The Oil and Gas Industry

The social and economic effects of energy-producing facilities have been studied extensively. Extractive industries, such as mining and oil and gas drilling, have historically occurred in rural areas with few nearby towns. In cases where the facility or site was far from existing settlements, the organizations heading the effort (either a private company or a government agency) would build a new town to house the workers. Since our study focuses on the effects of utility-scale solar facilities upon existing population centers, this literature review will exclude information on towns built purely for a new facility.

Literature review suggests that traditional resource development facilities, such as those based on petroleum, affect existing rural areas in a variety of ways. Effects vary greatly among different industries and facility locations; thus, quantitative data on impacts is hard to come by. However, studies often focus on three broad areas:

• Job creation Population growth
• Local fiscal impacts
• Job Creation

Proponents of resource development often extol the positive effects these facilities will have on local employment. However, job creation is often dependent on several facility characteristics, including project scale and technology. While the local labor pool may be qualified for less-skilled jobs, often local hiring will not satisfy the demand in professional, technical, and supervisory areas.¹ While local laborers may be hired, local unemployment levels may not necessarily decrease, especially when the unemployed do not have the skills required for the new positions. Just as the quality of local labor plays a part in employment impacts, so does the quantity of available labor. A town will likely experience greater employment effects if its job applicants do not have to compete with the job applicants in other nearby towns.
Similarly, oil and gas facilities may also generate secondary employment effects. Secondary employment refers to jobs created indirectly by the facility. For example, if a new facility attracts workers to the area, local stores will likely see an increase in business, which may lead to new jobs at the stores. The magnitude of indirect employment effects are largely determined by the new project and are dependent on factors such as employee wages and the company’s likelihood of purchasing local goods.

Population Growth
Rapid population growth is a common experience in rural towns near new resource extraction facilities. Examples of small towns experiencing rapid population growth because of energy development can be seen as early as the 1800s and up through modern times. In the late 19th century, an oil boom in Scio, Ohio, caused the town’s population to skyrocket from 900 to approximately 12,000.² More recently, Uinta County, Wyoming’s population grew from 7,100 to 13,021 residents between 1970 and 1980 as a result of oil and gas development and the construction of gas processing plants.³ Similar trends are evident in towns experiencing other types of energy development, including coal mining and power plant construction.⁴

When an area’s labor pool is inadequate for an energy project, outside labor will likely move to the area to fill the gap. Like a facility’s impact on employment, in-migration is also dependent on several facets of the project, including the facility’s scale. Towns with larger populations (greater than 1,000 individuals) and with developed services will likely experience greater rates of population growth than areas without developed services.⁵ Generally, such towns may see their population grow as much as 10- 15 percent annually.⁶ With the influx of new individuals, secondary industries in the town may also begin to grow; more individuals will move to the area to fill these secondary positions.⁷

Rapid population increase often corresponds with decreased availability of public services. Demand for education, water and sewer, health care facilities, fire and police protection, and transportation systems may increase as a result of population growth.⁸ The term “boomtown” is used to describe towns where “rapid population growth associated with energy and other resource development creates social disruptions, cultural conflicts, and pathological behaviors.”⁹ Increased rates of mental illness, school dropout rates, child abuse and drunkenness have all been observed, though other research suggests that the social deviancy associated with new resource extractive facilities may be overblown.¹⁰,¹¹,¹²,¹³  Decades of research suggest boomtowns are the result of inadequate services, because they are either antiquated and/or unable to absorb the increased demand.¹⁴ Eventually, increased tax revenue may cover the costs of expanded services.¹⁵

Sweetwater County, Wyoming, exemplifies the boomtown phenomenon.¹⁶ In the early 1970s, mineral extraction and processing ramped up significantly. Population and employment nearly doubled in four years, to 36,900 and 15,225 respectively. Also during that time, the number of mental health clinic caseloads increased eight-fold and there was a drastic shortage of schoolrooms. Furthermore, growth in municipal water and sewage services, as well as roads and electric service, could not keep up with demand. During the boom, crime rates increased by 60 percent.

Local Fiscal Impacts
It is difficult to generalize the fiscal impacts of extractive facilities because taxation systems vary by state.¹⁷ However, most states impose a severance tax, which taxes a facility by the amount of a resource extracted. A portion of severance tax revenue may be funneled to an “impact fund” for affected communities.¹⁸ States may also levy a corporation income tax. Facilities on federal land may pay lease fees and production royalties. However, taxes and fees collected at both the state and federal level may not specifically benefit local municipalities affected by the extractive facility.

In addition to funds that come from state or federal government, local municipalities may benefit from a facility’s indirect and induced effects. Local workers hired by the facility will likely live in town, thereby increasing the demand for housing and possibly spurring construction of new housing stock. Local workers will spend their earnings in town, boosting the economy. An influx of new workers will create a demand for more stores and restaurants, which will in turn hire workers who will spend their incomes locally.

1 Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 149.

2 Jeff A. Spencer and Mark J. Camp, Images of America: Ohio Oil and Gas (Chicago, IL: Arcadia Publishing, 2008) 7-8.  

3 John M. Halstead and F. Larry Leistritz, “Energy Development and Labor Market Dynamics: A Study of Seven Western Counties,” Western Journal of Agricultural Economics 9, no. 2 (1984): 359.    

4 John M. Halstead and F. Larry Leistritz, “Energy Development and Labor Market Dynamics: A Study of Seven Western Counties,” Western Journal of Agricultural Economics 9, no. 2 (1984): 359.    

5 Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 150.    
 
6 Ronald L. Little, “Some Social Consequences of Boom Towns,” N.D. L. Rev. 402, no. 53 (1976-1977): 403.   

7 John M. Halstead and F. Larry Leistritz, “Energy Development and Labor Market Dynamics: A Study of Seven Western Counties,” Western Journal of Agricultural Economics 9, no. 2 (1984): 357-369.    

8 Ronald L. Little, “Some Social Consequences of Boom Towns,” N.D. L. Rev. 402, no. 53 (1976-1977): 405.  

9 Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 154.    

10 Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 156.    

11 William R. Freudenburg, “Social Impact Assessment,” Annual Review of Sociology 12, (1986): 462.    

12 L. Bacigalupi and W. R. Freudenburg, “Increased mental health caseloads in energy boomtowns,” Admin. Ment. Health 10, (1983), quoted in Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 155-156.   

13 E.V. Kohrs, “Social consequences of boom town growth in Wyoming,” Presented at Regi. Meet. Am. Assoc. Adv. Sci., Laramie, Wyoming, quoted in Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 155-156.

14 J.S. Gilmore, “Booms towns may hinder energy resource development,” Science 191, (1976), quoted in Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 155-156.    

15 Ronald L. Little, “Some Social Consequences of Boom Towns,” N.D. L. Rev. 402, no. 53 (1976-1977): 406.    

16 Ronald G. Cummings and Arthur F. Mehr, “Investments for Urban Infrastructure in Boomtowns,” Nat. Resources J., 223, no. 17 (1977): 223.    

17 Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 152.   

18 Gene F. Summers and Kristi Branch, “Economic Development and Community Social Change,” Annual Review of Sociology 10, (1984): 153.