Thursday, January 12, 2012
White House Credits Marcellus & Fracking for Economic Boom
Yesterday, the White House released a report titled “Investing in America: Building an Economy that Lasts” (a copy of is embedded below). The report credits the Marcellus Shale and fracking with fueling an economic boom in the U.S. The relevant section says this: Only a few years ago, fears of a looming natural gas shortage led to significant investments in the rapid construction of liquefied natural gas (LNG) port facilities that could enable the United States to import vast quantities of natural gas. Projections from the Energy Information Administration (EIA) as recently as 2005 suggested expanding natural gas imports for decades. Just several years ago, leaders of the domestic organic chemical industry predicted that shortages in natural gas would dramatically raise the domestic price of natural gas, one of their key inputs. Without the prospect for adequate domestic supplies of natural gas at reasonable prices, companies increasingly pointed to overseas operations where they could access large quantities of low-cost natural gas. Since the mid-2000s, however, the discovery of new natural gas reserves, such as the Marcellus Shale, and the development of hydraulic fracturing techniques to extract natural gas from these reserves has led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users. Appropriate care must to be taken to ensure that America’s natural resources are extracted in a safe and environmentally responsible manner with the safeguards in place to protect public health and safety. Provided these precautions are taken, the potential benefits to the U.S. economy are substantial. Of the major fossil fuels, natural gas is the cleanest and least carbon-intensive for electric power generation. By keeping domestic energy costs relatively low, this resource also supports energy intensive manufacturing in the United States. In fact, companies like Dow Chemical and Westlake Chemical have announced intentions to make major investments in new facilities over the next several years. In addition, firms that provide equipment for shale gas production have announced major investments in the U.S., including Vallourec’s $650 million plant for steel pipes in Ohio. An abundant local supply will translate into relatively low costs for the industries that use natural gas as an input. Expansion in these industries, including industrial chemicals and fertilizers, will boost investment and exports in the coming years, generating new jobs. In the longer run, the scale of America’s natural gas endowment appears to be sufficiently large that exports of natural gas to other major markets could be economically viable.