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Testimony

presented before the New York State Senate Democratic Conference Public Forum on Hydrofracking July 18, 2012 250 Broadway, New York, NY By: Jannette M. Barth, Ph.D., Pepacton Institute LLC PO Box 127, Croton on Hudson, NY 10520 Email: jm.barth@mac.com 914-271-5305 Thank you for inviting me to testify. My name is Jannette Barth. I am a Ph.D. economist and I have been developing economic models and conducting economic analyses for over 35 years. For over three years, I have dedicated much of my time to investigating the potential economic impact of shale gas development on New York. I frequently write, lecture and testify on this subject. I have no financial interest related to shale gas development other than as a New York State taxpayer, landowner and citizen. Unlike many studies in this area, my work is not sponsored or funded by anyone other than me. I have not undertaken any of my work on this subject for compensation. I invite others testifying here today to similarly declare their interests. It is very clear that biased and inaccurate information is being spread by the gas industry; and the press and our own DEC are repeating the false claims. Our decision makers in both Albany and Washington may be relying on this misinformation. Independent researchers not funded by the natural gas industry reach vastly different conclusions from industry-funded studies. The studies funded by the gas industry exaggerate benefits and ignore significant costs. They often use exaggerated reserve and production estimates, thereby overstating projections of jobs, income and tax revenue. They ignore costs to communities such as the costs associated with increased truck traffic, costs associated with increased demands on fire departments, police, hospitals and social services. They ignore the fact that extractive industries are known for creating short-term booms followed by long-term busts. Industries that are not compatible with an industrialized landscape or with potential water, air and land contamination are likely to decline in the region. In New York State, examples of such industries that are vital to the region include agriculture, organic farming, tourism, outdoor recreation, wine making, and hunting and fishing. And crowding out of many businesses is likely as well, leaving economically devastated communities down the

road. Look to the conditions in Appalachia as an example of this. An ignored opportunity cost to upstate communities is the loss of future development as vast networks of pipelines are built, ruling out future building and economic development over or adjacent to the pipelines after the gas industry and its short term jobs leave the area in a few years. We have recently learned that at least one major insurance company is unwilling to insure against the unique risks associated with fracking. If one cannot get a residential mortgage due to industrial activity on the property, or if one cannot get homeowners insurance, or if drinking water becomes contaminated, home values and, consequently, property tax revenue may plummet. The limited and incomplete economic assessment done for the DECs revised draft SGEIS suffers the same fatal flaws of the industry-funded studies. Benefits are exaggerated and significant costs are ignored. And by the way, Eugene Leff of the DEC told me that the public will not be given an opportunity to comment on future revisions to the economic assessment. One of the studies not funded by the industry concludes, Counties that have focused on energy development are underperforming economically compared to peer counties that have little or no energy development. A peer-reviewed article concludes, The areas of the United States having the highest levels of long-term poverty,, tend to be found in the very places that were once the site of thriving extractive industries. Another one concludes that there is clear evidence that resource-dependent counties in the United States exhibit more anemic economic growth. I looked at data on unemployment rates, income levels, and poverty rates in counties in New York State, where we have had conventional gas drilling for a long time. I looked at similar data for counties in Texas where shale gas drilling has been going on for about a decade. These data support the peer-reviewed conclusions that residents in gas intensive counties have, over all, not fared better than residents in other counties. Industry and government have touted shale gas as a means of lessening dependence on foreign energy sources and achieving a cheap and plentiful source for domestic energy consumption. Now it appears that the gas industry is seeking to export US shale gas. Thus we are putting in jeopardy the environment, public health and economy of New York in order to provide profits to the gas industry for supplying the economic development of China. That's not a trade I'd like to make. The oil & gas industry spends huge amounts of money on lobbying, political contributions, public relations, advertising, and even economic impact studies, in order to spread falsehoods and hide the truth. Here is the truth. Extractive industries create boom and bust cycles and communities in upstate New York are

likely to be worse off economically in the long-run if we allow shale gas development. The oil & gas industry is a highly capital-intensive industry, meaning that vastly more money is spent on equipment, than on training and employing workers, who typically follow the rigs from state to state. Thus, encouraging oil and gas development is not an effective strategy for creating jobs in New York. With the industry curtailing production at the same time that energy users are being encouraged to convert to natural gas, and if our shale gas is sold in the global market, supply will be reduced at the same time that demand increases. Under those circumstances, the domestic price of natural gas is unlikely to remain low in the long-run. The only parties likely to benefit in the long run from shale gas development in the Marcellus Shale are the gas companies and a very few lucky and large landowners, while serious long-term costs will be borne by the public and local communities. Before making any decisions regarding shale gas drilling in New York, we must insist on comprehensive, unbiased, peer-reviewed assessments of economic impacts for the state and our communities, both short-term and long-term. I urge our leaders to do what is right for the people of New York. Respectfully submitted, Jannette M. Barth, Ph.D

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