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Fracked on their own Petard: Depantsing the Perryman Report about Denton’s Fracking Ban

On November 4th, Denton could ban
fracking, forever ridding its neighborhoods of a poisonous specter. Ever since
we got the signatures to put the ban on the ballot, support has been growing
like a tidal wave.











This has the oil and gas industry scared. They are
getting desperate.  






They’ve taken out full page color ads in the local
paper accusing us of being unpatriotic. The head of the Texas Railroad
Commission, a man whose campaigns are 80% funded by the very industry he
supposedly oversees, insinuated that Russia
is behind the ban (I’m still waiting for my check from the Kremlin, but
when it arrives, the first round of vodka is on me).






The industry even spent an estimated $50,000 on a
counter-petition campaign in support of fracking. For two weeks, out-of-state
petitioners, being paid $4/signature (plus hotel and travel expenses), flooded
the city. It was a shamelessly dishonest stunt. I was stopped by one petitioner
(from St. Louis) in the Kroger parking lot who actually told me that his petition was for a fracking ban. Texas
Sharon Wilson caught another petitioner lying
on video and several others attested to their annoying and mendacious
tactics.






The industry also did what they do best: fund a
report about how great they are. They hired the Perryman Group to write a
report about how much the proposed fracking ban would cost Denton. Of course,
what they ‘found’ were some big scary numbers. A ban would cripple the city!






They timed the release of the report to coincide
with last week’s epic City Council meeting about the ban that brought in 600
people (sitting in three overflow rooms) and stretched on until 3 a.m. To
parrot the findings of the report at that meeting, several industry
representatives drove in to Denton, including the former Chief Justice of the
Texas Supreme Court (surprisingly, he now works for the oil and gas industry).






Their strategy worked. Media coverage cited
the report’s figures, making it sound like the people of Denton would be
committing economic suicide if they adopted the fracking ban. And the industry
trolls keep shouting the report’s conclusions into their echo chambers.

Now, usually, I find it best to ignore this kind of
overt bias. But the stakes are too high. Someone has to call bulls**t. So, here
goes:

1. The
report is completely one-sided. It
is not a cost-benefit analysis of the fracking ban. It is only a cost analysis.
The benefits of taking the oh-so-radical move to ban a toxic industry from
neighborhoods are not even considered. Yet City Councilmember Kevin Roden is right that a fracking ban will create a local economic boom. More on this later.



2. It
is a black box that does not include
the data or the model used. Their model relies heavily on economic multipliers,
which are easy to abuse to
get the findings you want.



3. The
Perryman Group is notorious for
exaggerating figures to fit their clients’ preferred reality. When
TransCanada hired them, the Perryman Group said that the Keystone XL Pipeline
would create as many as 550,000 jobs. Even analysts who support the pipeline called
their figures “dead wrong” and ‘meaningless.’ An independent
analysis by Cornell University found that the pipeline would create only
500 to 1,400 jobs (gosh, Perryman was only off by three orders of magnitude).











4. Don’t
forget the rule of the one percent (or less). We
know that fracking is a miniscule part of Denton’s economy. Mineral values are
just 1.1% of total property values in the city. Minerals contribute just 1% of
total property tax revenues, meaning fracking accounts for 0.5% of the city’s
General Fund. The mining sector accounts for just 0.27% of the local workforce.
The only exception to this rule is that Denton families actually rake in a whole 2% of the total mineral wealth generated in Denton (companies and absentee mineral owners claim roughly 90%). 



5. OK,
set aside the report’s one-sidedness and hidden assumptions. Set aside the
Perryman Group’s track record of hyperbolic industry cheerleading. Let’s take
the giant leap to assume the report is not a gross exaggeration. Even then, the
report actually confirms the rule of the
one percent (or less). To start, it concludes that the ban will cost the city about
$501,000 in tax revenues annually. The total annual resources of the City are $826 million, so that's 0.06%.  If we compare their figure just to the City's General Fund (representing the bulk of tax revenues) it's still just 0.5%. 



But this is letting them off the hook, because the Perryman Report's numbers ar projections over the next ten years. Everything about Denton's economy is projected to grow over the next ten years, which means annual tax revenues will grow. Indeed, in just the two years from 2011-2013, Denton's General Fund increased by 12% from $87 million to $99 million.



So let's conservatively estimate a 5% annual growth rate in the General Fund, which in ten years would mean it will be at $155 million. Now let's take the halfway point at five years as a conservative average total General Fund level over the projected time frame. That's about $121 million, so we'd need to adjust their estimated cost in terms of tax revenues down to 0.4%.



6. The
report confirms the rule of the one
percent (or less) again. It claims that the ban will cost 2,077 person
years of employment over ten years. Yet ‘person-years’ is a flow that accumulates
over the ten year period, so the figure actually amounts to 207 jobs. The total
workforce for Denton is 67,316, so the impact of the ban is 0.3%. Surprise! That’s about the same
number posted
by the city, which we have been using, of 0.27%.



But again this is letting them off the hook, because they are projecting over ten years and Denton's work force is projected to grow significantly in that time frame. Indeed, Denton County's employment grew by over 5% in just one fear from 2012-2013. If we project that into the future and do the same conservative estimates as above (for tax revenues but this time for the work force), then we'd need to revise their figure down to just 0.25%.



7. And again…
The report estimates a loss of roughly $25 million per year in the city’s gross
product. Now, as far as I know, no one bothers to count the total gross product
for cities – only nations and states. So, we will have to use a proxy to
estimate Denton’s gross product. One way to do this is to divide Texas’ $1.5 trillion
gross product by 215 (as Denton’s population is 1/215th of the
state’s population). That yields a gross product for Denton of $6.98 billion,
which means Perryman’s estimated cost of the ban is a whopping 0.36% of Denton’s gross product.



Again, though, Denton's gross product will grow over the next decade. If we peg this to population growth, we can get a decent estimate in how Denton's economy will balloon. The expected population of Denton in 2020 is 147,825, an incredible 24% increase from the present population. The same growth in our gross product would mean we revise Perryman's figure down to 0.2%.



In case the pattern isn't obvious yet, we can say the exact same things about their own figures for impacts of a ban on the Denton Independent School District. Even using today's annual operating revenues for DISD, their figure is just 0.2%. But DISD's budget is growing at a rate of 6%. If we project that and do the same conservative calculations as above with taxes and employment, then their figure drops to 0.17%.



8. To
conclude, let’s return to the benefits
of a fracking ban (the costs of not banning
fracking). Many of these benefits are hard to measure, but very real. Indeed,
they may not be easy to count but in the end they are what really counts: health, quality of life, and your
right to feel safe in your home and peacefully enjoy your property:

A
ban will reduce health care costs (and lost worker productivity) by cutting
fracking’s outsized contribution to smog-forming
ozone in an area with alarmingly
high rates of childhood asthma.

A
ban will eliminate the waste of hundreds of millions of gallons of city water,
in a drought-prone area, and the risks posed to our groundwater resources.

A
ban will reduce the costs of development. A fracking ban means dozens or
hundreds fewer gas well pad sites, thus fewer impediments to development and
lower taxes to finance it.

A
ban will open up more land for more profitable land uses. Gas well sites (often
more than an acre in size) chew into residential and commercial development,
which produce larger and more sustained revenues.

 A
ban will protect home values. Fracking reduces
nearby residential property values, thus depleting tax revenues.

A
ban will protect quality of life. Fracking brings with it: overwhelming truck
traffic (it takes more than 1,000
diesel trucks to bring a single well into production), noise and light
pollution, and fumes and odors. It takes away your right and ability to enjoy
your home.

A
ban will attract the workforce of the future. Fracking is a deterrent for the
people Denton needs to recruit to fill the high-tech, high-paying jobs that can
propel its economy forward. The millenials
who are hitting the workforce now want cities with a high quality of life.
Poisonous fracking 200 feet from homes doesn’t quite fit that bill. They’ll
find jobs, and take their dollars, elsewhere.  

A
ban will provide peace of mind. Parents won’t have to worry – like Denton
resident Maile Bush worries – about the health of their children. How much
of a benefit is it to not have a carcinogen-emitting
industrial site outside your child’s or your grandchild’s bedroom window?

The industry wants to frame the vote on the ban in
terms of a cost-benefit calculation. But they just shot themselves in the foot
with this report. When we really look at the numbers (which they doubtlessly
exaggerated in their black box) in the context of the local economy, we find
that they are miniscule. They are far outweighed by the benefits of
safeguarding property rights, water, air, home values, and the health,
livability, and safety of our community.