Blog Posts > West Virginia Shale Development Falls Short of Economic Promise

West Virginia Shale Development Falls Short of Economic Promise

Written by WVCBP on February 8, 2019

The nearly six-fold increase in West Virginia’s natural gas production in the last decade, due largely to shale development, or fracking, has fallen short of expectations for economic growth, job creation, and tax revenue generation, according to a new report released by the Institute for Energy Economics and Financial Analysis (IEEFA) and the West Virginia Center on Budget and Policy.

The report, Falling Short: Shale Development in West Virginia Fails to Deliver on Economic Promises, finds that the shale industry has underperformed economically due to the falling price of natural gas, which has cut into the industry’s profits and under-delivered state tax revenues. It has also missed expectations of creating jobs, reducing poverty, and spurring wider economic growth.

Key findings include:

  • The economic development gains of the shale industry have underperformed initial projections partly due to exaggerated early claims made by the industry and industry-funded studies.
  • Planners failed to anticipate the significant and sustained collapse in natural gas prices resulting from large increases in production.
  • Severance tax revenues grew through Fiscal Year 2015 and then fell off. Fiscal Year 2018 natural gas severance tax revenues were only 15% higher than FY 2008 revenues, adjusted for inflation.
  • The growth in employment from 2008 to 2017 has been in natural gas pipeline construction, largely temporary jobs while jobs in drilling and related activities have actually declined-about 40% of pipeline construction jobs are held by out-of-state workers.
  • Natural gas production is concentrated in six of the state’s 55 counties which produce 80% of West Virginia’s natural gas.

Missed Opportunities in Governor’s Proposed Budget

Governor Jim Justice’s FY 2020 budget includes new spending initiatives and pay raises while avoiding spending cuts as the state’s financial situation shows signs of stability. While the FY 2020 budget is an improvement after years of budget cuts, it represents a missed opportunity to reverse the damage of past mistakes and invest in a future shared prosperity.

Our latest issue brief provides an overview of the governor’s FY 2020 budget proposal, and the underlying factors that are influencing the state budget, and how future actions could change the dynamics of the state budget. Steps policymakers can take to ensure that the budget not only provides a better foundation for economic prosperity but that it also protects vulnerable children and families and helps push more people out of poverty include:

* Enacting a Paid Family and Medical Leave Program
* Creating a refundable state Earned Income Tax Credit
* Boosting childcare assistance
* Making higher education debt free
* Raising the severance tax to fund the Future Fund
* Closing corporate tax loopholes, reenacting the Estate Tax, and increasing the tobacco and soda tax

Another pro-worker policy recommendation is raising the minimum wage to $15/hour like New Jersey did this week. Here’s more in Ted’s blog post about what this could mean for West Virginia workers and families.

From the Dome: Session Reaches Half-Way Point

This week at the legislature saw West Virginia take another concrete step to lift the lifetime ban on SNAP benefits for persons with felony drug convictions. HB 2459 was voted out of Senate Judiciary Committee without amendments. It now heads to the full Senate for a vote early next week. Read more about why West Virginia needs to eliminate this ban in this blog post by Policy Fellow Tara Holmes.

Also in the House, an assault on local governance made it out of the Committee on Government Organization. HB 2708, also known as a preemption bill, would severely limit the ability of counties and municipalities to make local decisions. The committee hearing took a raucous turn when social conservatives attempted to amend the bill and override the ability of municipalities to adopt non-discrimination ordinances that protect LGBT citizens. The amendment ultimately failed and the bill currently is in possession of the House Judiciary Committee.

Unequal Happy Hour Discussion Includes State’s Gender Pay Gap

WVCBP Policy Outreach Coordinator Kelly Allen and Boss Babes Kayla Young address the crowd at the Unequal Happy Hour on February 7 in Charleston

February 19: Criminal Justice Reform Advocacy Day at the Capitol/Screening of Healing Justice

WV Capitol Complex, 9:00 – 1:00PM. Join youth leaders, legislative champions, advocates, and formerly incarcerated people as they stand united. Call to Action for Racial Equality and other advocates are calling for second chances and a path forward for people suffering from addiction, in recovery, and the children and families who are impacted by a criminal justice system that disproportionately impacts poor people and people of color. If you are interested in youth-led activities happening that day, contact Shanequa Smith.

 

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