U.S. gas boom fails to deliver economic benefits

The shale gas boom in Appalachia has delivered “little beneficial economic impact to host communities” despite twenty years of development, with regions that experienced the highest concentration of drilling seeing weaker job and income growth — and even greater population loss — than other parts of the country, according to a new report.

The Marcellus Shale formation, which straddles western Pennsylvania, eastern Ohio, and parts of West Virginia, is the most productive gas basin in the country. Output has climbed more or less uninterrupted for two decades.

But promises from the industry that the gas boom would bring prosperity have not panned out, according to a new study from the Ohio River Valley Institute (ORVI), an Appalachian-focused think tank.

“Data going back two decades to the start of the shale gas fracking boom show a natural gas industry that, while growing wildly and making immense contributions to economic growth as measured by gross domestic product, has also done little to stimulate job growth, raise wages and incomes, or stem population losses,” wrote Sean O’Leary, a senior researcher at ORVI and author of the report.

The number of people employed in Pennsylvania’s gas industry has fallen to just over 16,000 today, down from 30,000 in 2012. But even in its heyday, those employment figures were not enormous. By way of comparison, Walmart employs 60,000 people in the state, and the University of Pittsburgh Medical Center — a large health care company — employs 100,000 people, six times that of the gas industry.

“That’s because the industry’s failure to contribute meaningfully to job and income growth is structural in nature,” O’Leary said. The gas industry is extremely capital-intensive, but not very labour-intensive. The Pennsylvania gas industry generates just one job per USD$1 million of GDP, compared to six jobs per million dollars of GDP for the broader Pennsylvania economy.

That’s not because gas production has declined — far from it. The tri-state region, which ORVI has dubbed “Frackalachia,” produces around 37 billion cubic feet of gas per day, or about a third of the country’s entire output.

With each passing year, the industry has become more productive, squeezing out more gas even as it sheds workers. Between 2018 and 2022, a period that saw surging output, the industry eliminated 10,000 jobs. Another 3,000 have disappeared since then.

This creates a paradox that may not seem intuitive at first glance. GDP has risen significantly in the counties of Frackalachia, but on the economic indicators that most reflect economic development — jobs, wages, income, and population growth — the counties that have seen the most intense drilling lag well behind the rest of the state.

For instance, in Pennsylvania, the most gas-reliant counties saw job growth of just 1 percent between 2008 and 2025 — effectively stagnant. At the same time, Pennsylvania as a whole saw job growth of 7 percent over the same period.

Even more stark is the extent of population loss in shale gas counties, which suffered from a substantial depopulation over the course of the gas boom. Greene County, Pennsylvania, one of the most productive counties in the Marcellus Shale, saw its population shrink by more than 13 percent since 2008, at a time when the state’s population grew by 3.7 percent.

To be sure, there are plenty of individual examples of landowners leasing their land and earning enormous sums. Amounts varied, depending on what was offered by a particular company and how much land a person possessed, but it could range from hundreds to tens of thousands of dollars upfront, plus monthly royalties.

“Larger landowners reaped royalty checks worth thousands of dollars for a month of production, a real windfall that allowed some of them to buy a new tractor, put a new roof on the barn, and so on,” Colin Jerolmack, a Professor of Environmental Studies and Sociology at New York University, told Gas Outlook in an email. Jerolmack has extensively researched the economic and sociological impacts of the Pennsylvania gas boom, and his book, “Up to Heaven and Down to Hell” details the experiences of families living through the drilling frenzy.

“There were some real winners in the ‘fracking lottery,’” he said.

However, in many cases, the royalty checks dwindled faster than expected, and the downsides — including noise, pollution, and the lost sense of control over one’s own property — were often worse than many anticipated. “I would say that many folks wound up making less money, and experiencing more disruption, than they expected,” he said.

More broadly, however, the individual windfalls did not translate to widespread prosperity.

“I do think that there’s been more economic benefit to landowners directly than to the local economies as a whole,” Jerolmack said.

Gas, petrochemicals, hydrogen…data centres?

Appalachia has bet its fortunes on one industry after another, gambling on various iterations of a familiar economic model that promises to offer struggling communities more or less a silver bullet.

After the fracking boom began to mature and growth slowed, the industry proposed a series of massive petrochemical facilities to process all the gas into plastic. Proponents of the petrochemical boom made bold claims about enormous job growth and prosperity. But those dreams fizzled, leaving the region with little to show for it.

Pennsylvania handed out $1.6 billion in tax breaks to Shell for an ethane cracker, intended to be the flagship project for a sprawling petrochemical boom up and down the Ohio River. However, four other massive ethane crackers failed to get off the ground, and even Shell’s plant has led to disappointing financial results. Importantly for people living nearby, the Shell facility has been riddled with operational problems, resulting in chronic air pollution.

The failed petrochemical boom did not deter the gas industry from promoting its next vision — a multi-state hydrogen hub. With bipartisan backing, including federal funding during the Biden administration, the ARCH2 hydrogen hub would use the region’s abundant shale gas to produce hydrogen for trucking, aviation, home heating, and data centres.

But, as Gas Outlook reported early last year, its prospects at the outset appeared bleak. As it stands, there’s very little activity at the hydrogen hub and the concept is essentially at a standstill.

Even as each of these visions for a region-wide industrial renaissance, underpinned by gas, has run aground, a very powerful public narrative about an economic bonanza remains. Political leaders in both major parties in Pennsylvania have largely supported the gas industry for much of the past two decades, framing gas drilling as a key to economic development.

But that assertion is belied by the evidence, which shows that surging gas production has “relentlessly failed to deliver any of the benefits it is now said to promise,” O’Leary wrote.

“In summary, Pennsylvania’s shale gas industry is not currently a major employer, it’s not a growing one, nor does it have any apparent route to becoming one,” he concluded.

Meanwhile, Pennsylvania is one of many regions seeing explosive growth in data centre construction. The state risks repeating some of the same mistakes of the shale gas era, O’Leary said. Data centres are even less labour-intensive than gas. They do not offer royalties to landowners, so none of the benefits are shared at all. And the drawbacks — gargantuan users of energy, land, and water — are considerable. Soaring electricity costs tied to data centres has already become a political flashpoint in the state.

However, the one difference is that grassroots and political support is not nearly as strong for data centre development as it has been for gas. Anecdotally, Jerolmack said, “there’s more apprehension, less excitement, and less hope for prosperity associated with data centers compared to how residents felt about fracking at the outset.”

“So most residents just feel like bystanders, worried that their quality of life and property value will suffer without them receiving any benefit or having any say,” he said.

He added that while fracking has enjoyed bipartisan support, “data centers seem to invite skepticism from both Democrats and conservatives.”