Article

February 2014

The Marcellus Shale gas boom in Pennsylvania: employment and wage trends

In recent years, the U.S. oil and natural gas industry has seen rapid growth in shale gas production. With the commercial development of the Marcellus Shale formation in the northeastern United States, much of that growth has occurred in Pennsylvania, a traditionally coal-producing state. This article uses data for the period 2007–2012 to examine employment and wage trends in Pennsylvania’s oil and natural gas industry and to compare those trends with corresponding developments in the state’s coal mining industry.

In the latter half of the 19th century, Pennsylvania dominated the U.S. oil market. The first oil well was drilled in Titusville, Pennsylvania, in 1859, prompting the first oil boom in the United States. Pennsylvania was the leading U.S. producer of oil until the 1901 Texas oil boom.1 With the recent drilling in the Marcellus Shale—the largest shale formation in the United States, spanning six northeastern states—the growth in shale gas production in Pennsylvania has revived the state’s important role in the nation’s oil and natural gas industry. This article presents employment and wage trends in Pennsylvania’s oil and natural gas industry over the 2007–2012 period. It also compares that industry with the state’s economically important coal mining industry.

Background

The U.S. Energy Information Administration (EIA) projects that U.S. annual natural gas production will increase from 23.0 trillion cubic feet in 2011 to 33.1 trillion cubic feet in 2040, a gain of 10.1 trillion cubic feet (44.0 percent).2 More than 87 percent of this increase is due to growth in shale gas production, whose share of total natural gas production is projected to reach 50.4 percent by 2040.3 Because of this rapid growth, the oil and natural gas industry has experienced large employment and wage increases over the past few years. Many of these increases have occurred in areas outside the “oil patch” region, which produces a substantial amount of U.S. oil and natural gas and comprises the states of Oklahoma, Texas, and Louisiana. (For states whose employment in the oil and natural gas industry changed by more than 1,000 over the 2007–2012 period, see figure 1.)

Shale gas is natural gas trapped within shale formations, which are made of thin layers of fine-grained sedimentary rocks. These shale formations cover a wide area. Conventional vertical wells can only access a small vertical layer of shale, making the extraction of gas deposits uneconomical. Horizontal drilling, that is, drilling along the thin layers of rock, has allowed gas producers to access much more natural gas from shale deposits. Gas producers have effectively used horizontal drilling with hydraulic fracturing (commonly called fracking), which is an extraction technique in which water, chemicals, and sand are pumped into the horizontal wells to fracture the shale rock and allow natural gas to flow out. These two techniques, when used in combination, have enabled gas producers to extract shale gas both rapidly and economically.

The nation’s most developed shale “play” (i.e., a commercially exploited geographical area or energy deposit) is the Barnett Shale in Texas, where drilling began in the late 1990s. Since 2003, the use of horizontal wells in the Barnett Shale has increased considerably.4 Strong economic results from this practice have led to drilling in other areas, such as the Haynesville and Fayetteville shale plays in Texas, Louisiana, and Arkansas.

However, the most interesting shale development is in the Marcellus Shale. Much of the recent drilling in that shale has occurred in Pennsylvania, a traditionally coal-producing state that has seen a surge in natural gas production and employment over the past few years. Counties in northeastern and southwestern Pennsylvania have been most affected by the growth in natural gas production.

Notes

1 “The world of oil: the history of Titusville, PA” (Ithaca, NY: Paleontological Research Institution and its Museum of the Earth; and Cayuga Nature Center), http://www.museumoftheearth.org/outreach.php?page=s_oil_home/s_oil_s6_history/s_oil_s6_titus_1.

2 “Annual energy outlook 2013,” table 13 (U.S. Energy Information Administration, April 2013), http://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm.

3 “Annual energy outlook 2013,” figure 91 (U.S. Energy Information Administration, April 2013), http://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm.

4 “Technology drives natural gas production growth from shale gas formations” (U.S. Energy Information Administration, July 2011), http://www.eia.gov/todayinenergy/detail.cfm?id=2170.

1next page

View full article
About the Author

Jennifer Cruz
cruz.jennifer@bls.gov

Jennifer Cruz is an economist in the Office of Employment and Unemployment Statistics, U.S. Bureau of Labor Statistics.

Peter W. Smith
smith.peter@bls.gov

Peter W. Smith is an economist in the Office of Employment and Unemployment Statistics, U.S. Bureau of Labor Statistics.

Sara Stanley
stanley.sara@bls.gov

Sara Stanley is an economist in the Office of Employment and Unemployment Statistics, U.S. Bureau of Labor Statistics.