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Misinformed Fractivist Gets Lesson in Economics from Cabot Oil and Gas

natural gas now - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.

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A naive and misinformed fractivist from Ohio recently made a pitiful attempt to dismiss the economic record of Cabot Oil and Gas and came up very short.

Cabot Oil and Gas is doing exploratory development in Ohio these days. A small but new crop of fractivists has, of course, arisen to oppose it. One of them, by the name of Deborah Hughes, of Jeromesville, Ohio, recently wrote a letter to the editor of the Ashland Times-Gazette attempting to diminish Cabot’s economic contributions to Susquehanna. It didn’t go well when Cabot responded.

Here’s some of what Deborah Hughes had to say (there’s more, all of which has been repeatedly debunked here):

The truth is not always a good sales pitch especially when it comes to fracking shale. So I guess you need a good story a fish tale. Or maybe just don’t tell the truth at all?

…Cabot has claimed that unemployment is virtually non-existent? The unemployment rate is 4.8 percent in Susquehanna County and natural resources and mining account for only 6 percent of the jobs.

Our friend and guest blogger from Cabot, Kelsey Mulac, responded (emphasis added):

According to Pennsylvania Department of Labor & Industry Center of Workforce Information & Analysis, the unemployment rate in Susquehanna County was 4.1 percent as of May 2018. For reference, in May 2009, the unemployment rate was 8.4 percent.

This by itself is a significant improvement and should be celebrated. Put another way, Susquehanna County has a labor force of 20,300 workers. Of the eligible workforce, 19,500 people are employed; meaning only 800 people are seeking employment.

Full employment, in fact, is never 0 percent unemployment. The Board of Governors of the Federal Reserve System declares that “even in good times, a healthy, dynamic economy will have at least some unemployment as workers switch jobs, and new workers enter the labor markets and other workers leave.”

Therefore it is important to look at Susquehanna County’s unemployment rate in this context. According to the U.S Congressional Budget Office, the natural rate of unemployment (NAIRU) short-term in 2018 is 4.73 percent. Therefore, for all intents and purposes, Susquehanna County is fully employed and Cabot’s claims are just as fully justified.

Hughes’ second comment implying that oil and natural gas jobs are only classified under natural resources and mining and that these jobs account for only 6 percent percent of the jobs is completely missing the point. Thousands are employed, across multiple diverse industries, to support natural gas development. The folks who operate the rigs and work on well pads are just the beginning.

Here are a few examples of this diverse support base: hundreds of truck drivers move materials and water for the gas industry. Timber companies clear trees for pad development and turn the cut timber into mulch for erosion control. Excavation companies build pad sites. Farmers grow hay and sell it to the industry for land reclamation projects. Paving companies rebuild roads for the industry. Even event caterers feed crews working onsite.

Kelsey is entirely correct, of course. She even understated how good Susquehanna County is doing with respect to employment over the last quarter. Here is the latest data from the Fed comparing Ashland County, Ohio to Susquehanna County, Pennsylvania.

Cabot Oil and Gas

Any questions, Deborah?

More importantly, you don’t measure the economic impact of the fast-food restaurant by merely counting the number of kids flipping burgers or their salaries. There are also the managers, owners, truckers delivering the patties, advertising agencies supporting the business, contractors building and revamping the stores, farmers supplying the beef and so on. Moreover, you don’t assess the contributions of agriculture by looking only at the number of farmers. There are also feed dealers, cattle and milk haulers, equipment suppliers and veterinarians involved.

Economic impact is proportionately related to the multiplier effects it has in stimulating other business activity and the value of what is produced. Calculating the contributions of the gas industry by only counting the number of folks working on the drill rig or fracking crew is like figuring the value of vehicle by the number and price of the tires. There’s a whole lot more going on that can’t be ignored.

Fractivists, of course, are desperate to ignore the obvious and that’s why they pull these stupid stunts. They seldom work, though. Thinking people know better.

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One thought on “Misinformed Fractivist Gets Lesson in Economics from Cabot Oil and Gas

  1. If you’re going to extend your list of benefits of fracking to include anyone in the related industries having more work:

    1) you should include the overall health costs of spills and pollution and climate change.

    2) employment is not obviously a good signal of prosperity. You can have 96% of people employed, sure, great, but what percentage of people actually happy with their work, hours, salary level?

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