Tom Shepstone
Shepstone Management Company, Inc.

Tim Kelsey, a Penn State Ag Economist, has conducted a guerrilla campaign against natural gas by continuing to minimize the contributions of the industry.

I graduated from the Penn State University College of Agriculture many years ago with a degree in agricultural economics and fews things are more frustrating to me than seeing a staff member from that department repeatedly trashing Pennsylvania’s shale gas miracle. I’m talking about Tim Kelsey, a Professor of Agricultural Economics, who has just released a jobs study obviously intended to feed the false idea the shale gas industry hasn’t done much for Pennsylvania compared to its costs. It’s an academic card game designed to convince others what we see with our own eyes can’t possibly be true, except that it is.

Tim Kelsey

The last time we mentioned Tim Kelsey on these pages it was in conjunction with his use by State Impact as a source to discredit shale job numbers used by the Pennsylvania Department of Labor, first under Governor Ed Rendell and, later, by the Corbett Administration. Kelsey was, as usual, available to offer a skeptical view (based on his quarrel with the footnotes). I noted then Tim Kelsey was anything but an an unbiased observer, linking to a Lancaster Online piece about a Quaker anti-pipeline gathering at which he said “Some people are making a lot of dollars (from Marcellus Shale). But the majority of the residents are not making much money, if at all.”

Before that, Tim Kelsey was:

• Suggesting shale development negatively impacts farming,
• Serving as part of the study team that produced an incredibly shallow and error-ridden piece of work suggesting Pennsylvania health might be impacted by gas drilling,
• Using anecdotal evidence to suggests non-landowners were incurring all the costs and receiving none of the benefits associated with natural gas development unless they are lucky enough to secure a job in the industry, completely ignoring Act 13 impact fee distributions, and
• Stating “municipal governments are not experiencing major increases in revenue to help pay for any such impacts from natural gas development,” which was again based on anecdotes and against all other evidence.

Yes, Tim Kelsey has been on a campaign against natural gas for a long time. This jobs study is just the latest in a string of reports intended to deliver a negative spin on the one thing that is actually helping rural areas such as Bradford, Greene, Susquehanna, Tioga and Washington Counties, not to mention micropolitan Williamsport and Lycoming County.

This latest report, entitled “Resident vs. Nonresident Employment Associated with Marcellus Shale Development” is authored by Kelsey and two other junior members of the ag economic staff at Penn State is a little different than the others. They were all based on “anecdotal evidence” (which is no evidence) combined with superficial analyses of other data intended to give the reports academic gravitas without much work. This one is based on econometric gobbledygook explained in those extra long paragraphs that discourage most from reading or thinking about what is being said.

Econometrics is a merging of statistical analysis with economics and it presents a golden opportunity for academics of particular views to advance them by interweaving statistical probability with causation. That statistical correlation doesn’t necessarily mean one thing is caused by the other is well known but the correlations always get attention because they imply the causation and the explanations are so dense no goes much further than simply accepting the work of the person presenting the statistics. The damage is done upon publication and the person challenging the stats is on the defensive from the outset – the beauty of econometrics!

There is a deeper problem, though, and it’s explained rather nicely in this article, which notes the following regarding a study that purported to show the rate of interest didn’t have much impact on investment because the rates didn’t vary much during the period examined and, therefore, there was little to measured in the way of correlation (emphasis added):

Of course, this does not mean that the rate of interest had no potential causal relationship with fluctuations of investment. Rather it means that, due to the lack of substantial fluctuations in the interest rate in the period of observation, whatever effects it may or may not have had were simply not realised. Thus, from the given evidence we simply do not know.

Many would interpret Tinbergen’s results to say something like: “The rate of interest has very little effect on fluctuations in investment”. From a statistical point-of-view that statement is perfectly true for the period given. But from a causal point-of-view — which is what we as economists are generally interested in — it is completely hollow.

The question then arises: why, after over 70 years, are econometrics textbooks engaged in the same oversights and vaguenesses as some of the pioneering studies in the field? I think there is a simple explanation for this. Namely, that if econometricians were to be clear about the distinction between statistical and causal relations it would become obvious rather quickly that the discipline holds far less worth for economists than it is currently thought to possess.

These observations are particularly applicable to this latest gas bashing study by Tim Kelsey. He tells us this:

Our models produce a number of interesting results. First, while Marcellus activity has a positive effect on employment, the effect is statistically signifcant only for counties in which 90 or more wells were drilled in a given year.

Like the mistaken economist who thought lack of interest rate movement meant no impact  on investment, Kelsey says the lack of large well numbers means no economic impact. More to the point, Kelsey never explains, and cannot explain with econometric data, what the local economies in these rural areas might have been without natural gas development. He never addresses the fact this opportunity replaced much poorer ones in many cases.

Cabot Oil & Gas Worker

We don’t hear about the employed but money-losing farmer who finally got a decent paying job in the gas industry, or the kid with welding talent who was able to stop working as a janitor and get a job building pipelines. The several people I know who live in Wayne County (with no gas drilling as yet) who got jobs in neighboring Susquehanna County don’t count either. Nor, do the employees at Penn College who shifted much of their focus from other curriculums to natural gas related programs.

There are several other questions that also arise reading this study:

1. Why does the data stop at 2011, when rural Pennsylvania was still very much in economic recession and gas companies were converting from imported workers to locals? Kelsey suggests the recession was a one or two-year event but where I live housing construction has yet to revive. The construction industry and everyone who worked on it would have fallen on even harder times if that had not been able to shift from building houses to building welds but that impact counts for naught in the mind of Tim Kelsey.
2. Why did Tim Kelsey think this thoroughly unprofessional and gratuitous slap at Governor Tom Corbett (who merely continued what Ed Rendell started) was necessary?
   “For example, in 2013 in the midst of a (failed) re-election campaign, Governor Tom Corbett claimed that 200,000 Pennsylvanians had jobs or were made more prosperous because of the industry (T. Puko, Pittsburgh Tribune Review, November 14, 2013)”
3. Why did the study not examine Internal Revenue Service data that would have allowed easy comparisons county by county and especially with New York counties bordering Pennsylvania? Had it included this data, which is more current, it would have demonstrated, as we did a few days ago with this post, that there is a huge economic difference – a difference that can only be explained to those on the ground by the shale gas activity the Commonwealth allows and the Empire State imperiously doesn’t.
4. Why does Tim Kelsey continually dwell on the costs of natural gas development to communities without mentioning the contributions of Act 13? This is the theme that runs through all Kelsey reports – that costs are being imposed with no evidence of commensurate benefits – almost as if he has never
   set foot in these areas. He pretends Act 13 benefits, extolled by county after county, go unmentioned.
5. Why does the data analysis start at 2003 and not differentiate between the wholly different set of economic circumstances in rural Pennsylvania during 2003-2008 as compared to later? The years 2004-2008 were boom years for some parts of rural Pennsylvania with second-home activity, which went bust in 2008, when Marcellus Shale development kicked in. Kelsey never addresses this economic sea change or how bad things would have been without shale gas.

Get the picture? It’s not hard to see the bias when one looks beyond the econometric mumbo-jumbo at what was left out. This is study nothing more than  a continuation of Tim Kelsey’s long campaign against natural gas development in Pennsylvania, which he hides behind a face of neutrality.

There’s just one more thing, though, and it’s the big one. It’s the last listed item in Tim Kelsey’s bibliography for this study and refers to this observation from the study:

Furthermore, overall state and national changes in employment from unconventional gas development may have little bearing on the welfare of the counties that most directly bear the costs of increased well activity, making local impacts an important issue for researchers and policymakers (e.g., White 2012).

The source for this was a link to a Patch article by Jesse White – the infamous former Representative Jesse White who lost his office after pretending, on Facebook and numerous other places, to be a young girl, a murdered teenager no less. What more do we need to know about Tim Kelsey’s credibility?