Wednesday, March 31, 2010

Marcellus Mysteries

Former PEL head here (and former UCSUR employee I should probably disclose) Kathy Klaber in the news in the Inky over a spat with the governor on proposed Marcellus Shale taxes

It's a good point to bring up one of the great mysteries out there in the state and region's economy.  Let's say I accept there is all this Marcellus drilling activity going on.  You can't quite miss it and I first noticed it some time ago. I know some of the folks with new jobs as well. Anecdotal, but real.  But here is the thing I have brought up before.  yet I keep hearing politcians saying there are 50K new jobs in Pennsylvania because of Marcellus shale drilling.  One on tv the other day sadi we were already +50K in jobs and heading toward +80K.

So here is all the relevant history for the state's entire mining employment over the last decade through February and you would be hard pressed to see all that much net new employment.   50K would dwarf the entire sector by more than a factor of 2..... so it's not like that level of employment is just going to go missing from the data. That and some of the highest unemployment rates in the state are in the core of what is the drilling footprint for all of this. 

What is going on?... some different things.  Some employment may not be captured in the data as yet.  There are some administrative things that may explain a little bit, but not enough to get us a real answer.   I'm not so sure coal mining has been doing so great and so that nets out of the employment data.  What I still think is happening is that a lot of the drilling is folks who are not tecnically employed here.  Still lots of workers being brought in temporarily to staff the work going on... and whether they stay after the rigs are set remains to be seen. So if the workers are here, a lot of their economic impact is here at least while they are here... but if their permanent home is elsewhere then we lose a lot of it.  These folks may be here for extendend assignments, or I've even been told of more weekly workers who fly in and out each week.   I would love to see detailed time series data on point to point air traffic between Pittsburgh and Texas over the last few years.

Now if you do just doubt the data then there is a big pot of employment in the region that is not showing up in the data and things are an awfully lot better then even our relatively good numbers these days show.  You would have to have some seriously rose colored glasses to believe that too much, but at the margin there might be some truth to that.  It is fundamentally what some folks must believe when they say we are looking at 50-80K new jobs out there already.   

Beyond the data issue itself, the fundamental factors are out there.  Natural gas prices are plummeting and lots of natgas producers are idling rigs. It's a weird market these days for natural gas, especially compared to oil prices which is diverging more than it has in a long time from natgas.... More on that from Seekingalpha. Around the world some natgas producers are finding the current price unsustainable.  Funny thought is...  OPEC tries to control the price of oil right?  So if there is ever a similar cartel attempted to impact natgas prices, would Pennsylvania have to be a member?   a de facto member of course.

Bottom line.... somebody better start mass producing natgas cars again to use up some of this stuff or we are going to have a real storage problem pretty soon.

and btw.... here come the .......  Norwegians?


Anonymous johnnyg said...

Just like every other politician (as opposed to government) statistic, I'm sure it's inflated by every ancilary worker, too. So, if one of those roughnecks (slang for drill crew employee--not trying to cast aspertions here) walks into Wal-Mart and buys new Red Wing boots, some oil for his truck, and a bag of chips, I'm sure the politican counts every job in that store as "supported" by the oil industry.

That said, this March 2010 investor presentation from Chesapeake (find at that at least that company is drilling mostly in Northcentral tier counties and in West Virginia. Which seems to fit the anecdotal evidence--like all the Inky articles you've been tracking. I know that Range Resources in very active in Washington and Greene Counties, but I'm just not sure the full impact has hit SWPA yet.

Wednesday, March 31, 2010 9:04:00 PM  
Anonymous MH said...

I just flew out of Pittsburgh today. Sitting around me were three drillers flying back to Oklahoma City. They said it was two weeks on and two weeks off.

Wednesday, March 31, 2010 10:37:00 PM  

Post a Comment

Links to this post:

Create a Link

<< Home