Economist: Energy exploration in NC has benefits, costs
Posted April 15, 2013
Raleigh, N.C. — 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.