Sunday, February 10, 2013

Marcellus Shale Fueling Brain Drain

State U would like more funding. But college graduates are geographic whores. Why would residents pay higher taxes only to see the best and brightest flee?

On a smaller scale, empty nesters frustrate school district attempts to fund vital educational programs. I live in Loudoun County, Virginia. It's booming. It's wealthy, obscenely so. Yet austerity rules and foreign language instruction for elementary school students feels the weight of the ax. Why should I pay more property tax so your kid can learn a skill that will likely benefit some other community down the line?

Brain drain is a public relations problem for some. It's the ace up the sleeve for real estate developers and big business. I've enjoyed watching the Marcellus Shale Coalition (MSC) play both sides of this fence. Pennsylvania residents should allow drilling so young adults won't have to leave in search of work. Spin from last year:

With natural gas prices slightly more than half of what they were a year ago and drilling rigs moving out of the state to more lucrative plays, the Marcellus Shale Coalition is touting job growth for Pennsylvanians.

At a rally on the Capitol steps Monday, the industry group attempted to counter two of the most persistent criticisms leveled at its jobs claims: that the jobs are temporary, nonunion work and too often go to out-of-state workers from places such as Texas and Oklahoma. ...

... Mike Narcavage, an executive with Chesapeake Energy, a company drilling for gas in Pennsylvania, spoke of a brain-drain “boomerang.” People who had left Pennsylvania for work are returning because of opportunities that have opened up in the Marcellus Shale industries, he said.

Support shale gas development so prodigal sons and daughters will return home. That's funny. Like universities and local schools, the MSC has painted itself into a corner in order to fend off criticism. The Devil's due:

In fact, students trained in Pennsylvania are often flown to shale states like North Dakota for work, said Byron Kohut, the western hub director for the program, based at Westmoreland County Community College.

"It's just the nature of the business" to transport workers from state to state, Ms. Fisher said.

Several years ago, when drilling in the Marcellus Shale region began, one of the chief criticisms of the industry was its importing of trained workers from Texas and Oklahoma to Pennsylvania. Now that training programs are in place here, the ShaleNET organizers have found that students will often be flown to whatever state -- and shale formation -- needs them fastest.

College graduates leaving for greener pastures is an inconvenient truth for public higher education. The same goes for the itinerant energy industry. I blogged about it in 2010 (here and here). I'll quote myself from that second link:

As the global market recovers, itinerant workers in states such as Pennsylvania might be called to other parts of the world. I expect the demand for workers in the Pittsburgh region to increase dramatically even as the number of new drilling sites levels off (if that does indeed happen).

I didn't have a crystal ball. I wanted to understand the talent migration impact of the Marcellus Shale play. The MSC was making strong assertions in order to advance industry's policy positions. Playing fast and loose with the facts can backfire. A reminder about the propaganda used in 2010 to fend off a severance tax:

Yet as our production expands in Pennsylvania, the competition for the critical capital needed to produce a Marcellus well — each requires about $4 million — grows stronger and fiercer by the day. Other shale gas-producing states — particularly Texas, Oklahoma, Louisiana and Arkansas — want those investments, and those jobs, just as much as we do.

But we’re not just competing with other states for these opportunities. Poland, China, Canada and other foreign nations are working aggressively to secure the capital needed to expand their energy production, too. There’s a reason officials at the Kremlin read news clips from the Marcellus region every morning — and it’s not because they’re looking for coupons.

It’s no secret that our elected officials in Harrisburg are considering a new tax on shale gas production. Unfortunately, some don’t seem to understand that global competition for capital will react to the magnitude of the tax, evidenced by their consideration of a tax that would be the nation’s highest and least competitive.

If Pennsylvania taxes, then there will be a brain drain of investment capital. The assertion didn't make sense then. Now, the claims are comically phony. Brain drain hysteria muddies the policy waters. No one can see the schools of red herring.

To arms, environmentalists! Fracking causes brain drain. What's good for the goose is good for the gander, right Kathryn Klaber?

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