Study: Hydraulic Fracturing Is ‘Game-Changer’ for U.S. Economy

Study: Hydraulic Fracturing Is ‘Game-Changer’ for U.S. Economy
December 20, 2013

A new policy study explains the facts about hydraulic fracturing so legislators and regulators can make better-informed decisions on fracking issues.

The study, authored by energy policy analyst Isaac Orr and published by The Heartland Institute, which also publishes Environment & Climate News, documents the economic benefits of hydraulic fracturing, environmental challenges, and public policy options.

From Novelty to Mainstream
Hydraulic fracturing, commonly known as “fracking,” is powering a revolution in American energy production that is reversing decades of decline. Although oil and gas producers have engaged in fracking since the middle of the twentieth century, the development of new “smart” production technologies, together with new discoveries of abundant oil and natural gas in shale rock formations, is transforming fracking from a novel energy production technique into the mainstream of energy production.

Rescue from Rising Costs
In his study, Orr documents how Fed Chairman Alan Greenspan and other prominent economists warned last decade that high natural gas prices threatened the nation’s economy. The Clinton administration had championed natural gas as an environmentally friendly conventional energy source, but the resulting increase in demand for natural caused a rapid price increase. The fracking revolution that began late last decade rescued the U.S. economy from potentially devastating consequences of natural gas’ growing energy market share and rapidly rising prices.

Dramatic Production Increases
“Thirty-five states now participate in what has been christened America’s Shale Revolution. This development has resulted in a 34 percent increase in U.S. natural gas production since 2005, which has made the United States the world’s largest producer of natural gas,” Orr explains.

“The Shale Revolution also has brought U.S. oil production to a 20-year high and created thousands of energy sector jobs, in addition to thousands of jobs outside the energy sector,” Orr observes.” Last year, U.S. oil production increased by 14 percent over the previous year, the greatest increase among countries annually producing a million barrels or more. The year 2012 also marked the largest one-year increase in oil production in U.S. history. In the process, oil imports as a percent of U.S. consumption have fallen from 70 percent in 2009 to 37 percent in February of 2013, despite policies from Washington that have caused production of oil, natural gas liquids, natural gas, and coal on federal land to fall in quantity and as a percentage of total production. Furthermore, North America is projected to become energy-independent by 2020, a development that would have been impossible prior to the invention of smart drilling.”

Orr provides a compelling graph documenting fracking’s impact in reversing the nation’s long-term energy production decline. The graph, utilizing U.S. Energy Information Administration data and originally published by Reuters, shows U.S. oil production consistently and dramatically declining from 9 million barrels per day in 1986 to merely 5 million barrels per day in 2008. Despite federal policies rendering an increasing amount of government-owned lands off limits to oil production, fracking boosted U.S. oil production to 7 million barrels per day by 2013. Similarly, U.S. natural gas production has increased by a third since 2005.

Benefits Throughout the Economy
Orr documents society-wide economic benefits from this American energy rebirth.

“The economic impact of hydraulic fracturing is not limited to the energy sector or the communities near drilling sites. Increased domestic production of natural gas has resulted in lower natural gas prices. According to the Yale Graduates in Energy Study Group, natural gas consumers saved more than $100 billion in 2011; the study suggests the overall benefit derived from recovering shale gas outweighs the costs by a ratio of 400 to 1. Inexpensive natural gas is also driving investment in energy-intensive industries such as steel and aluminum processing, fertilizer production, and manufacturing,” writes Orr.

For those states and communities embracing hydraulic fracturing, the economic benefits are impressive.

“Nowhere is the economic potential of shale oil and gas production more evident than in towns like Williston, North Dakota. Williams County, which includes the city of Williston, has experienced a 316 percent growth in jobs, from 8,671 in 2000 to 36,107 in the third quarter of 2012,” Orr writes.

“Since oil production in the Bakken Formation began, North Dakota has climbed from eighth-largest oil-producing state in the nation in 2007 to second place today, eclipsing Alaska,” Orr continues. “The growth in oil production in North Dakota has supported the creation of 70,000 new jobs state-wide in the past five years. These jobs are a major reason why the North Dakota unemployment rate has remained the lowest in the nation, steadily holding near 3.2 percent.”

Reassuring Environmental Data
Nevertheless, environmental groups worry about whether fracking endangers groundwater quality. Orr explains the fracking process, environmental precautions, and the environmental track record of fracking operations. Importantly, despite government environmental officials testing thousands of groundwater sites near fracking operations, federal and state environmental officials have never found a single instance of the hydraulic fracturing process causing groundwater contamination.

“This Policy Study concludes hydraulic fracturing can be done in a safe and environmentally responsible manner,” Orr reports. “State governments have done a commendable job working with environmental and industry leaders to craft legislation that protects the environment while permitting oil and gas production to move forward. Federal regulations would be duplicative, resulting in higher costs without significantly increasing environmental protections.”

Internet Info:

The full study, “Hydraulic Fracturing: A Game-Changer for Energy and Economies,” is available at http://heartland.org/sites/default/files/11-10-13_isaac_orr_on_fracking.pdf. ">http://heartland.org/sites/default/files/11-10-13_isaac_orr_on_fracking.pdf