Business

Economist: Energy exploration in NC has benefits, costs

Posted April 15, 2013

— Drilling for oil and gas in North Carolina and off the state's coast could generate millions of dollars in economic activity and create thousands of jobs while also causing millions of dollars in damage to coastal communities and reduce property values inland, according to a new report.

Mike Walden, an economist at North Carolina State University, said he wanted to take an objective look at the benefits and costs of developing North Carolina’s energy resources. He didn't receive funding from any outside sources to produce the report.

“There are both potential ‘upsides’ and potential ‘downsides’ to energy resource development in North Carolina, and neither the ‘ups’ nor the ‘downs’ should be ignored,” Walden wrote in the 40-page report.

A state commission is drafting rules for natural gas drilling in North Carolina, and lawmakers are considering legislation that would allow the first drilling permits to be issued in March 2015.

Walden estimates that gas drilling would generate $80 million annually in income, including $4.9 million in public revenue, and create 496 jobs as infrastructure and facilities were developed. Once wells were drilled and gas was being produced, he estimates $158 million in annual revenue from the industry, including $9.6 million in new annual public revenue, and 1,406 jobs over a 20-year period.

He said the estimates could change if the amount of available underground gas or energy prices change.

Using information from Pennsylvania, where the drilling process known as hydraulic fracturing, or "fracking," is widespread, Walden calculated that environmental damage from drilling could reduce nearby property values by $636 million and $4.7 billion.

Fracking involves pumping a high-pressure mix of water, chemicals and sand into wells to break up deposits of shale and release gas trapped in the rock. Opponents say the process contaminates groundwater.

When it comes to offshore energy exploration, Walden estimates $181 million in annual income, including $11 million in public revenue, and 1,122 new jobs during a seven-year build-up period. After that, he projects $1.9 billion in income annually over a 30-year period, including $116 million a year in public revenue, along with 16,910 jobs.

As with the gas drilling, the income and job estimates are sensitive to changes in energy prices and production.

Oil spills off the coast could created $83 million in environmental costs, primarily to the fishing and tourism economy in coastal counties, Walden said, noting that he based his estimates on the impact of offshore spills over a 45-year period.

Gov. Pat McCrory is working with the governors of South Carolina and Virginia to develop a unified approach to offshore drilling.

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  • stevee2 Apr 16, 11:39 a.m.

    Saw a fishing show over the weekend down in a saltwater estuary along the gulf, and the fishermen said they were catching fish like never before. He stated "The fishing is better now than I've ever seen it. It's like the spill never happened." Either mother nature has taken care of the polution, or maybe even BP's effort has been successful.

  • Rebelyell55 Apr 16, 9:09 a.m.

    I still believe that at this time, we should not be doing any drilling, main inland for gas. Now is just not the time. Leave it there for future generation who'll most likely need it more than we will. It'll also give time to see the long term effects in place where they are drilling. We're just not in bad enough shape as a state to jump into something like this for short term gains, with out long term knowledge of effects.

  • miseem Apr 16, 8:40 a.m.

    So what does the oil spill comment have to do with this?Riddickfield.

    Read the article. Even better, read his report. It discusses fracking for gas on shore AND offshore drilling for gas and oil. Of course, I always take Walden's reports with a grain of salt since his comments a couple of years ago that the typical person in the US would not feel the pinch from higher gas prices until they got above five dollars a gallon. Even a small spill could cost more than 83 million in clean up and damages. He's talking about total costs from spills for decades.

  • Riddickfield Apr 16, 8:04 a.m.

    So what does the oil spill comment have to do with this? They are drilling for gas. Oil spills are totally unrelated and would occur with or without natural gas wells.

  • davidgnews Apr 15, 7:24 p.m.

    Glad he had something to occupy his time.