Economic and Community Impacts

Regional oil and gas development could have direct and indirect financial impacts to Allegheny College as well as many impacts to the greater economy and community.  Quantifying these impacts is difficult, if not impossible, and therefore makes any attempt at weighing costs and benefits problematic.

Potential Financial Benefit to Allegheny College

Should Allegheny College choose to sign a lease with an oil and gas company, the college would receive a signing bonus.  The landowner groups which have communicated with Allegheny estimate that the signing bonus could range from $1500-4000 per acre.  Since Bousson is 283 acres, a signing bonus could be anywhere from $400,000 to just over $1 million.  Any additional revenue is dependent upon whether drilling occurs, the quantity and quality of gas extracted, the market and prices for natural gas and other condensates, and the production royalty percentage negotiated in the lease.  While not based on any particulars of the Bousson acreage, one leasing company suggested 100 acres of land could yield $1 million in production royalties over the 20 year life of a well.

If Allegheny were to lease the Bousson acreage, the question then becomes how to spend the income from the signing bonus and possibly future production royalties.  Members of the Allegheny community have suggested funneling income towards efforts to achieve campus climate neutrality by the year 2020, adding to Allegheny’s endowment, creating scholarships for students, or investing in research and teaching facilities and equipment at Bousson.  While some Alleghenians are opposed to drilling at Bousson under any circumstances, some others would be in favor if the money was invested in a way that would contribute to the benefit of the institution.  Other institutional economic considerations include questions about how the decision to lease or not would impact prospective students’ decision to enroll as well as the likelihood of receiving donations from alumni and friends of the college.  It has been suggested that some donors would be unlikely to make gifts to Allegheny if leasing was approved based on principled opposition to deep shale gas development, while others might be unlikely to donate to an institution if refusal to lease is perceived as an imprudent dismissal of a financial opportunity.

Potential Costs and Benefits to the Regional Community

Allegheny must also consider the impacts of deep shale natural gas development upon the surrounding community.  Again, it is difficult, if not impossible, to quantify these impacts with any certainty.  During informational and discussion sessions in the 2012-2013 academic year, many questions raised by attendees focused on the impact of shale gas drilling on the local economy as well as social concerns.  Considerations include:

  • Will a natural gas boom in Pennsylvania contribute to lower natural gas prices and therefore a stronger economy both regionally and nationally?
  • Will the natural gas produced in Pennsylvania be sold and consumed locally and therefore depress prices or will it be transported to the high-using east coast market and therefore not affect prices?  Or as a local natural gas supplier employee posited, PA becoming part of the east coast market (whereas now it is more a region of it’s own) could actually cause our natural gas prices to go up.
  • Will Pennsylvania’s natural gas be used nationally or be exported internationally?
  • Will oil and gas development bring new jobs and revenue to our region?
  • Will industry jobs be filled by locals or transplants?
  • Will oil and gas activity boost the housing market?  Will this be to the benefit (better home sale market) or to the detriment (inflated rental prices) of the community?
  • Will any realized economic boom be lasting or will it be followed by a bust when the drilling activity ceases?
  • Will the natural gas boom help the manufacturing sector by providing cheap energy sources and therefore lowering the production costs and increasing the competitiveness of local manufacturers?  Would this have ripple effects for local employment rates, wages, manufacturing profits, and higher tax revenue for the local government?
  • Will new jobs attract workers in the Meadville community away from existing jobs, particularly in the manufacturing sector, since local businesses may not offer the same wage rate?
  • Will Crawford County experience social consequences of this new industry, considering other gas communities have experienced high rates of violence, rape, prostitution, drug addiction, and alcoholism.
  • Will tax revenues be sufficient to keep up with increased road traffic and therefore necessary maintenance?
  • If drilling (and any potential negative impacts) are likely to occur in our region regardless of Allegheny’s decision, should the college not then take advantage of the potential economic benefits of leasing Bousson?  Is it possible to maximize the potential economic benefits, while minimizing risks?