Investment in energy efficiency should be part of a transition plan to improve the quality of life for counties in Ohio, West Virginia and Pennsylvania that have had lots of natural gas activity, according to new reports from the Ohio River Valley Institute.
The reports also shed light on why the overall quality of life has lagged in seven counties that have produced the lion’s share of Ohio’s fracked gas, even as their gross domestic product has risen.
“When you do energy efficiency — not just in homes, but in businesses, workplaces, schools and other public buildings — you are also contributing to an improved quality of life,” said Sean O’Leary, lead author of the two reports released Wednesday.
First, energy efficiency work on heating, ventilation, air conditioning, and doors and windows tends to be labor-intensive, O’Leary said. “For each dollar that goes into them, they generate about three to four times as many jobs as a dollar spent or earned in natural gas.”
“These are businesses that are done by local contractors,” O’Leary continued. “When you spend money with them, the money stays in the local economy. They hire local workers, and it has a multiplier effect.”
“The third thing is that these kinds of investments have an annuity value,” O’Leary said. “That is, they cause savings on utility bills.” That translates into a lower drain on residents’ personal incomes. And, “the savings go on for decades.”
As support, O’Leary and colleagues point to Centralia, Washington, as a model for Appalachian counties to use to transition from dependence on fossil fuel industries. They describe the model in one of the reports.
Located roughly midway between Seattle and Portland, Oregon, the area had long depended on coal mining and a coal-fired power plant. At times from 1994 to 2005, the unemployment rate surpassed some Appalachian counties.
The Centralia coal mine closed in 2006. Only one unit remains operating at the power plant, and it is scheduled to retire in 2025. Yet from 2015 to 2019, the area’s gross domestic product grew at twice the nationwide rate, and it added more than 2,800 new jobs, according to the report.
In particular, TransAlta, which owned the coal mine and still owns the power plant, agreed to invest $55 million for a transition plan that supports energy efficiency, economic and community development, and education and retraining programs.
“You just walk around town, and you see this is a nicer place to live and have a business than it used to be,” O’Leary said.
“Energy efficiency is definitely the bedrock of clean energy job growth,” said Jane Harf, executive director of Green Energy Ohio, who did not work on the reports. “In 2019, almost three-quarters of Ohio clean energy jobs were in the energy efficiency sector, and the same held true across the Midwest.”
“Energy efficiency is also the low-hanging fruit in the fight against climate change,” Harf continued. “Reducing the amount of energy we use is critically important, regardless of the source.”
If energy efficiency upgrades like those made in Centralia were done in three panhandle counties in West Virginia, residents would save about $8 million a year on their utility bills, O’Leary said. “And that’s money that would be recycled back into the local community.”
Contrast with gas
In contrast, the Ohio River Valley Institute’s other new report suggests the natural gas industry is “destined to fail” when it comes to delivering lasting quality of life benefits for people in 22 counties in Ohio, West Virginia and Pennsylvania.
Since 2008, the industry has invested billions of dollars to develop fracked horizontal gas wells, along with mid-stream processing plants, pipelines and related activity. Despite setbacks in the nation’s coal industry, the economic sector for mining, quarrying, and oil and gas grew from 4% of those counties’ economies in 2008 to 35% in 2019, according to the report.
Yet while overall jobs grew 9.9% nationwide from 2008 to 2019, the 22 counties covered in the reports saw only 1.6% growth, the Ohio River Valley Institute reported earlier this year. The seven Ohio counties included — Belmont, Guernsey, Carroll, Jefferson, Harrison, Monroe and Noble — actually saw a drop in net job numbers of roughly 8%.
“How in God’s name can you invest $80 billion and not see any job growth or much change in economic activity?” O’Leary said.
In contrast to the energy efficiency sector, natural gas operations are “capital-intensive, rather than labor-intensive,” O’Leary said. Compared to other industries, relatively few jobs are created for the dollars invested.
Additionally, much of the work drilling and fracking horizontal wells has been done by skilled workers from outside the region.
An influx of temporary workers gave Belmont County in Ohio “issues with the mobile parks coming in, and they had to build hotels for all the workers coming in,” said former County Commissioner Mike Bianconi. That provided a short-term boost for the hospitality and service industries, while providing disruptions in other ways.
“But you know, they’ve all left,” Bianconi said.
Royalty payments also have not translated into improvements in most people’s personal incomes, O’Leary said. For one thing, natural gas spot prices have declined from their high in 2008 of more than $12 per million Btu down to less than half that for the high in February 2021. And several months from 2012 forward have had spot prices below $2 and $3 per million Btu, Energy Information Administration data show.
Consequently, royalty payments to local property owners are less, O’Leary and colleagues report. Less money is available for people’s personal income and spending in the local economies. And that money isn’t distributed evenly throughout the community.
In a separate analysis, economist Amanda Weinstein at the University of Akron and colleagues at Indiana’s Ball State University attempted to gauge the quality of life for people in counties across the United States. In general, counties that are rich with natural amenities, such as beaches or mountains, tend to rank high.
The Appalachian counties covered by the report indeed offer some beautiful scenery and other natural amenities. Yet they lag behind other areas when it comes to their general quality of life, Weinstein said. Those counties have a history of extensive coal mining, as well as natural gas drilling.
“Instead of building on those natural amenities, those extractive industries actually reduce it,” Weinstein said.
The quality of life rankings use data from the 2010 census, before the largest expansion of fracking and horizontal drilling in the Marcellus and Utica plays. However, the declining population data for the Appalachian counties suggest people might be “voting with their feet” to leave. Also, the quality of an area’s environment for business doesn’t necessarily translate into a better quality of life, Weinstein said.
Looking to the future
The time is ripe to talk about a transition for the Appalachian counties, O’Leary said, especially in light of the infrastructure plans being discussed at the federal level right now. And at least some local leaders are looking to broaden their communities’ economic base.
“You cannot deny the fact that we need to diversify the economy when you look at the numbers,” said County Commissioner Mike Belding of Greene County, Pennsylvania. He noted that a few natural gas companies have made substantial investments in the community, including one that has given money for a recreation center and another that has been working to expand broadband coverage. Yet overall, he said, “I would agree with the failings of the industry writ large.”
The report on the Centralia model for transition was “very eye-opening,” Bianconi said. He encourages residents to look beyond coal and natural gas with “open eyes and an open mind.”
Spokesperson Mike Chadsey at the Ohio Oil and Gas Association was more critical. “Just like their last effort, the only thing that is destined to fail is this anti-natural gas-funded report gaining any traction,” he said, raising questions about the organization’s funders. “The fact remains, according to state data, over 208,000 are proudly employed in the natural gas industry here in Ohio.”
That number jibes with an April 2020 report from the Ohio Department of Job and Family Services, using data through the third quarter of 2019. The same report still shows March 2020 unemployment rates higher than the state averages for the seven counties included in the Ohio River Valley Institute reports.
“We’re looking at the fact that the counties are getting a bad deal economically,” O’Leary said. “Even if you’re pro-industry, even if you’re pro-fracking, that doesn’t mean you should be for a bad deal.”