is less available in nonmetro persistent poverty counties in the Deep South and Southwest, and among nonmetro counties in the lower Great Plains and western Mountain States.
• Internet subscription trends suggest that households in persistently poor rural counties may face additional barriers to internet adoption such as affordability and digital literacy.
• 81.9% of rural households with internet subscriptions and 56.1% of urban households had internet subscriptions through wired sources such as cable, fiber-optic, or Digital Subscriber Line broadband.
• Metro households were much more likely to have internet access solely through cellular data plans (35.5% vs. 7.2%). This could be due to the lack of cell towers in rural areas, inability to afford it, or both. Federal programs that aim to make rural broadband more affordable tend to focus on wired services, also exacerbating the issue.
  
• Persistently poor counties, metro and rural, are more likely to have a higher share of racial minorities. The exception is Central Appalachia.

Quick hits: Peabody Energy to eliminate retired miner benefits; USDA launches new customer-service portal

Here's a roundup of stories with rural resonance; if you do or see similar work that should be shared on The Rural Blog, email us at heather.chapman@uky.edu.

Americans flock to chicken, the nation's number one quarantine meat. Read more here.

The U.S. Department of Agriculture has launched a new customer-service interface. Read more here.

Peabody Energy to eliminate a health-care benefit program for retired miners. Read more here.

The Supreme Court will hear arguments in President Trump's case attempting to exclude undocumented immigrants from Congressional redistricting numbers. Read more here.

Teachers say election conspiracy theories rampant among youngsters in areas where Trump is popular, and say distance learning makes it harder to guide children through misinformation. Read more here.

A novel way of mitigating climate change: feeding cows red seaweed could help them burp less methane. Read more here.

U.S. shale operators looking for signs of optimism despite a year of bankruptcies and job losses. Read more here.

Trump administration moves to overhaul the Migratory Bird Treaty Act, relax rules on killing birds. Read more here.

Parler is bringing together mainstream conservatives with anti-Semites and white supremacists. Read more here.

A fact-check: a Danish study has been rumored to prove that face masks are useless in protecting against the coronavirus. That's false. Read more here.

Rural Texas clinic can't offer telehealth because they don't have broadband or enough staff. Read more here.

Federal government to allow private flood insurance for millions. Read more here.

Gas flaring from oil extraction up 23% from 2018 to 2019 in U.S.; some states are taking steps to regulate it more

"Gas flaring in the United States increased 23 percent last year, contributing to global levels of the practice that have not been 'seen in more than a decade,' according to a new report," Carlos Anchondo reports for Energy & Environment News. The analysis by the World Bank says the U.S. "flared the third-largest amount of gas in the world from 2018 to 2019, following Russia and Iraq. Globally, the volume of gas flaring — in which surplus gas is burned off into the air — increased 3%, rising from 145 billion to 150 billion cubic meters."

That matters because flared gas contains methane, a potent greenhouse gas that contributes to climate change. Methane is the main volatile hydrocarbon in natural gas; flaring burns most of it, but some can escape, and one product of the burning is carbon dioxide, the main greenhouse gas.

Flaring intensity, the amount of gas flared per unit of oil produced, also increased nearly 12% in the U.S. from 2018 to 2019, but dropped by 10% in the first quarter of 2020 despite increased oil production, Anchondo reports. That's because of improved utilization of flared gas, the report says.

Some states are taking steps to regulate flaring, including major Permian Basin drilling states New Mexico and Texas, Anchondo reports.

Quick hits: Appalachian New Deal offered; rural homelessness could rise after federal pandemic aid runs out

Here's a roundup of stories with rural resonance; if you do or see similar work that should be shared on The Rural Blog, email us at heather.chapman@uky.edu.

A coalition of left-leaning environmental and economic policy groups have published an "Appalachian New Deal" meant to give federal lawmakers ideas on how to bring more jobs and clean energy to the region as they consider the next stimulus bill. Read more here.

Drillers are increasingly declaring bankruptcy and sticking taxpayers with the cleanup costs, while executives pocket millions and workers lose jobs. Read more here.

Will rural homelessness hit after benefits and eviction moratoriums end? Read more here.

Because rural physicians are older on average, they could be at an increased risk of severe outcomes if they catch covid-19. Read more here.

Halliburton looking beyond U.S. shale oil as fracking remains unprofitable

The pandemic has soured the outlook on the U.S. shale oil industry, but there's evidence it was running out of steam already, if energy giant Halliburton is any indication.

"Way back in January (it’s been a long year) Halliburton was already souring on shale. Way before the novel coronavirus put the final nail in the coffin of the West Texas shale revolution, the multinational corporation and one of the largest oil field service companies in the world had very publicly been going through a rough patch with shale oil," Haley Zaremba reports for Oil Price. "January 2020 marked the posting of Halliburon’s third straight quarterly loss during the national shale slump that also caused the corporation to take a $2.2 billion charge to its earnings. As a result of this massive shale slump, Halliburton laid off a whopping eight percent of its North American staff in the middle of last year, before dismissing even more employees in the Western U.S."

Bloomberg reported this week that Halliburton "is looking away from its traditional North American heartland for sales growth as the fracking behemoth works its way through an historic oil bust." Though U.S. shale was once a major income source for the company, Halliburton suggested to investors that it may limit or eliminate U.S. shale. That a company the size of Halliburton is moving away from U.S. shale entirely "could certainly be seen as a harbinger of doom," Zaremba reports.

Because U.S. shale prices have recovered somewhat, some other drillers are reopening and creating more wells, but that may not be enough to pay down the coming debt for companies that were only able to meet growing demand through heavy borrowing, Zaremba reports.

Chesapeake Energy declares bankruptcy, others may follow since 1/3 of U.S. shale-oil producers 'technically insolvent'

Horizontal hydraulic fracturing pioneer Chesapeake Energy filed for Chapter 11 bankruptcy to eliminate $7 billion in debt, and others could follow soon, Alexandra Scraggs reports for Barron's.

Lower demand during the pandemic triggered an oil crash that's hitting the fracking industry hard. The U.S. became a top oil producer recently because of the fracking boom, but keeping up with that boom means most fracking companies are heavily leveraged and can't afford a downturn.

But bond yields for Chesapeake have been distressed since August 2019, long before the pandemic, Scraggs reports. She lists 10 other oil and gas companies that could also declare bankruptcy, including drilling equipment maker Forum Energy Technologies.

According to a Deloitte study, one-third of U.S. shale-oil producers are "technically insolvent," with crude oil prices so low, meaning they will have trouble repaying debts. Oil prices have gone up a bit since April, "but the rebound will do little to prevent 15 years of debt-fueled production growth catching up with many shale producers,"  Kevin Crowley reports for Bloomberg.

Pennsylvania attorney general releases 'scathing' grand jury report on state fracking industry, regulatory industry

"Pennsylvania Attorney General Josh Shapiro on Thursday released a scathing grand jury report on the state’s Marcellus Shale natural gas industry that not only outlines health and safety issues caused by hydraulic fracturing, but also takes to task the chief agency in charge of enforcing regulations on the industry," Frank Kummer reports for The Philadelphia Inquirer.

At a press conference, Shapiro described a "revolving door relationship between the state’s Department of Environmental Protection and the industry, saying officials from the agency 'repeatedly failed to exercise their duties and responsibilities,'" Kummer reports. He characterized their relationship as "too cozy" and said DEP officials who testified to the grand jury were repeating fracking industry talking points. He also noted that an energy company hired seven former DEP employees from the same office.

"The grand jury report was the result of a two-year investigation that included 287 hours of testimony. It examined an industry that has drilled over 12,000 unconventional wells, as well as what the jurors called a 'chemical cover-up' that allows companies to keep secret complex chemical compounds used in the fracking process," Kummer reports.

A 2017 study linked low birth weight and other health problems for infants who lived near fracking wells. 

Unusual USDA order opens door to more grazing, logging and development in national forests and national grasslands

Agriculture Secretary Sonny Perdue "ordered the U.S. Forest Service to expedite environmental reviews on its land, paving the way for more grazing, logging and oil development on public lands," Rebecca Beitsch reports for The Hill.

Perdue announced the order Friday during a visit to Montana, a state where "ranchers, miners, and oil and gas workers have long argued for increased access to public lands," Beitsch reports. It's also one of the states with a U.S. Senate race that could help switch control of the chamber to Democrats.

The order came in the form of "an unusual memo" to Forest Service Chief Vicki Christiansen that "lacks the formal letterhead or signature typical with such documents, and mainly sets broad goals for the Forest Service rather than laying out any specific policy directives," Beitsch reports.

Randi Spivak, director of the Center for Biological Diversity's public lands program, said the order would not only hurt the environment, but said it was essentially a political stunt meant to help Sen. Steve Daines, R-Montana, who is relying heavily public-lands issues in his campaign to defend his seat against former Montana governor Steve Bullock, Beitsch reports.

The U.S. Senate recently passed a bill to fully and permanently fund the Land and Water Conservation Fund at $900 million annually. The move was seen as an effort to help Daines and fellow Republican senator Corey Gardner of Colorado in their re-election bids.

U.S. oil output increasing as global demand remains down

Though oil and gas drilling in the United States recently hit an 80-year low, and global demand remains down, American oil producers are bringing production back up.

"Scores of shale-drilling companies turned off wells to reduce output when U.S. oil prices fell to negative territory in late April, after millions world-wide stopped driving and flying due to the new coronavirus, causing a steep drop in global demand," Rebecca Elliott reports for The Wall Street Journal. "Now that more of the world is reopening and prices are rebounding to nearly $40 a barrel, companies including Parsley Energy Inc. and WPX Energy Inc. are starting to turn some of those wells back on, even as they continue to put off most new drilling."

Output is still "far below" pre-pandemic peaks, when the U.S. was the world's top producer of crude oil. "While turning existing wells back on is likely to temporarily boost U.S. production this summer, American oil output is still widely expected to drop in 2020," Elliott reports. "That is because shale wells lose steam quickly, and companies have sharply cut back on the number of new wells they are drilling." That will likely continue to hurt the nation's economy, according to analysts.

Global oil demand has increased, though it's still an estimated 13% below last year's levels. On Saturday, the Organization of Petroleum Exporting Countries agreed to extend production cuts for another month to bring prices up. "OPEC delegates were briefed on the likelihood that U.S. producers would turn the taps back on last week," Elliot reports, "but also discussed forecasts that American production would likely decline later in the year before agreeing to extend output cuts."

Shale-oil bust hits rural economies as royalty checks wither

Horizontal hydraulic fracturing, which makes oil and gas in deep, dense shale easier to reach, turned the U.S. into the world's top energy producer before the crash. But the oil bust "has erased tens of thousands of jobs in the drilling and service sectors, dried up local tax revenues and charitable largess that flowed along with crude oil to Texas, North Dakota and Oklahoma," Jennifer Hiller reports for Reuters. It has also meant less income for about 12 million rural Americans who receive royalty checks for allowing frackers to drill on their land.

For example, Paul Ruckman, a retiree in DeWitt County, Texas, used to receive enough royalty money to build a six-bedroom vacation home with plenty left over, but told Hiller his checks have dropped 70 percent since January and said he imagines it'll get worse.

"Royalties, which can range from 12.5% to 25% of the value of oil and gas pumped, helped revitalize DeWitt and other communities in oil patches across the United States," Hiller reports. "The average oil-land owner collects about $500 a month, according to the National Association of Royalty Owners, but that will not last."

Trump considers giving federal aid to fracking companies threatened by coronavirus-fueled oil war

UPDATE: The Trump administration is strongly considering extending federal aid to shale oil producers (some of whom also drill for natural gas) that have been hurt by falling oil prices, The Washington Post reports. Cornell University professor Robert Hockett, who advised Sens. Bernie Sanders and Elizabeth Warren on economic policy, said bailing out frackers would be "absurd," when "We are in the midst of a crisis where people are literally having to skip work and may miss paychecks or face medical debt" because of the coronavirus. 

However, Jared Bernstein, an Obama-era economic advisor to Joe Biden, noted that the Obama administration helped many firms with low-interest loans during the 2008 financial crisis, and said he would prefer that aid to oil companies come in the form of loan guarantees rather than cash bailouts, the Post reports.

The already unstable American shale-oil industry, which relies on horizontal hydraulic fracturing deep underground, is under threat because of a coronavirus-fueled game of chicken between Russia and Saudi Arabia.

Demand for energy is falling worldwide as people cut back on travel and production in the wake of the coronavirus epidemic. Too much supply and not enough demand for oil have lowered prices. Over the weekend, Saudi Arabia urged other members of the Organization of the Petroleum Exporting Countries to cut production in order to boost prices, but Russia refused. Because of the coronavirus and Russia's refusal, oil prices have dropped as much as 30 percent in the last week, The Associated Press reports.

"Now the fracking industry, which President Donald Trump sought to expand with hard-line support for increased fossil fuel production, faces potential ruin," Alexander Kaufman reports for HuffPost. "Fracking, a ballyhooed but financially fragile sector, struggled to stay afloat with crude selling at $50 per barrel. If prices stay around $30, or even fall as low as $20, U.S. frackers simply might be unable to keep up."

"The energy meltdown threatens to cause a repeat of the 2014-16 oil crash that bankrupted dozens of American oil and gas companies and caused hundreds of thousands of layoffs. Although the industry survived, the experience proved to be very painful," Matt Egan reports for CNN Business.

Fracking makes up 63% of U.S. oil production, according to estimates from the Energy Information Administration. Oil and gas drilling is growing faster in the U.S. than in any other country, and fracking accounts for 90% of that growth, Kaufman reports.

The fracking boom made the U.S. the world's largest oil producer and turned a decades-long petroleum deficit into a surplus last September, Jed Graham reports for Investor's Business Daily. But frackers have had to borrow heavily to drive that expansion, and they're not seeing the hoped-for profits. Meanwhile, productivity of wells has peaked, and prime drilling areas may be exhausted within the next five years.

Dozens of U.S. oil companies were already in financial trouble before the oil war, "but unlike the 2014 price plunge, Wall Street—down on the industry due to poor returns—isn’t primed to offer a helping hand," Collin Eaton and Rebecca Elliott report for The Wall Street Journal.

Pioneer Natural Resources Co. Chief Executive Scott Sheffield said that probably half of the nation's public oil exploration and production companies will go bankrupt over the next two years, Eaton and Elliott report. Pioneer is one of the leading producers in the Permian Basin.

Ethane 'cracker' plants will add manufacturing element to Ohio Valley fracking boom; environmentalists wary

Inside Climate News map; click the image to enlarge it

Appalachia once depended on coal mining and steel jobs, but the natural-gas boom could make the region a petrochemical and plastics manufacturing hub, especially in the upper Ohio Valley.

"In a year or two, Shell Polymers, part of the global energy company Royal Dutch Shell, plans to turn . . . gas into plastic pellets that can be used to make a myriad of products, from bottles to car parts," James Bruggers reports for Inside Climate News. Such facilities are called cracker plants because they "crack" ethane molecules into ethylene and polyethylene. "Two Asian companies could also announce any day that they plan to invest as much as $6 billion in a similar plant in Ohio. There's a third plastics plant proposed for West Virginia."

The gas boom is fueled by hydraulic fracturing, or fracking, a drilling process that can extract oil and gas unreachable by conventional means. The process comes with environmental hazards: "Planet-warming greenhouse gas emissions from the Shell plant alone would more or less wipe out all the reductions in carbon dioxide that Pittsburgh, just 25 miles away, is planning to achieve by 2030, Bruggers reports. "Drilling for natural gas leaks methane, a potent climate pollutant; and oil consumption for petrochemicals and plastics may account for half the global growth in petroleum demand between now and 2050."

Environmental groups caution against basing economic growth on another industry that harms the environment, especially as fossil fuels and plastics are facing international pushback, and worry that the region will only benefit for a few decades. But many Ohio Valley communities benefiting from the boom don't have room to be choosy.

"We have been digging our way out of a very deep hole for decades," said Jack Manning, president and executive director of the Beaver County Chamber of Commerce in Pennsylvania, just west of Pittsburgh. "When Shell [Polymers] came along with a $6-to-$7 billion investment ... we were in the right spot at the right time," he told Bruggers.