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Economic Growth, Thanks to Fracking

Mark Green's picture
American Petroleum Institute

Mark Green joined API after 16 years as national editorial writer in the Washington bureau of The Oklahoman newspaper, capping a 30-year career in print journalism. At API he is responsible for...

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  • Mar 28, 2013 7:00 pm GMT
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Thanks, shale and hydraulic fracturing!

Two news items prompt today’s gratitude. First, a new study of Texas’ Eagle Ford shale play shows the dramatic economic lift being provided by oil and natural gas development. Second, a Reuters article underscores the point that affordable natural gas – again, thanks to fracking and shale – is spurring a U.S. manufacturing renaissance – in this case, attracting investment in this country from foreign companies.

The Eagle Ford study by the University of Texas at San Antonio has these numbers:

  • More than $61 billion in total economic impact in 2012 across a 20-county region from oil and natural gas development, up from $25 billion in 2011.
  • 116,000 jobs supported in 2012, up from 48,000 in 2011.
  • Projections of 127,000 jobs supported and an economic impact of $89 billion for Texas in 2022.
  • More than $1 billion in revenue to local government and $1.2 billion in state tax revenue in 2012.
  • Eagle Ford will produce 527,000 barrels of crude oil a day this year and is projected to produce 771,000 barrels/day in 2022.

Bloomberg quotes Tom Tunstall, the study’s lead researcher:

“I think we’re sort of in unknown territory. Previous oil and gas exploration has been conventional. Shale is different. Drilling folks will probably be in the area longer than conventional plays.”

AEI’s Mark J. Perry has a chart showing rapid oil production growth from Eagle Ford since 2008:

Perry:

What makes the Eagle Ford Shale story so amazing is how fast development, investment, and production has taken place there. As the chart above illustrates, the Eagle Ford Shale oil boom didn’t even really start until 2011, and then oil output almost tripled in just a single year. Suddenly, Eagle Ford Shale became the “single largest oil and gas development in the world” last year and created an unexpected $61 billion economic “windfall” for Texas that came out of nowhere. One of the strongest reasons to be optimistic about America’s economic future is the energy revolution, which is best illustrated by the amazing job- and prosperity-creating shale formations of Eagle Ford in Texas, the Bakken in North Dakota and the Marcellus in Pennsylvania.

America’s shale energy revolution is boosting U.S. manufacturing – while also luring investment from manufacturers in other countries, Reuters reports – attracted by lower energy costs for new facilities as well as affordable feedstock for various products:

When Wolfgang Eder and his team started looking around for a site for a new plant for Voestalpine, the Austrian steelmaker he heads, they had 17 sites in eight countries on their list. This month, after more than a year of looking, they settled on the U.S. state of Texas, after a boom in the production of natural gas from shale extraction brought gas prices down to just a quarter of what companies paid in Europe. … With cheap shale gas making the United States a magnet for industrial companies like Voestalpine, many economists are positing a return to industrialisation for the world’s biggest economy after more than a decade of consumption-led growth. “America is currently seeing a renaissance of production,” said Felix Schuler, a partner at Boston Consulting Group (BCG) based in Germany who specialises in the industrial goods sector.

According to Reuters, other foreign companies are eyeing the U.S. because of affordable energy – much of it developed from shale with hydraulic fracturing:

  • South African petrochemicals group Sasol may spend up to $7 billion on an ethane cracker complex in the U.S.
  • Egypt’s Orascom Construction Industries is building a $1.4 billion fertilizer plan in Iowa.
  • Taiwan’s Formosa Plastics has expanded plans for a new ethylene plant in Texas.
  • Japanese oil refiner Idemitsu Kosan and trading house Mitsui & Co may operate a petrochemical plant in the U.S.

Thanks to shale and hydraulic fracturing, the United States has the opportunity for significant economic and energy benefits. To realize those benefits we need a true all-of-the-above approach to energy development that expands domestic access to resources, implements common-sense regulatory and permitting processes and, quite simply, leadership that embraces and manages the energy wealth we have. API’s Erik Milito, group director for upstream and industry operations:

“Oil and natural gas present a valuable opportunity to the nation. Now is the time for presidential leadership, and we urge President Obama to support an American energy policy that takes advantage of this opportunity – that will spur growth in jobs, generate more revenue (for government) and add to our long-term energy security by providing reliable, affordable supplies of energy for generations to come.”

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David Rickmers's picture
David Rickmers on Mar 28, 2013

South Texas is truly blessed to have enough carbon underground to kill everyone. Not word one about climate change. Gas in the ground is sequestered carbon.

Ron Wagner's picture
Ron Wagner on Mar 28, 2013

Another good article Mark, keep them coming. The natural gas revolution is going to help the entire world with cheap, clean, abundant fuel.

Ivor O'Connor's picture
Ivor O'Connor on Mar 28, 2013

Kind of reminds me of 1849. The magical gold rush that made everybody rich. Thank you gold.

Max Kennedy's picture
Max Kennedy on Mar 28, 2013

Cheap yes, for now but production is falling off much faster than expected so probably not cheap for long.  Clean, not by a long shot!

Ron Wagner's picture
Ron Wagner on Mar 28, 2013

Natural gas is getting us off of coal, diesel, and gasoline, at least to some extent. It will remain far cheaper than petroleum. Coal forms a lid on the price at about $5.00. That is where electricity generators will switch to coal burning in modern plants. 

It is really a mistake for educated people to prefer the status quo to this wonderful fuel, rather than to see the potential to replace much dirtier fuels. Actually if you figure the downsides of solar and wind power they are really not less noxious than natural gas. They are not perfect either. 

Natural gas has allowed America to beat the efforts of Europe which has focused too much on wind and solar. They are now importing our dirty coal. Fortuately they have seen the light and are going to start fracking soon. 

Ron Wagner's picture
Ron Wagner on Mar 28, 2013

Here is an article that tells how Europe has failed in their overreliance on wind and solar:

http://www.naturalgaseurope.com/europe-role-natural-gas-climate-targets

I K's picture
I K on Mar 29, 2013

It is just the start, if natural gas stays 75% cheaper than oil for a prolonged period (5-10 years plus) then LNG and CNG will start making their way into other produces and uses.  A big one would be LNG powered aircraft.

Fuel is the biggest cost in air travel so cutting 75% off your biggest cost will be very tempting. It would also be fairly easy to install a mini NG to LNG plant at the major airports.

Ivor O'Connor's picture
Ivor O'Connor on Mar 29, 2013

You are so funny Wagner. I wish we could "fail" like Europe. 

Rick Engebretson's picture
Rick Engebretson on Mar 29, 2013

I strongly favor an "all of the above" energy development strategy. Success of the oil and gas industry is an essential part. So congratulations on your success, Mark.

We all have our own agendas and challenges. If we spend more time improving our efforts and less time insulting others, we might each gain from the others.

The fossil carbon is a possible problem. But we "bio" advocates can exploit that carbon if we have water. The problem in the biosequestration effort is; if there is water, there are farmers to immediatly use it up.

It is all connected and mutally dependent. Conservation and moderation should be a larger part of our agenda.

David Rickmers's picture
David Rickmers on Mar 29, 2013

Air travel is environmentally unsustainable. Personal automobiles are environmentally unsustainable. If you extrapolate current trends the lines converge at "unsustainable". We need a global revolution against blind consumerism.

Bobbi O's picture
Bobbi O on Mar 29, 2013

 Mark,

 I support natural gas development but I think it wise supporters of  natural gas development  address  the environmental objections to burning carbon based natural gas. There are two main points .

  Fugitive methane : this is correctable through closed well completion which Howarth’s article held was responsible for one third to one half of the methane leakage during the life cycle of methane. Most of the rest is pipe leakage in gas fields and pipelines.  Currently, fugitive methane is more easily detected now with  new detection tools such as Picarro’s mobile methane detection system. Leak detection and correction is something the Federal and State regulators should strongly enforce to assuage public concerns.
The second point is addressing the release of CO2 from utillty and industrial scale gas plants. Although much better than coal , industry would be wise to incorporate new technologies to capture and utilize CO2 from the waste plume . On this issue , I have heard very little discussion.

Ron Wagner's picture
Ron Wagner on Mar 29, 2013

Here are the main facts for you Ivor:

1. We have lowered our pollutants and CO2 emissions far more than Europe.

2. Europeans pay more than double what we do for energy.

3. Europeans are importing our coal, because of not fracking and getting their own shale gas.

4. European governments are now admitting their over reliance on wind and solar, and are determined to start fracking. France is the big exception because their nuclear industry is still too powerful a lobby to allow fracking. France has the most shale gas potential in Western Europe. 

If you want to live in a delusional world, that is your right. 

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