Energy Production: Blessing, Curse, Both?

A new study from the Kansas City Fed attempts to determine whether the rural energy-production boom creates stronger local economies. The results from rural counties in a nine-state region are mixed.

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The same boom that is fueling the nation’s energy sector is also fueling a debate about whether gas and oil production is helping or hurting local economies.

The Yonder has carried a number of studies and reports that look at these issues. Here’s a new one that comes from an economist at the Federal Reserve Bank of Kansas City, Jason P. Brown.

Brown looks at 647 nometropolitan counties in a nine state region from Wyoming to Louisiana from 2001 to 2011. He concludes that increased natural gas production isn’t a curse on local economies. But if it’s a blessing, it’s a modest one.

Brown broke his counties down into ones that had seen an increase or a decrease in gas production, or which had no gas production at all. (We’ve got an interactive, Lower 48 map with similar data in an earlier story.) Then he ran a model to see whether he could isolate the impact of gas production from all the other factors that affect local economies.

The chart above tells the story.

Counties that had an increase in gas production saw greater growth in employment and population (the first and second set of bars in the chart). But counties with no gas production had the biggest growth in real personal income (the set of bars on the right of the chart).

Brown also looked at wages (the third set of bars), and found the most growth in counties where gas production had declined.

So, what do we make from this?

Brown says “within the timeframe and region under consideration, an increase in natural gas production has not been a natural resource curse for local economies.” But the growth in wages and employment he associates with gas production “has been modest.”

The map shows the study area, which included Arkansas, Colorado, Kansas, Louisiana, Nebraska, New Mexico, Oklahoma, Texas and Wyoming.

 

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