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Pennsylvania Businesses Seeing Marcellus Spike

Local businesses in two of the most active counties in the Marcellus Shale are reporting increased sales, but also some difficulties holding onto employees, according to a study from Penn State University released Sunday.

The survey found that 28% of business owners in Bradford and Washington counties in Pennsylvania said sales had increased because of natural gas drilling, while only 3% reported decreasing sales because of development.

Meanwhile, 9% of businesses said natural gas development made it more difficult to find qualified employees.

While the results only measure perceptions, they are still a "useful indication" of how development impacts local economies, according to Timothy Kelsey, the professor of agricultural economics who authored the report.

"Both counties have had more drilling activity than most other counties in the Commonwealth and their experience likely foreshadows what could occur in other counties as drilling activity increases," Kelsey wrote.

Kelsey and his team sent surveys to 1,000 locally owned and operated businesses in Bradford and Washington and got a 31% response rate on the survey, with 360 responses from Bradford and 259 from Washington.

Those are the epicenters of Marcellus development in Pennsylvania. Bradford County in northeastern Pennsylvania is smaller and more rural than suburban Washington County in southwestern Pennsylvania, but also more active.

Although Bradford is less than a third of the size of Washington in terms of population, it's much more active in terms of development. In 2010 Marcellus operators drilled 386 wells in Bradford and 139 in Washington.

While trends remain constant between the two counties, businesses in Bradford reported larger sales increases and greater difficulties in finding workers than businesses in Washington, something Kelsey attributed more to the small size of its economy than to the faster pace of its development. "The relative impacts will likely be greater in smaller counties, yet this also means greater risk of a 'bust' when drilling activity slows," he wrote.

Understandably, the researchers found the largest impacts at hotels, transportation businesses and restaurants in Bradford County -- all businesses forced to manage the large influx of workers arriving for development activities.

The survey also focused on tourism, a sector particularly concerned about development, but found few negative impacts to date. Of the 30 businesses that responded, 29% said sales had increased because of natural gas development and the rest reported flat sales. None reported decreasing sales or difficulties finding employees.

But because the survey is a snapshot of the business landscape in the early days of a boom, Kelsey said it is unclear how long-term development -- particularly pipelines and access roads -- might impact tourism businesses.

The survey is part of a larger effort by Penn State to study the economic impact of the Marcellus. Kelsey previously analyzed the correlation between drilling activities and tax revenues in Pennsylvania, information that has become central to the debate about whether or not to enact a production tax in Pennsylvania (see Shale Daily, March 2).

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