Is it possible to create a world where fracking helps communities?: Using economics to help community decisions
- macncheesetango
- Apr 14, 2025
- 10 min read
In our last blog post, we highlighted the complexities of fracking, particularly for Pennsylvania (PA) communities. While the industry promotes a positive narrative of job creation and energy independence, the reality for shale communities is far less optimistic. These communities often face long-term economic decline, health crises, ecosystem degradation, and job losses as fracking becomes more capital-intensive. But what if we reimagined how fracking tax revenues are used? Could we create a world where these communities thrive instead of decline?
In this blog post, we use our financial planning tool at CIW to explore how public investment can be re-optimized to meet community goals like carbon reduction, public health improvement, and overall sustainability. By shifting investment priorities, we aim to show how fracking communities can achieve better outcomes.
What is Fracking?
Fracking, or hydraulic fracturing, is a method of extracting oil and natural gas from underground rock formations. The process involves injecting high-pressure water mixed with sand and chemicals into shale rock to release trapped hydrocarbons. While it has revolutionized energy production in the U.S., fracking has significant environmental and health impacts, including groundwater contamination, methane emissions, habitat destruction, and increased seismic activity.
The Current Reality for PA Shale Communities
As shown in our previous blog post, the total impact of fracking on PA communities has been overwhelmingly negative since its expansion in 2007. These losses stem from:
Declining Employment: As fracking becomes more automated, jobs in shale industries have decreased by 15,000 from 2015-2025.
Economic Decline: Lower educational attainment due to reduced school funding leads to long-term economic stagnation.
Health Crises: Air and water pollution contribute to respiratory illnesses and other chronic conditions. Opioid use has also increased in shale regions.
Ecosystem Damage: Fracking sites often replace forests or agricultural land, leading to carbon emissions increases and habitat loss.
These combined effects have resulted in a net decline of $30 billion in community well-being for PA shale regions over this time frame.
The image above illustrates the total economic and environmental impacts of fracking on PA communities. While there is a $2 billion increase in shale jobs and $22 billion saved on energy bills, these benefits are overshadowed by $28 billion in lost long-term growth, $3 billion in health quality declines, and $3 billion in greenhouse gas (GHG) emission damages.
However, what if there was a way to re-route this public investment that is getting funneled away from schooling? Tax revenues sent to shale communities increased by $2 billion over this time frame, is it possible to invest in our communities to make them better off instead of worse off? Below are two options a community can take when beginning fracking in their community. The first, is how it’s been done historically in places like PA, where corporations convince a community to extract as much oil and gas as possible without restriction or management. This leads to declines in air and water quality, health, long run economic growth and increases in job loss and climate damages.
However, what if there was an alternate way to manage these resources? Instead of letting public education revenues drop, this money is reinvested in public schooling ensuring that students don’t begin dropping out of school early and providing job training courses for energy management through fracking, wind, and solar training. Then, long run economic growth and innovation don’t decline. Prioritizing giving shale jobs to local community members, instead of 70% of jobs going to people outside of the community, in addition to providing them with training for other energy jobs such as solar panel installation for when job loss occurs as production becomes more capital intensive - this protects against future job loss and economic decline. Providing stricter regulation on air and water quality measurements, while also providing education against opioid use which is common in shale industries, to improve health quality. Reinvesting in ecosystem growth as forests and agricultural land is converted to sale sites leading to carbon emissions increases and habitat destruction.
Economics: Shifting Focus from Flows to Stocks
How can we analyze if these investments will help communities? A key concept from economics helps here. Most cost-benefit analyses look at what economists call "flows" of benefits to observe community well-being and prosperity, but what we need to do is look at "stocks." For example, you take care of your backyard tomato garden (stock), and each week, this tomato plant gives you three new tomatoes (flow benefit). The more that you take care of your tomato plant by using fertilizer, watering it, and protecting it from rabbits (investment into the stock), the more tomatoes you benefit from and grow. Your total tomato "wealth" is the total number of tomatoes you will get over the lifecycle of the tomato plant, here 1 tomato plant X 156 tomatoes per year (stock X flow over the lifecycle).
This same concept can be applied to communities on a bigger scale. For example, an acre of forestland (stock) provides many (flow) benefits both monetarily and non-monetarily through timber harvests but also through recreational opportunities, air quality management, and carbon sequestration. We can provide public investment into these stocks by planting more forests (increasing the stock) or by utilizing better management practices (increasing the flows). Whether we focus on increasing the stocks or flows through investment, we know that the total benefits to the community will increase. When we want to increase community well-being, we need to focus on the entire picture of community wealth to get the full picture of community benefits, whereas most analyses only focus on the flows.
The image below demonstrates how to calculate community wealth by multiplying capital stocks (like acres of forest) by their annual flow benefits (like timber revenue and carbon sequestration). It emphasizes that valuing forests requires accounting for monetary and non-monetary gains, which drives total forest value for the community.
To get a better understanding of what is considered for community wealth, we consider anything that provides a monetary or non-monetary benefit to the community. Some examples are found in the image below; economists usually put them into different generalized categories of produced capital including all infrastructure and built structure, natural capital including all ecosystems and subsoil resources, human capital including all the knowledge and skills within people, health capital including all short and long term health effects, and social capital including all social connections and trust among people. Some of these examples may seem a little strange, but take social capital through social groups, which provide economic opportunities through sharing ideas and potential job opportunities while also increasing well-being through quality-of-life and health quality impacts.
The image below illustrates the four types of capital stocks, which are natural, productive, health, and social. These create economic opportunities and well-being to communities.
Now, what we do at CIW, is we check all the different types of programs that help communities by either investing in increasing the capital stocks or by increasing their flows. We check to see how each program improves overall community well-being and wealth. Then, based on different community goals such as hitting a carbon emissions target and their overall community budget for investment projects, we create a prioritized list of public investments for them to reach their goals. This is the method we will use to see if shale communities in PA can reinvest their tax revenues to ensure that community wealth, well-being, and sustainability is increasing over time instead of declining.
Application to PA Shale Communities
In PA, shale communities gained an additional $2 billion in tax revenue that could be used within the community; however, overall community well-being still declined. What if we reinvested this money in a different way? As shown in the last blog post, the biggest issues in these communities causing overall decline were:
Health Quality Declines: Health quality issues through air and water quality impacts from fracking sites, which impacts health quality as well as overall productivity. In addition, increased opioid use.
Human Capital Loss: First is the 15,000 jobs lost from 2015-2025 as shale production becomes more capital intensive. This is exacerbated by kids dropping out of school to begin working in shale industries only to be left without a job and no educational training leading to long run economic declines.
Ecosystem Service Loss: Big increase in both carbon and methane emissions from fracking. In addition, these shale sites are often on either park, forest, or agricultural land which leads to declining profits for the agricultural industry as well as increased habitat and ecosystem service loss.
Instead, if we focus on reinvesting this money into key areas to prevent the declines through:
Job Training: Both for students in high schools as well as adults working in the shale industry so they can transition from shale or coal work into solar or wind programs once the shale work is over, preventing job loss and giving transferable skills.
Public Education: Ensure that public education funding does not decline so students do not drop out of school while still providing training for high demand energy jobs.
Opioid Education and Naloxone Programs: To combat the increases in opioid use in these communities, invest in these programs.
Green Space: Investing in more green spaces to offset the declines in forest and agricultural land provides many benefits through carbon sequestration, increasing social trust, decreasing crime, and improving local air and water quality measures.
More Restrictions: Include tighter restrictions on local air and water quality, which improve health and economic outcomes.
Now we can test out our two different scenarios, investing historically like PA or investing in this new way to preserve community wealth, as shown in the figure below.
First, we focus on human outcomes below through productivity and health quality. Historically, jobs in PA declined from 2015-2025 through losing shale jobs. However, if there are job training programs, then as these shale jobs are phased out, these community members don’t lose jobs but transition to a new energy sector such as wind or solar. Historically, the lowering education and job availability led to long run growth declines. However, if these are managed and kids stay in school, then long run economic growth can increase. In addition, investing in green space and opioid programs targets the biggest health issues of air and water quality, opioid use, which allows health capital to increase.
Focusing on ecosystem outcomes, investing in green space isn’t enough to completely offset the increase in emissions from shale use; however, it preserves a key carbon sequestration source, which is at risk of declining through shale use. In addition, the job training in solar and wind energy ensures that there is a community focus on shifting away from fossil fuels, and the community does not land in a “fossil-fuel” trap, which is found by researchers where shale communities end up polluting more and having less energy innovation then if the community never invested in shale to begin with because they assume that they no longer need to focus on energy innovation. In the long run, this will now allow these communities to decrease their emissions even more. In addition, the increase in green spaces also increases other ecosystem service benefits such as habitat restoration and air and water quality management.
Collectively, all of these impacts are shown below on community well-being for these PA shale communities. Instead of declining by $30 billion in community well-being, these collective investments targeting the capital stocks hardest hit by shale impacts leads to increasing community well-being by $17 billion.
Conclusion
To handle complex sustainability issues such as fracking and its impact on Pennsylvania's shale communities, we advocate for a shift from traditional, narrowly focused economic analyses to a holistic investment strategy. By employing the CIW financial planning tool, the post examines how re-investing fracking tax revenues, not just on short-term economic gains, but on a community's overall wealth, could reverse the current trend of decline. For instance, the typical approach in PA has led to a $30 billion loss in community well-being since 2007 due to job losses, reduced education opportunities, health crises linked to pollution, and ecosystem degradation. However, by expanding into green spaces and increasing natural capital, investing in schools and human capital a more prosperous environment is achievable.
Moving from short-term profits to expanding community assets like job training programs to re-allocate human capital into green technologies, protecting clean water and clean air, improving the health of citizens, and strengthening education programs, can foster healthier, more resilient communities. The implementation of this innovative strategy in PA alone could boost community well-being by an estimated $17 billion. Therefore, if fracking tax revenues were strategically reinvested into key holistic areas rather than the traditional, solely economic approach, PA and other shale communities around the world could protect themselves from the damages of fracking and achieve a more sustainable future.
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