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Shale Continues to Drive U.S. Manufacturing Renaissance
By now we all know that the development of American energy resources from shale remains a major economic engine for our country, responsible for hundreds of thousands of jobs across the nation. But another important (and under-told) benefit of the "shale revolution" is its role in resuscitating America's previously declining manufacturing base...

By now we all know that the development of American energy resources from shale remains a major economic engine for our country, responsible for hundreds of thousands of jobs across the nation. But another important (and under-told) benefit of the “shale revolution” is its role in resuscitating America’s previously declining manufacturing base.

Last month, a report from PricewaterhouseCoopers highlighted how affordable, domestic supplies of natural gas will save U.S. manufacturers more than $11 billion per year over the next decade, in addition to creating a million new jobs during that same period. This affordable energy supply is also projected to increase disposable income for each household in the United States by as much as $2,000 per year.

So it should be no surprise, although still worth highlighting, that a new report from the White House shows how domestic manufacturing, after years of stagnation and decline, is finally on the rebound. From that report:

The manufacturing sector has recovered faster than the rest of the economy, supporting growth and job creation. Over the past two years, the economy has added 334,000 manufacturing jobs — the strongest two-year period of manufacturing job growth since the late 1990s. Manufacturing production has surged 5.7% on an annualized basis since its low in June of 2009, the fastest pace of growth of production in a decade.

And what, according to the White House, is driving that recovery?

A boom in natural gas production has supported manufacturing: The surge in domestic natural gas production can lower energy costs, reduce pollution and drive investment in the industries that supply equipment the natural gas sector and those that use natural gas as an input to production, like the chemical industry. Recent data from the Energy Information Administration indicate that by the end of 2011 natural gas extraction increased by over 24% since 2006.

Later in the report, under the heading “America’s Natural Resource Boom,” the White House report describes how expanded natural gas production, particularly from shale, has “led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users.”

The Washington Post echoed the good news about America’s energy-led manufacturing rebirth in an editorial that ran yesterday:

The White House briefing paper that accompanied the “insourcing” event attributes much of the rebound in manufacturing to the boom in domestic natural gas production, made possible by new “fracking” technologies. The federal government didn’t do much specifically to promote fracking. Yet the process has dramatically cut the price of gas, a key industrial input, and led to spinoff employment in related industries. The White House notes that more of such development, appropriately regulated, could have “substantial” benefits to the U.S. economy. Even in a polarized Washington, everyone should be able to agree on that.

Candidly, we’re not all that interested in the specific politics of the matter, but it’s worth noting the Post’s observation that the federal government “didn’t do much” to promote developing natural gas from shale — and yet, voila!, here we are. Opponents of shale have for years labored under the delusion that the EPA should be in charge of directly regulating the process of hydraulic fracturing, calling for heavy-handed federal control on the misguided assumption that only such a system will guarantee the broadest possible benefits.

But as this White House report makes clear, shale development and hydraulic fracturing (which has been tightly regulated by the states for decades) is creating jobs and revitalizing one of America’s proudest and most critical industries. And as ANGA points out, the natural gas production at the center of this manufacturing renaissance is being done in a “safe and responsible manner,” thereby removing any need to choose between a strong economy and a clean environment.

With these facts clearly established, the question for critics is: Why should we jeopardize this bright spot in an otherwise troubled economy — facilitated by responsible, state-based rules and regulations — with a one-size-fits-all, Washington-centered regulatory regime?

Another “Peak” Performance
It’d be easy to analogize the small group of analysts who continue to believe the world is imminently running out of oil and natural gas to the stranded Imperial Japanese soldiers who, upon being discovered in the jungles of Guam and Indonesia in the 1970s, refused to accept that the second World War had decades earlier come to a close.

It’d be easy to analogize the small group of analysts who continue to believe the world is imminently running out of oil and natural gas to the stranded Imperial Japanese soldiers who, upon being discovered in the jungles of Guam and Indonesia in the 1970s, refused to accept that the second World War had decades earlier come to a close.

Easy – but not entirely accurate. One of the key differences between these two groups is that the media actually take seriously the serial skepticism of the first, often parroting with QED-certainty the notion that America has only “three percent” of the world’s oil, for example, notwithstanding a growing and increasingly definitive body of evidence indicative of an American resource base of enormous, potentially even singular proportions.

But if you take a closer look at the arguments that undergird the peak-oil philosophy, you find an interesting and under-reported aspect that lies at its core: In most cases, these folks don’t actually argue that the world is physically short on oil and natural gas. They argue that these resources, even if they do in fact exist, can’t be produced economically over the long-term. Of course, whether the energy isn’t there or is — and just can’t be developed under a reasonable cost scenario – the skeptics often arrive at the same conclusions: we’re running out of the stuff, they say — at least the “easy” stuff — and thus need to restructure our entire economy in anticipation of that crash.

Thanks to the emergence of “tight” oil and natural gas reserves as an important source of U.S. fossil energy, though, the peak energy community finds itself today back on the defensive side of the ball. Plainly put, these guys simply weren’t prepared (in truth, were any of us?) for what would become possible virtually overnight, with plays such as the Haynesville going from a daily yield of precisely zero BCF in 2007 to more than 5.5 BCF a day today. In 2005, Pennsylvania produced less than 0.5 BCF a day despite drilling 3,600 new wells. In 2011, only 2,800 new wells were drilled – and only about half of them were actually brought online. And despite all that, the state produced more than 3.0 BCF a day of natural gas in 2011. Six times the volume of 2005, with 23 percent fewer wells drilled – all thanks to the Marcellus.

Of course, you won’t find any of this data in the article that appeared this week on Slate.com. The thesis of that piece, written by peak-oil exponent Chris Nelder – co-author of an entire book on all the great investment opportunities that will exist someday soon in a world without oil — is that projections of abundance associated with the development of natural gas from shale are overblown. In support of that position, he borrows heavily from the playbook of peak-oil analyst Arthur Berman, someone well known within the industry prior to this year, but whose status got a major boost this summer after The New York Times ran his research (and his quotes) on its front-page.

If you’ve never seen Mr. Berman present on this subject before, you don’t know what you’re missing. We had the privilege to sit right alongside him in a forum on shale organized last April by Cornell’s law school – and as this video will confirm (start at hour three), he’s very good at what he does. After his piece hit in the Times, we also had a chance to chat with him on the phone. He’s a good guy, and a smart guy. We think he’s wrong about shale. But the good news is: we won’t have to wait but two or three years to figure out who’s right.

As far as Berman’s argument goes, it tends to look a little like this: Data collected from the Barnett over the past 15 years suggests that not all shale wells are created equal; that some produce well-below their expected ultimate recovery (EUR) rates; and that optimistic projections about shale’s future contributions to U.S. energy supply will never be realized, in part because of the clash between low natural gas prices and high drilling and completion costs, and in part because the wells themselves, he argues, tend to peter-out after the first few years of production. Paradoxically, Mr. Berman appears to argue both that new shale wells won’t be productive, and that natural gas prices will remain at their historic lows. How both can be true, we’re not entirely certain of.

Unfortunately for the peak-oil crowd, these arguments tend to unravel pretty quickly when the scope of inquiry is broadened out to account for the performance of other shale plays (which isn’t to pay short shrift to the Barnett, which, at 5.0 BCF a day, is currently averaging more natural gas per month than at any point in its history). Notable in his Slate.com article, Nelder flatly ignores the volumes currently being produced in the Haynesville and Marcellus regions – suggesting that these plays aren’t sufficiently “mature,” and thus shouldn’t be included in his analysis.

But Art Berman hasn’t ignored the Haynesville. And to his credit, he’s been good enough to admit that his initial assessments of the play weren’t quite right, sort of. In April 2009, Berman wrote that it was “difficult to imagine that the Haynesville Shale can become commercial.” Only two months later, in June, Berman had changed his tune, saying that “I now think that the Haynesville Shale reserve estimates that I presented previously were too low.” Still, in a 2010 article, Berman suggested the Haynesville numbers were “disappointing.” In March 2011, the Haynesville became the top-producing onshore natural gas field in the United States, and now stands among the top five producing fields in the entire world. What a disappointment.

Despite holding firm to a less-than-sanguine view on the potential abundance of natural gas from shale, Nedler writes in his piece this week that “I am not anti-gas; neither is Berman.” And on that, we take a man at his word. Indeed, Berman wrote an entire post this summer laying out the reasons he supports the continued deployment of hydraulic fracturing.

But hey, it certainly didn’t escape our notice that this year’s annual conference of ASPO-USA (the trade association for peak-oil enthusiasts) in November hosted a panel discussion — moderated by Berman himself — featuring a who’s who line-up of anti-shale activists, including NRDC’s Amy Mall, Rob Jackson from Duke, and Tony Ingraffea and Bob Howarth from Cornell. ASPO member Roger Bezdek also presented at that conference; we had the pleasure of debating him in Miami back in Dec. 2010 (note: December in Miami > December in Washington). Peak oil guys like to say they’re not “anti-gas” – but Bezdek’s presentation, found on page 52 of this document, certainly seems to suggest otherwise, wouldn’t you say?!

Here’s the thing:  There’s nothing wrong with being a contrarian. Nothing wrong, or nefarious, or illegitimate, with offering up an alternative view on what the history might hold for shale. But there’s a big difference between forecasting that something won’t happen and actively working to ensure it doesn’t.

For those who continue to advance the view that natural gas from shale won’t pan-out as planned, professional reputations are at stake. To “win” this particular argument, peak energy proponents need the geology to turn out bad (that is, for oil and natural gas not to exist), or for the oil and natural gas that does exist to remain right where it is in the ground.

If these folks were confident of the first outcome, they wouldn’t need to involve themselves in the second. But they’re not. Which may be why you’re starting to see folks like Art Berman, a climate change skeptic, appear alongside environmentalist activists committed to stopping the development of shale wherever it’s being considered. At first glance, it would appear an unlikely association. But though the philosophies may differ, the end-goal of both groups is the same. To environmentalists, abundant natural gas from shale is a threat to renewables. And for the peakers, it’s a threat to the credibility of their prognostications. It’s really as simple as that.

So: Will the experts’ projections on shale end up translating into the type of real-world abundance that could help our country create thousands of family-supporting jobs, generate billions in taxpayer revenue, and deliver significant annual cost-savings to consumers? We hope it does, but we don’t know. Some in the peak energy community, it can be assumed, hope it doesn’t. But they don’t know either. If the point of the Slate article is to confirm this uncertainty, mission accomplished. But weren’t we all aware of that before the piece even ran?

When It Comes to Job Creation, The Facts Speak for Themselves

Organization committed to stopping hydraulic fracturing suggests real jobs created by real economic activity do not exist.

It’s one thing for groups opposed to the development of American energy resources from shale to suggest that the massive economic stimulus currently being made possible as a result of these activities is overstated – notwithstanding the fact that their own jobs as professional activists depend on these activities continuing.  But it’s a completely different thing to suggest that these jobs simply do not exist. Given all we continue to see in communities across the country where responsible shale development is taking place, it’s a statement that would make even Jean-Paul Sartre blush.

Unfortunately, that’s exactly what Food & Water Watch — which is a non-profit organization that accepts tax-deductible donations — has suggested with its latest report, which takes aim in particular at a recent study projecting massive economic growth for the state of New York if shale development is allowed to move forward. The broader implication, though, is that all economic models are all fundamentally flawed, so any projection of economic gain from energy development activity is, according to FWW, “dubious.”

Before we get to the many problems in FWW’s report, we thought it would be important to point out from the get-go the irony of Food & Water Watch accusing others of inflating data. This is the same organization, as you might remember, that inflated its own participation rates for an anti-hydraulic fracturing call-to-action, apparently in an effort to make its fundraising emails more appealing.

As to the report, our job here at EID is to read through the document so you don’t have to. What follows is a sampling of the questionable claims made by FWW, accompanied by a healthy dose of reality.

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Food & Water Watch: “Local, state and federal policymakers should look to actual employment data, not dubious economic forecasts.” (p. 2 )

EID: As it turns out, the oil and gas industry – particularly those companies active in shale – has a very strong record when it comes to creating jobs, and an equally strong standing with respect to “actual employment data.” For example, a Financial Times article that was published the same day FWW released its analysis has the headline: “Oil shale boom boosts US jobs market.” Perhaps that was published too late to make it into the qualifying footnotes of FWW’s report.

But that’s far from the whole story. A study from IHS Global Insight found that in 2010, America’s independent oil and gas producers supported nearly 400,000 direct jobs nationwide, all while generating around $263 billion in gross economic output.

At the state level, the jobs numbers are also significant. In Louisiana, the oil and gas industry supports more than 310,000 jobs in the state, driven not only by offshore production by also the Haynesville Shale, the nation’s largest producing shale gas field. Production in the Barnett Shale in north Texas has created more than 119,000 jobs throughout the state. According to the Pennsylvania Department of Labor & Industry, the Marcellus Shale supports 214,000 jobs across the Commonwealth. In fact, the unemployment rates for Tioga (7.6 percent), Bradford (6.4 percent), and Susquehanna (8.1 percent) counties — three of the most significant areas in terms of Marcellus production — are all lower than the statewide unemployment rate for Pennsylvania. It’s also worth pointing out that the average salary for workers in the industry is roughly 64% higher than the statewide average for Pennsylvania. Even those working in ancillary industries make about 35% more than the Pennsylvania average income.

As for the job creation potential in New York, the state’s Department of Environmental Conservation (DEC) has estimated that as many as 53,000 new jobs could be created from the development of the state’s portion of the Marcellus Shale.

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Food & Water Watch: Alleges that “fracking fluid migration underground” are among the “environmental and public health risks” of hydraulic fracturing and shale development. (p. 3 )

EID: This is contradicted directly by state regulators from across the country – including the head of the New York DEC – and President Obama’s own EPA Administrator Lisa Jackson has confirmed that the process has not contaminated ground water. The reality is that hydraulic fracturing has been used more than 1.2 million times over the past 60 years, not just for oil and natural gas, but for water wells, geothermal wells, and even by EPA as a clean-up tool at Superfund sites. It should be noted, though, that FWW’s source for this claim is none other than the New York Times series attacking the industry, a series that has been almost universally panned, not only by two notable Democratic governors but also by the Times’ own public editor.

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Food & Water Watch: “[D]irect jobs are not created when royalty and lease payments are made.” (p. 5 ) FWW uses this baseless claim to conclude that “$2.02 billion of the $2.95 billion in in-state spending consisted of landowner payments and taxes. This leaves $930 million in in-state spending toward direct job creation.” (p. 6 )

EID: The billions of dollars injected into the economy each year in the form of royalty and lease payments associated with oil and natural gas development don’t play a role in creating jobs? That would probably come as news to the thousands of folks, many in unrelated industries, whose jobs can be directly tied back to royalty payments in Texas, as detailed in this study commissioned by the Fort Worth Chamber of Commerce last summer. But beyond that, there’s also an interesting sleight of hand here. FWW asserts that royalties and lease payments don’t create jobs, but then claims that “landowner payments and taxes” don’t create jobs either. But taxes are not lease payments; taxes are collected by the government. Without notice, FWW seamlessly broadens its interpretation of what constitutes royalties and lease payments to include taxes, then uses that dubious definition to undermine the economic impacts of shale development. But doesn’t tax collection require staff (i.e. jobs) too, ranging from tax attorneys and paralegals to auditors and other administrative staff? Is FWW suggesting these jobs don’t exist either?

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Food & Water Watch: “Food & Water Watch conservatively assumed that at least half of the gas industry jobs would be filled by out-of-state workers if New York is opened up to shale gas development.” (p. 8 )

EID: FWW believes that if a company is not headquartered in a particular state, then most of the workers will also come from out of state. This is completely unsupported by the data. Of the thousands of new hires made by the industry in neighboring Pennsylvania, an overwhelming majority of the workers (71%) are from Pennsylvania. The industry has also spent more than $411 million over just the past three years to fund the repaving and improvement of local roads, as well as to enhance the state’s transportation infrastructure. This activity also requires workers, which means jobs in Pennsylvania for Pennsylvanians. Replicating this success in New York would bring similar benefits to the Empire State, particularly to areas that have experienced economic malaise for decades.

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Food & Water Watch: “[A]n employment multiplier of 1.92 better estimates the potential total jobs across industries created by shale gas development in New York in 2015.” In the very next paragraph, FWW says the number of jobs created with that multiplier is “less than 1 percent of projected private sector employment in 2018 in the state of New York, which is projected to be 8,6975,730.” (p. 2)

EID: It’s ironic that FWW would criticize others for not understanding how to use a multiplier and then turn around and, in the very next paragraph, misuse a multiplier. As FWW says, the 1.92 multiplier is an assessment of the overall economic impact in 2015, yet the group suggests that the multiplier can easily be applied to 2018 as well, regardless of constantly changing economic realities. FWW takes an abstract employment figure (materialized without the use of “dubious” economic models), multiplies it by a number that they do not understand, and then divides the result by a broader employment figure for a completely different year.

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Food & Water Watch: “[T]he oil and gas extraction industry has one of the largest employment multipliers of any industry”. (p. 9)

EID: We agree, and this is why there are thousands upon thousands of people across the country who have jobs, thanks to the responsible development of shale oil and gas resources. Look no further than North Dakota – which boasts the lowest unemployment rate in the nation (3.5%) and a budget surplus that could allow the state to eliminate its property tax – to see just how powerful an economic engine the oil and gas industry can be.

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Food & Water Watch: “[J]ob creation in health and human services, presumably due to shale gas industry accidents, is included.” (p. 4)

EID: For a subtle jab, this gets a “nice try.” But as it turns out, everyone needs dentists, physicians and optometrists, even those who are in peak physical condition. Moreover, FWW may want to examine the available data. According to the Bureau of Labor Statistics, the incidence rate for injuries and illnesses among all industries is 3.8 per 100 workers. The oil and gas industry is less than a third of that, with a rate of only 1.2 per 100 workers.

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Sundown for Krugman

Another day, another misrepresentation of natural gas in the New York Times.

As you know, we’ve spent considerable time debunking articles in the New York Times that question the benefits and safety of natural gas production, particularly as it relates to hydraulic fracturing. Unfortunately, the folks at the Times still haven’t gotten the message.

This week, Paul Krugman used one of his weekly columns to extol the future of solar power, but not before baselessly demonizing shale gas development.

Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.

Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.

First and foremost, let’s give Mr. Krugman some credit. He does refer to hydraulic fracturing as an “impressive technology,” which it most certainly is. Unfortunately for Mr. Krugman and his readers, though, it’s all downhill from there.

Regarding the “toxic (and radioactive) wastewater that contaminates drinking water,” Krugman is blatantly misstating the facts or, at best, ignoring a key feature of areas where shale gas production is taking place: naturally occurring radioactive material, or NORM, which can be found on the surface or deep underground.

Claims about radiation have been made before (by, naturally, the New York Times), but both the Pennsylvania Department of Environmental Protection (DEP) and the U.S. Geological Survey have found that this is largely a natural phenomenon, not the result of some nefarious gas industry activity, and any radiation is at or below background levels that are no threat to human health. An examination by a water utility in western Pennsylvania also found no radioactive contaminants in the local water supply.

In fact, earlier this year the New York Department of Environmental Conservation (DEC) made the following conclusion about NORM in its assessment of future hydraulic fracturing in the state: “Based upon currently available information it is anticipated that flowback water would not contain levels of NORM of significance,” adding that this “does not present a risk to workers because the external radiation levels are very low.”

Krugman then asserts, notwithstanding the facts, that there is “reason to suspect” that hydraulic fracturing has contaminated groundwater. The reality, though, is that hydraulic fracturing has been used more than 1.2 million times and there has not been a single confirmed case of groundwater contamination. If Krugman thinks otherwise, then his argument is not only with state regulators from across the country, but also with President Obama’s own administrator of the Environmental Protection Agency, Lisa Jackson, who has testified that she is “not aware of any proven case where the fracking process itself has affected water.”

As for the “major damage” that Krugman cites, this claim is, like all the others in this op-ed, misstating reality. Again, the situation in Pennsylvania is instructive, as companies in that state over the past three years have invested more than $400 million in local and state roads. This type of commitment not only guarantees that impacts are minimized, but also that problems can be fixed with paid-for repairs.

And what does Krugman believe is the best alternative to clean, affordable, and reliable natural gas? Solar power, which is currently far more expensive (and significantly less reliable) than natural gas. Krugman says that its price is declining, but his argument that “we’re just a few years from the point” when electricity from solar becomes cost competitive contradicts well-regarded data from the Energy Information Administration (EIA). The EIA’s levelized cost of electricity generation shows that solar is between $211 and $312 per megawatt hour. Combined cycle natural gas generation, however, is between $62 and $65 per megawatt hour, while conventional coal generation is listed at $95 per megawatt hour.

Krugman argues that the current price disparity is due to fossil fuels not being “priced” correctly, which is another way of lamenting the fact that there is no price on carbon. If we had a carbon tax or cap and trade regime, Krugman believes, “it’s likely that we would already have passed [the] tipping point” of price parity between solar and conventional power sources.

But here’s the kicker: EIA’s data actually incorporates a de facto price on carbon by artificially inflating the costs of GHG-intensive technologies (as a carbon tax or cap and trade regime would do). The assumptions in EIA’s data include this important nugget:

Although currently there is no Federal legislation in place that restricts greenhouse gas (GHG) emissions, regulators and the investment community have continued to push energy companies to invest in technologies that are less GHG-intensive. The trend is captured in the AEO2011 Reference case through a 3-percentage-point increase in the cost of capital when evaluating investments in new coal-fired power plants, new coal-to-liquids (CTL), and coal and biomass-to-liquids (CBTL) plants without carbon capture and storage (CCS).

Natural gas is easily the most affordable electricity option, but even Krugman’s attempt to suggest that solar would be cost competitive with coal if we “priced coal-fired power right” doesn’t come close to representing what objective data shows. And as Robert Bryce points out in his own debunking of Krugman’s op-ed, carbon pricing may not even be the most effective way of reducing emissions:

According to the International Energy Agency, the U.S. is now cutting emissions faster than Europe, even though the EU has instituted an elaborate carbon-reduction scheme. Why is this happening? It’s not due to increased domestic use of wind or solar. Instead, it’s simple economics. Cheap natural gas is displacing higher-carbon coal in the U.S. electricity-generation fleet. That option is not available in Europe, where natural-gas prices are more than two times those of the U.S.

Krugman ends by saying hydraulic fracturing “is not a dream come true,” which is a subjective assessment but one that should nonetheless be scrutinized. Just take a stroll through Pennsylvania and you’ll see that responsible natural gas production in the Marcellus Shale is revitalizing local economies and creating jobs at an incredible pace. Development of the Barnett Shale in Texas has created over 100,000 jobs. And thanks to the affordability of natural gas, residents in the Northeast are enjoying lower monthly utility bills — a testament to hydraulic fracturing and the shale revolution it has helped create.

For those who make a living bashing the benefits of natural gas, hydraulic fracturing is indeed far from a dream come true, as it makes their job of claiming natural gas is too dirty and too expensive that much harder. But for the hundreds of thousands, even millions, of people who are reaping countless benefits, shale gas development has indeed been an enormous blessing.

Prior to submitting his column for publication, perhaps Mr. Krugman should have consulted his fellow New York Times columnist David Brooks.

Maryland Strongly Supports Natural Gas Production

New poll finds Maryland voters, like their neighbors in New York and Pennsylvania, want to participate in the shale gas revolution

It may be news to government officials in Annapolis who have imposed a temporary pause on hydraulic fracturing, but voters throughout the state of Maryland actually support natural gas production. Big time.

A new poll by Gonzales Research & Marketing Strategies finds that an incredible 80% of Marylanders support natural gas production in the United States, including 60% who “strongly support” it. The poll finds large majority support for developing natural gas among both men and women, across all political affiliations, and in every region of the state.

As for producing natural gas specifically in western Maryland, where the Marcellus Shale could provide significant new economic opportunities for the Old Line State, nearly 75% of voters in the state express support. Production in western Maryland also enjoys majority support across all demographics polled in the state.

This poll comes as another Quinnipiac survey in New York shows a plurality of voters support Marcellus Shale development, a fact that has remained consistent in Quinnipiac’s polling over the past few months. A Siena poll from last month also found more New Yorkers supported than opposed natural gas production.

And in neighboring Pennsylvania, where the Mighty Marcellus is the source of significant job creation and the rebirth of manufacturing, voters say the economic benefits of drilling outweigh any perceived environmental issues by 62 percent to 30 percent.

Throughout the United States, natural gas development enjoys 81% support according to a recent poll by the American Consumer Institute (ACI).

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The ‘Age of Shale’ and America’s Energy Future

With billions of dollars in new investments and global interest soaring, the shale revolution is here to stay.

Shh…don’t tell the New York Times, but it looks like America’s energy renaissance in shale — which has been fueling economic recovery from North Dakota to Texas and Louisiana to Pennsylvania — is going to last for a long, long time.

As the Wall Street Journal reports, in a story aptly stating that the “Age of Shale” has arrived:

Shale discoveries have reinvigorated U.S. oil and gas production that just half a dozen years ago was widely seen as in terminal decline. Today, there is a glut of cheap natural gas, and domestic oil production is rising for the first time in decades. Shale development is even spreading to other countries, such as Poland and Argentina.

The shale boom has already minted a half-dozen new billionaires comparable to the riches brought by the Internet.

“You certainly have to record the discovery and the exploitation of resources from both oil and gas shales as one of the great wealth creators in American history,” said Ralph Eads, vice-chairman of investment bank Jefferies & Co., which has advised on more than $75 billion worth of shale deals over the last three years. “It looks to be the economic equivalent to any of the big technology innovations.”

Recent market developments further highlight this trend. Kinder Morgan Inc. announced this past weekend that it would be buying El Paso Corporation in a deal worth approximately $38 billion. The acquisition will ultimately create the fourth-largest energy company in North America.

What prompted that enormous deal? El Paso owns the largest natural gas pipeline system in North America, with more than 43,000 miles of gas pipelines. As Reuters points out, the deal combines “the two largest natural gas pipeline operators in North America in a huge bet on the fast-growing market for that fuel.”

More from Reuters:

Despite weak natural gas prices, production of the fuel has been rising as energy companies pile into shale fields — underground formations rich in oil and gas. In the Eagle Ford Shale in South Texas, where there are scant pipelines, companies are having to rely on trucks and are building rail terminals to handle the vast field’s output.

El Paso already owned the largest natural gas pipeline system in North America, with more than 43,000 miles of pipe. The combined company would own 67,000 miles of natural gas pipe and another 13,000 miles of pipelines to move refined products and other fuels.

“We believe that natural gas is going to play an increasingly integral role in North America,” Kinder Morgan Chief Executive Richard Kinder said in a statement. “We are delighted to be able to significantly expand our natural gas transportation footprint at a time when it seems likely thatdomestic natural gas supply and demand will grow at attractive rates for years to come.”

And this is only one of stories out this week about the growing shale revolution. Statoil ASA has also announced that it is purchasing Brigham Exploration to get a piece of the mighty Bakken Shale in North Dakota. The purchase makes Statoil one of the top 10 holders of Bakken acreage, and shows how shale development is attracting massive amounts of direct investment in American energy development.

Less than a decade ago, few would have predicted that these massive investments would take place. But through the expanded use of proven technologies like hydraulic fracturing and horizontal drilling, the United States has completely transformed its position in the global economy, not only with respect to energy security, but also with the capacity for job creation and economic growth.

In Pennsylvania, the development of the Marcellus shale has led to a rebirth of manufacturing, especially the steel industry. A study from Penn State shows that Pennsylvanians saved more than $630 million on their utility bills thanks to shale gas production, and the oil and gas industry in the Keystone State has helped create nearly 50,000 jobs in 2011. In Texas, the Eagle Ford shale is not only creating much-needed jobs, but is also putting the state’s finances on a stronger footing: In November, more than $1 billion will be added to the state’s rainy day fund, revenue that is mostly generated from oil and gas production. And thanks to the development of the Haynesville shale in northern Louisiana, Shreveport-Bossier is now the ninth fastest growing metropolitan area in the entire country. In Ohio, developers are only just beginning to invest billions of dollars into local economies to tap the resources of the Utica Shale.

By 2017 the United States could be the largest oil producer in the world — thanks mostly to shale oil development in places like the Bakken and the Eagle Ford — and shale gas is already allowing countries in Europe to think about disentangling themselves from the Russians.

America’s energy future is perhaps brighter than it has ever been, a status that owes itself to the continued and responsible development of domestic shale resources.

**UPDATE III** NYT’s “Dewey-Defeats-Truman” Moment on Shale?

*UPDATE II* Durham Bull

Albany Times Union Editorial: “Informed public policy won’t come from silencing diverse views”

A bad lesson in censorship
Albany Times Union, Editorial
Monday, April 4, 2011

One might reasonably assume that the state’s top staff geologist would have some relevant thoughts about drilling for natural gas. But good luck finding out what’s on Langhorne B. Smith Jr.’s mind, now that the state has muzzled him.

If only irony were an alternative energy source. Here’s the state Education Department — an agency responsible for fostering knowledge — barring Mr. Smith from talking to reporters after his comments on gas drilling caused a backlash among environmentalists — who normally are the first to cry out when politics takes precedence over science.

We don’t particularly agree with Mr. Smith on a few key points, either. But shutting down an informed voice is absolutely the wrong thing for the government to do, and for environmentalists to support, if only in their failure to denounce it.

As the Times Union’s James M. Odato found, Mr. Smith has been forbidden to talk to reporters since he spoke out on hydraulic fracturing, a controversial process of extracting natural gas that the energy industry wants to employ in the vast Marcellus Shale formation that lies under six states.

We and many others have expressed concern about potential problems, including drinking water contamination. No permits have been issued in New York while the state Department of Environmental Conservation works on regulations and the federal Environmental Protection Agency studies the practice of hydrofracking.

Mr. Smith in an interview last month spoke positively of the Marcellus Shale’s natural gas as a “huge gift” and characterized reports of water contamination as exaggerated and distorted.

He called for vigorous oversight of hydrofracking by the DEC and said natural gas could help relieve global warming and reliance on dirtier-burning fuels like coal.

Hydrofracking opponents, such as Environmental Advocates, the Sierra Club and United for Action, objected, with some suggesting that Mr. Smith’s opinion is tainted because of his private work as an energy industry consultant.

The blowback apparently has made the Education Department uncomfortable enough to cite a protocol that requires employees to check with the agency’s communications office before talking to reporters, or face “appropriate administrative action.” The agency said it’s looking into Mr. Smith’s private work, too.

We’ve been down this unfortunate road before. The state’s former wildlife biologist, Ward Stone, endured official intimidation, including a threat of transfer, for his dogged pursuit of pollution. He was an important voice on issues like the state’s own now-defunct trash incinerator in downtown Albany, where his tests found evidence of pollution in residential neighborhoods. Environmentalists protested the state’s attempts to silence him.

Not here, though. They’re content to let a scientist they disagree with be gagged.

They should join us instead in calling on Education Commissioner David Steiner and the Board of Regents to relax their stifling policies and let public employees contribute to important public discussions without checking with official handlers. This debate should be all about finding the truth, not winning even at the cost of it.

THE ISSUE:

 

The state Education Department bars a knowledgeable employee from talking about gas drilling.

 

THE STAKES:

 

Informed public policy won’t come from silencing diverse views.

NOTE: Click HERE to view this editorial online.

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Shale Continues to Drive U.S. Manufacturing Renaissance

Friday, January 13th, 2012

By now we all know that the development of American energy resources from shale remains a major economic engine for our country, responsible for hundreds of thousands of jobs across the nation. But another important (and under-told) benefit of the “shale revolution” is its role in resuscitating America’s previously declining manufacturing base.

Last month, a report from PricewaterhouseCoopers highlighted how affordable, domestic supplies of natural gas will save U.S. manufacturers more than $11 billion per year over the next decade, in addition to creating a million new jobs during that same period. This affordable energy supply is also projected to increase disposable income for each household in the United States by as much as $2,000 per year.

So it should be no surprise, although still worth highlighting, that a new report from the White House shows how domestic manufacturing, after years of stagnation and decline, is finally on the rebound. From that report:

The manufacturing sector has recovered faster than the rest of the economy, supporting growth and job creation. Over the past two years, the economy has added 334,000 manufacturing jobs — the strongest two-year period of manufacturing job growth since the late 1990s. Manufacturing production has surged 5.7% on an annualized basis since its low in June of 2009, the fastest pace of growth of production in a decade.

And what, according to the White House, is driving that recovery?

A boom in natural gas production has supported manufacturing: The surge in domestic natural gas production can lower energy costs, reduce pollution and drive investment in the industries that supply equipment the natural gas sector and those that use natural gas as an input to production, like the chemical industry. Recent data from the Energy Information Administration indicate that by the end of 2011 natural gas extraction increased by over 24% since 2006.

Later in the report, under the heading “America’s Natural Resource Boom,” the White House report describes how expanded natural gas production, particularly from shale, has “led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users.”

The Washington Post echoed the good news about America’s energy-led manufacturing rebirth in an editorial that ran yesterday:

The White House briefing paper that accompanied the “insourcing” event attributes much of the rebound in manufacturing to the boom in domestic natural gas production, made possible by new “fracking” technologies. The federal government didn’t do much specifically to promote fracking. Yet the process has dramatically cut the price of gas, a key industrial input, and led to spinoff employment in related industries. The White House notes that more of such development, appropriately regulated, could have “substantial” benefits to the U.S. economy. Even in a polarized Washington, everyone should be able to agree on that.

Candidly, we’re not all that interested in the specific politics of the matter, but it’s worth noting the Post’s observation that the federal government “didn’t do much” to promote developing natural gas from shale — and yet, voila!, here we are. Opponents of shale have for years labored under the delusion that the EPA should be in charge of directly regulating the process of hydraulic fracturing, calling for heavy-handed federal control on the misguided assumption that only such a system will guarantee the broadest possible benefits.

But as this White House report makes clear, shale development and hydraulic fracturing (which has been tightly regulated by the states for decades) is creating jobs and revitalizing one of America’s proudest and most critical industries. And as ANGA points out, the natural gas production at the center of this manufacturing renaissance is being done in a “safe and responsible manner,” thereby removing any need to choose between a strong economy and a clean environment.

With these facts clearly established, the question for critics is: Why should we jeopardize this bright spot in an otherwise troubled economy — facilitated by responsible, state-based rules and regulations — with a one-size-fits-all, Washington-centered regulatory regime?

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Another “Peak” Performance

Friday, December 30th, 2011

It’d be easy to analogize the small group of analysts who continue to believe the world is imminently running out of oil and natural gas to the stranded Imperial Japanese soldiers who, upon being discovered in the jungles of Guam and Indonesia in the 1970s, refused to accept that the second World War had decades earlier come to a close.

Easy – but not entirely accurate. One of the key differences between these two groups is that the media actually take seriously the serial skepticism of the first, often parroting with QED-certainty the notion that America has only “three percent” of the world’s oil, for example, notwithstanding a growing and increasingly definitive body of evidence indicative of an American resource base of enormous, potentially even singular proportions.

But if you take a closer look at the arguments that undergird the peak-oil philosophy, you find an interesting and under-reported aspect that lies at its core: In most cases, these folks don’t actually argue that the world is physically short on oil and natural gas. They argue that these resources, even if they do in fact exist, can’t be produced economically over the long-term. Of course, whether the energy isn’t there or is — and just can’t be developed under a reasonable cost scenario – the skeptics often arrive at the same conclusions: we’re running out of the stuff, they say — at least the “easy” stuff — and thus need to restructure our entire economy in anticipation of that crash.

Thanks to the emergence of “tight” oil and natural gas reserves as an important source of U.S. fossil energy, though, the peak energy community finds itself today back on the defensive side of the ball. Plainly put, these guys simply weren’t prepared (in truth, were any of us?) for what would become possible virtually overnight, with plays such as the Haynesville going from a daily yield of precisely zero BCF in 2007 to more than 5.5 BCF a day today. In 2005, Pennsylvania produced less than 0.5 BCF a day despite drilling 3,600 new wells. In 2011, only 2,800 new wells were drilled – and only about half of them were actually brought online. And despite all that, the state produced more than 3.0 BCF a day of natural gas in 2011. Six times the volume of 2005, with 23 percent fewer wells drilled – all thanks to the Marcellus.

Of course, you won’t find any of this data in the article that appeared this week on Slate.com. The thesis of that piece, written by peak-oil exponent Chris Nelder – co-author of an entire book on all the great investment opportunities that will exist someday soon in a world without oil — is that projections of abundance associated with the development of natural gas from shale are overblown. In support of that position, he borrows heavily from the playbook of peak-oil analyst Arthur Berman, someone well known within the industry prior to this year, but whose status got a major boost this summer after The New York Times ran his research (and his quotes) on its front-page.

If you’ve never seen Mr. Berman present on this subject before, you don’t know what you’re missing. We had the privilege to sit right alongside him in a forum on shale organized last April by Cornell’s law school – and as this video will confirm (start at hour three), he’s very good at what he does. After his piece hit in the Times, we also had a chance to chat with him on the phone. He’s a good guy, and a smart guy. We think he’s wrong about shale. But the good news is: we won’t have to wait but two or three years to figure out who’s right.

As far as Berman’s argument goes, it tends to look a little like this: Data collected from the Barnett over the past 15 years suggests that not all shale wells are created equal; that some produce well-below their expected ultimate recovery (EUR) rates; and that optimistic projections about shale’s future contributions to U.S. energy supply will never be realized, in part because of the clash between low natural gas prices and high drilling and completion costs, and in part because the wells themselves, he argues, tend to peter-out after the first few years of production. Paradoxically, Mr. Berman appears to argue both that new shale wells won’t be productive, and that natural gas prices will remain at their historic lows. How both can be true, we’re not entirely certain of.

Unfortunately for the peak-oil crowd, these arguments tend to unravel pretty quickly when the scope of inquiry is broadened out to account for the performance of other shale plays (which isn’t to pay short shrift to the Barnett, which, at 5.0 BCF a day, is currently averaging more natural gas per month than at any point in its history). Notable in his Slate.com article, Nelder flatly ignores the volumes currently being produced in the Haynesville and Marcellus regions – suggesting that these plays aren’t sufficiently “mature,” and thus shouldn’t be included in his analysis.

But Art Berman hasn’t ignored the Haynesville. And to his credit, he’s been good enough to admit that his initial assessments of the play weren’t quite right, sort of. In April 2009, Berman wrote that it was “difficult to imagine that the Haynesville Shale can become commercial.” Only two months later, in June, Berman had changed his tune, saying that “I now think that the Haynesville Shale reserve estimates that I presented previously were too low.” Still, in a 2010 article, Berman suggested the Haynesville numbers were “disappointing.” In March 2011, the Haynesville became the top-producing onshore natural gas field in the United States, and now stands among the top five producing fields in the entire world. What a disappointment.

Despite holding firm to a less-than-sanguine view on the potential abundance of natural gas from shale, Nedler writes in his piece this week that “I am not anti-gas; neither is Berman.” And on that, we take a man at his word. Indeed, Berman wrote an entire post this summer laying out the reasons he supports the continued deployment of hydraulic fracturing.

But hey, it certainly didn’t escape our notice that this year’s annual conference of ASPO-USA (the trade association for peak-oil enthusiasts) in November hosted a panel discussion — moderated by Berman himself — featuring a who’s who line-up of anti-shale activists, including NRDC’s Amy Mall, Rob Jackson from Duke, and Tony Ingraffea and Bob Howarth from Cornell. ASPO member Roger Bezdek also presented at that conference; we had the pleasure of debating him in Miami back in Dec. 2010 (note: December in Miami > December in Washington). Peak oil guys like to say they’re not “anti-gas” – but Bezdek’s presentation, found on page 52 of this document, certainly seems to suggest otherwise, wouldn’t you say?!

Here’s the thing:  There’s nothing wrong with being a contrarian. Nothing wrong, or nefarious, or illegitimate, with offering up an alternative view on what the history might hold for shale. But there’s a big difference between forecasting that something won’t happen and actively working to ensure it doesn’t.

For those who continue to advance the view that natural gas from shale won’t pan-out as planned, professional reputations are at stake. To “win” this particular argument, peak energy proponents need the geology to turn out bad (that is, for oil and natural gas not to exist), or for the oil and natural gas that does exist to remain right where it is in the ground.

If these folks were confident of the first outcome, they wouldn’t need to involve themselves in the second. But they’re not. Which may be why you’re starting to see folks like Art Berman, a climate change skeptic, appear alongside environmentalist activists committed to stopping the development of shale wherever it’s being considered. At first glance, it would appear an unlikely association. But though the philosophies may differ, the end-goal of both groups is the same. To environmentalists, abundant natural gas from shale is a threat to renewables. And for the peakers, it’s a threat to the credibility of their prognostications. It’s really as simple as that.

So: Will the experts’ projections on shale end up translating into the type of real-world abundance that could help our country create thousands of family-supporting jobs, generate billions in taxpayer revenue, and deliver significant annual cost-savings to consumers? We hope it does, but we don’t know. Some in the peak energy community, it can be assumed, hope it doesn’t. But they don’t know either. If the point of the Slate article is to confirm this uncertainty, mission accomplished. But weren’t we all aware of that before the piece even ran?

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When It Comes to Job Creation, The Facts Speak for Themselves

Wednesday, November 16th, 2011

Organization committed to stopping hydraulic fracturing suggests real jobs created by real economic activity do not exist.

It’s one thing for groups opposed to the development of American energy resources from shale to suggest that the massive economic stimulus currently being made possible as a result of these activities is overstated – notwithstanding the fact that their own jobs as professional activists depend on these activities continuing.  But it’s a completely different thing to suggest that these jobs simply do not exist. Given all we continue to see in communities across the country where responsible shale development is taking place, it’s a statement that would make even Jean-Paul Sartre blush.

Unfortunately, that’s exactly what Food & Water Watch — which is a non-profit organization that accepts tax-deductible donations — has suggested with its latest report, which takes aim in particular at a recent study projecting massive economic growth for the state of New York if shale development is allowed to move forward. The broader implication, though, is that all economic models are all fundamentally flawed, so any projection of economic gain from energy development activity is, according to FWW, “dubious.”

Before we get to the many problems in FWW’s report, we thought it would be important to point out from the get-go the irony of Food & Water Watch accusing others of inflating data. This is the same organization, as you might remember, that inflated its own participation rates for an anti-hydraulic fracturing call-to-action, apparently in an effort to make its fundraising emails more appealing.

As to the report, our job here at EID is to read through the document so you don’t have to. What follows is a sampling of the questionable claims made by FWW, accompanied by a healthy dose of reality.

—

Food & Water Watch: “Local, state and federal policymakers should look to actual employment data, not dubious economic forecasts.” (p. 2 )

EID: As it turns out, the oil and gas industry – particularly those companies active in shale – has a very strong record when it comes to creating jobs, and an equally strong standing with respect to “actual employment data.” For example, a Financial Times article that was published the same day FWW released its analysis has the headline: “Oil shale boom boosts US jobs market.” Perhaps that was published too late to make it into the qualifying footnotes of FWW’s report.

But that’s far from the whole story. A study from IHS Global Insight found that in 2010, America’s independent oil and gas producers supported nearly 400,000 direct jobs nationwide, all while generating around $263 billion in gross economic output.

At the state level, the jobs numbers are also significant. In Louisiana, the oil and gas industry supports more than 310,000 jobs in the state, driven not only by offshore production by also the Haynesville Shale, the nation’s largest producing shale gas field. Production in the Barnett Shale in north Texas has created more than 119,000 jobs throughout the state. According to the Pennsylvania Department of Labor & Industry, the Marcellus Shale supports 214,000 jobs across the Commonwealth. In fact, the unemployment rates for Tioga (7.6 percent), Bradford (6.4 percent), and Susquehanna (8.1 percent) counties — three of the most significant areas in terms of Marcellus production — are all lower than the statewide unemployment rate for Pennsylvania. It’s also worth pointing out that the average salary for workers in the industry is roughly 64% higher than the statewide average for Pennsylvania. Even those working in ancillary industries make about 35% more than the Pennsylvania average income.

As for the job creation potential in New York, the state’s Department of Environmental Conservation (DEC) has estimated that as many as 53,000 new jobs could be created from the development of the state’s portion of the Marcellus Shale.

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Food & Water Watch: Alleges that “fracking fluid migration underground” are among the “environmental and public health risks” of hydraulic fracturing and shale development. (p. 3 )

EID: This is contradicted directly by state regulators from across the country – including the head of the New York DEC – and President Obama’s own EPA Administrator Lisa Jackson has confirmed that the process has not contaminated ground water. The reality is that hydraulic fracturing has been used more than 1.2 million times over the past 60 years, not just for oil and natural gas, but for water wells, geothermal wells, and even by EPA as a clean-up tool at Superfund sites. It should be noted, though, that FWW’s source for this claim is none other than the New York Times series attacking the industry, a series that has been almost universally panned, not only by two notable Democratic governors but also by the Times’ own public editor.

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Food & Water Watch: “[D]irect jobs are not created when royalty and lease payments are made.” (p. 5 ) FWW uses this baseless claim to conclude that “$2.02 billion of the $2.95 billion in in-state spending consisted of landowner payments and taxes. This leaves $930 million in in-state spending toward direct job creation.” (p. 6 )

EID: The billions of dollars injected into the economy each year in the form of royalty and lease payments associated with oil and natural gas development don’t play a role in creating jobs? That would probably come as news to the thousands of folks, many in unrelated industries, whose jobs can be directly tied back to royalty payments in Texas, as detailed in this study commissioned by the Fort Worth Chamber of Commerce last summer. But beyond that, there’s also an interesting sleight of hand here. FWW asserts that royalties and lease payments don’t create jobs, but then claims that “landowner payments and taxes” don’t create jobs either. But taxes are not lease payments; taxes are collected by the government. Without notice, FWW seamlessly broadens its interpretation of what constitutes royalties and lease payments to include taxes, then uses that dubious definition to undermine the economic impacts of shale development. But doesn’t tax collection require staff (i.e. jobs) too, ranging from tax attorneys and paralegals to auditors and other administrative staff? Is FWW suggesting these jobs don’t exist either?

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Food & Water Watch: “Food & Water Watch conservatively assumed that at least half of the gas industry jobs would be filled by out-of-state workers if New York is opened up to shale gas development.” (p. 8 )

EID: FWW believes that if a company is not headquartered in a particular state, then most of the workers will also come from out of state. This is completely unsupported by the data. Of the thousands of new hires made by the industry in neighboring Pennsylvania, an overwhelming majority of the workers (71%) are from Pennsylvania. The industry has also spent more than $411 million over just the past three years to fund the repaving and improvement of local roads, as well as to enhance the state’s transportation infrastructure. This activity also requires workers, which means jobs in Pennsylvania for Pennsylvanians. Replicating this success in New York would bring similar benefits to the Empire State, particularly to areas that have experienced economic malaise for decades.

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Food & Water Watch: “[A]n employment multiplier of 1.92 better estimates the potential total jobs across industries created by shale gas development in New York in 2015.” In the very next paragraph, FWW says the number of jobs created with that multiplier is “less than 1 percent of projected private sector employment in 2018 in the state of New York, which is projected to be 8,6975,730.” (p. 2)

EID: It’s ironic that FWW would criticize others for not understanding how to use a multiplier and then turn around and, in the very next paragraph, misuse a multiplier. As FWW says, the 1.92 multiplier is an assessment of the overall economic impact in 2015, yet the group suggests that the multiplier can easily be applied to 2018 as well, regardless of constantly changing economic realities. FWW takes an abstract employment figure (materialized without the use of “dubious” economic models), multiplies it by a number that they do not understand, and then divides the result by a broader employment figure for a completely different year.

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Food & Water Watch: “[T]he oil and gas extraction industry has one of the largest employment multipliers of any industry”. (p. 9)

EID: We agree, and this is why there are thousands upon thousands of people across the country who have jobs, thanks to the responsible development of shale oil and gas resources. Look no further than North Dakota – which boasts the lowest unemployment rate in the nation (3.5%) and a budget surplus that could allow the state to eliminate its property tax – to see just how powerful an economic engine the oil and gas industry can be.

—

Food & Water Watch: “[J]ob creation in health and human services, presumably due to shale gas industry accidents, is included.” (p. 4)

EID: For a subtle jab, this gets a “nice try.” But as it turns out, everyone needs dentists, physicians and optometrists, even those who are in peak physical condition. Moreover, FWW may want to examine the available data. According to the Bureau of Labor Statistics, the incidence rate for injuries and illnesses among all industries is 3.8 per 100 workers. The oil and gas industry is less than a third of that, with a rate of only 1.2 per 100 workers.

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Sundown for Krugman

Friday, November 11th, 2011

Another day, another misrepresentation of natural gas in the New York Times.

As you know, we’ve spent considerable time debunking articles in the New York Times that question the benefits and safety of natural gas production, particularly as it relates to hydraulic fracturing. Unfortunately, the folks at the Times still haven’t gotten the message.

This week, Paul Krugman used one of his weekly columns to extol the future of solar power, but not before baselessly demonizing shale gas development.

Speaking of propaganda: Before I get to solar, let’s talk briefly about hydraulic fracturing, a k a fracking.

Fracking — injecting high-pressure fluid into rocks deep underground, inducing the release of fossil fuels — is an impressive technology. But it’s also a technology that imposes large costs on the public. We know that it produces toxic (and radioactive) wastewater that contaminates drinking water; there is reason to suspect, despite industry denials, that it also contaminates groundwater; and the heavy trucking required for fracking inflicts major damage on roads.

First and foremost, let’s give Mr. Krugman some credit. He does refer to hydraulic fracturing as an “impressive technology,” which it most certainly is. Unfortunately for Mr. Krugman and his readers, though, it’s all downhill from there.

Regarding the “toxic (and radioactive) wastewater that contaminates drinking water,” Krugman is blatantly misstating the facts or, at best, ignoring a key feature of areas where shale gas production is taking place: naturally occurring radioactive material, or NORM, which can be found on the surface or deep underground.

Claims about radiation have been made before (by, naturally, the New York Times), but both the Pennsylvania Department of Environmental Protection (DEP) and the U.S. Geological Survey have found that this is largely a natural phenomenon, not the result of some nefarious gas industry activity, and any radiation is at or below background levels that are no threat to human health. An examination by a water utility in western Pennsylvania also found no radioactive contaminants in the local water supply.

In fact, earlier this year the New York Department of Environmental Conservation (DEC) made the following conclusion about NORM in its assessment of future hydraulic fracturing in the state: “Based upon currently available information it is anticipated that flowback water would not contain levels of NORM of significance,” adding that this “does not present a risk to workers because the external radiation levels are very low.”

Krugman then asserts, notwithstanding the facts, that there is “reason to suspect” that hydraulic fracturing has contaminated groundwater. The reality, though, is that hydraulic fracturing has been used more than 1.2 million times and there has not been a single confirmed case of groundwater contamination. If Krugman thinks otherwise, then his argument is not only with state regulators from across the country, but also with President Obama’s own administrator of the Environmental Protection Agency, Lisa Jackson, who has testified that she is “not aware of any proven case where the fracking process itself has affected water.”

As for the “major damage” that Krugman cites, this claim is, like all the others in this op-ed, misstating reality. Again, the situation in Pennsylvania is instructive, as companies in that state over the past three years have invested more than $400 million in local and state roads. This type of commitment not only guarantees that impacts are minimized, but also that problems can be fixed with paid-for repairs.

And what does Krugman believe is the best alternative to clean, affordable, and reliable natural gas? Solar power, which is currently far more expensive (and significantly less reliable) than natural gas. Krugman says that its price is declining, but his argument that “we’re just a few years from the point” when electricity from solar becomes cost competitive contradicts well-regarded data from the Energy Information Administration (EIA). The EIA’s levelized cost of electricity generation shows that solar is between $211 and $312 per megawatt hour. Combined cycle natural gas generation, however, is between $62 and $65 per megawatt hour, while conventional coal generation is listed at $95 per megawatt hour.

Krugman argues that the current price disparity is due to fossil fuels not being “priced” correctly, which is another way of lamenting the fact that there is no price on carbon. If we had a carbon tax or cap and trade regime, Krugman believes, “it’s likely that we would already have passed [the] tipping point” of price parity between solar and conventional power sources.

But here’s the kicker: EIA’s data actually incorporates a de facto price on carbon by artificially inflating the costs of GHG-intensive technologies (as a carbon tax or cap and trade regime would do). The assumptions in EIA’s data include this important nugget:

Although currently there is no Federal legislation in place that restricts greenhouse gas (GHG) emissions, regulators and the investment community have continued to push energy companies to invest in technologies that are less GHG-intensive. The trend is captured in the AEO2011 Reference case through a 3-percentage-point increase in the cost of capital when evaluating investments in new coal-fired power plants, new coal-to-liquids (CTL), and coal and biomass-to-liquids (CBTL) plants without carbon capture and storage (CCS).

Natural gas is easily the most affordable electricity option, but even Krugman’s attempt to suggest that solar would be cost competitive with coal if we “priced coal-fired power right” doesn’t come close to representing what objective data shows. And as Robert Bryce points out in his own debunking of Krugman’s op-ed, carbon pricing may not even be the most effective way of reducing emissions:

According to the International Energy Agency, the U.S. is now cutting emissions faster than Europe, even though the EU has instituted an elaborate carbon-reduction scheme. Why is this happening? It’s not due to increased domestic use of wind or solar. Instead, it’s simple economics. Cheap natural gas is displacing higher-carbon coal in the U.S. electricity-generation fleet. That option is not available in Europe, where natural-gas prices are more than two times those of the U.S.

Krugman ends by saying hydraulic fracturing “is not a dream come true,” which is a subjective assessment but one that should nonetheless be scrutinized. Just take a stroll through Pennsylvania and you’ll see that responsible natural gas production in the Marcellus Shale is revitalizing local economies and creating jobs at an incredible pace. Development of the Barnett Shale in Texas has created over 100,000 jobs. And thanks to the affordability of natural gas, residents in the Northeast are enjoying lower monthly utility bills — a testament to hydraulic fracturing and the shale revolution it has helped create.

For those who make a living bashing the benefits of natural gas, hydraulic fracturing is indeed far from a dream come true, as it makes their job of claiming natural gas is too dirty and too expensive that much harder. But for the hundreds of thousands, even millions, of people who are reaping countless benefits, shale gas development has indeed been an enormous blessing.

Prior to submitting his column for publication, perhaps Mr. Krugman should have consulted his fellow New York Times columnist David Brooks.

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Maryland Strongly Supports Natural Gas Production

Thursday, October 27th, 2011

New poll finds Maryland voters, like their neighbors in New York and Pennsylvania, want to participate in the shale gas revolution

It may be news to government officials in Annapolis who have imposed a temporary pause on hydraulic fracturing, but voters throughout the state of Maryland actually support natural gas production. Big time.

A new poll by Gonzales Research & Marketing Strategies finds that an incredible 80% of Marylanders support natural gas production in the United States, including 60% who “strongly support” it. The poll finds large majority support for developing natural gas among both men and women, across all political affiliations, and in every region of the state.

As for producing natural gas specifically in western Maryland, where the Marcellus Shale could provide significant new economic opportunities for the Old Line State, nearly 75% of voters in the state express support. Production in western Maryland also enjoys majority support across all demographics polled in the state.

This poll comes as another Quinnipiac survey in New York shows a plurality of voters support Marcellus Shale development, a fact that has remained consistent in Quinnipiac’s polling over the past few months. A Siena poll from last month also found more New Yorkers supported than opposed natural gas production.

And in neighboring Pennsylvania, where the Mighty Marcellus is the source of significant job creation and the rebirth of manufacturing, voters say the economic benefits of drilling outweigh any perceived environmental issues by 62 percent to 30 percent.

Throughout the United States, natural gas development enjoys 81% support according to a recent poll by the American Consumer Institute (ACI).

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The ‘Age of Shale’ and America’s Energy Future

Tuesday, October 18th, 2011

With billions of dollars in new investments and global interest soaring, the shale revolution is here to stay.

Shh…don’t tell the New York Times, but it looks like America’s energy renaissance in shale — which has been fueling economic recovery from North Dakota to Texas and Louisiana to Pennsylvania — is going to last for a long, long time.

As the Wall Street Journal reports, in a story aptly stating that the “Age of Shale” has arrived:

Shale discoveries have reinvigorated U.S. oil and gas production that just half a dozen years ago was widely seen as in terminal decline. Today, there is a glut of cheap natural gas, and domestic oil production is rising for the first time in decades. Shale development is even spreading to other countries, such as Poland and Argentina.

The shale boom has already minted a half-dozen new billionaires comparable to the riches brought by the Internet.

“You certainly have to record the discovery and the exploitation of resources from both oil and gas shales as one of the great wealth creators in American history,” said Ralph Eads, vice-chairman of investment bank Jefferies & Co., which has advised on more than $75 billion worth of shale deals over the last three years. “It looks to be the economic equivalent to any of the big technology innovations.”

Recent market developments further highlight this trend. Kinder Morgan Inc. announced this past weekend that it would be buying El Paso Corporation in a deal worth approximately $38 billion. The acquisition will ultimately create the fourth-largest energy company in North America.

What prompted that enormous deal? El Paso owns the largest natural gas pipeline system in North America, with more than 43,000 miles of gas pipelines. As Reuters points out, the deal combines “the two largest natural gas pipeline operators in North America in a huge bet on the fast-growing market for that fuel.”

More from Reuters:

Despite weak natural gas prices, production of the fuel has been rising as energy companies pile into shale fields — underground formations rich in oil and gas. In the Eagle Ford Shale in South Texas, where there are scant pipelines, companies are having to rely on trucks and are building rail terminals to handle the vast field’s output.

El Paso already owned the largest natural gas pipeline system in North America, with more than 43,000 miles of pipe. The combined company would own 67,000 miles of natural gas pipe and another 13,000 miles of pipelines to move refined products and other fuels.

“We believe that natural gas is going to play an increasingly integral role in North America,” Kinder Morgan Chief Executive Richard Kinder said in a statement. “We are delighted to be able to significantly expand our natural gas transportation footprint at a time when it seems likely thatdomestic natural gas supply and demand will grow at attractive rates for years to come.”

And this is only one of stories out this week about the growing shale revolution. Statoil ASA has also announced that it is purchasing Brigham Exploration to get a piece of the mighty Bakken Shale in North Dakota. The purchase makes Statoil one of the top 10 holders of Bakken acreage, and shows how shale development is attracting massive amounts of direct investment in American energy development.

Less than a decade ago, few would have predicted that these massive investments would take place. But through the expanded use of proven technologies like hydraulic fracturing and horizontal drilling, the United States has completely transformed its position in the global economy, not only with respect to energy security, but also with the capacity for job creation and economic growth.

In Pennsylvania, the development of the Marcellus shale has led to a rebirth of manufacturing, especially the steel industry. A study from Penn State shows that Pennsylvanians saved more than $630 million on their utility bills thanks to shale gas production, and the oil and gas industry in the Keystone State has helped create nearly 50,000 jobs in 2011. In Texas, the Eagle Ford shale is not only creating much-needed jobs, but is also putting the state’s finances on a stronger footing: In November, more than $1 billion will be added to the state’s rainy day fund, revenue that is mostly generated from oil and gas production. And thanks to the development of the Haynesville shale in northern Louisiana, Shreveport-Bossier is now the ninth fastest growing metropolitan area in the entire country. In Ohio, developers are only just beginning to invest billions of dollars into local economies to tap the resources of the Utica Shale.

By 2017 the United States could be the largest oil producer in the world — thanks mostly to shale oil development in places like the Bakken and the Eagle Ford — and shale gas is already allowing countries in Europe to think about disentangling themselves from the Russians.

America’s energy future is perhaps brighter than it has ever been, a status that owes itself to the continued and responsible development of domestic shale resources.

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**UPDATE III** NYT’s “Dewey-Defeats-Truman” Moment on Shale?

Monday, June 27th, 2011

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*UPDATE II* Durham Bull

Wednesday, May 25th, 2011

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Albany Times Union Editorial: “Informed public policy won’t come from silencing diverse views”

Monday, April 4th, 2011

A bad lesson in censorship
Albany Times Union, Editorial
Monday, April 4, 2011

One might reasonably assume that the state’s top staff geologist would have some relevant thoughts about drilling for natural gas. But good luck finding out what’s on Langhorne B. Smith Jr.’s mind, now that the state has muzzled him.

If only irony were an alternative energy source. Here’s the state Education Department — an agency responsible for fostering knowledge — barring Mr. Smith from talking to reporters after his comments on gas drilling caused a backlash among environmentalists — who normally are the first to cry out when politics takes precedence over science.

We don’t particularly agree with Mr. Smith on a few key points, either. But shutting down an informed voice is absolutely the wrong thing for the government to do, and for environmentalists to support, if only in their failure to denounce it.

As the Times Union’s James M. Odato found, Mr. Smith has been forbidden to talk to reporters since he spoke out on hydraulic fracturing, a controversial process of extracting natural gas that the energy industry wants to employ in the vast Marcellus Shale formation that lies under six states.

We and many others have expressed concern about potential problems, including drinking water contamination. No permits have been issued in New York while the state Department of Environmental Conservation works on regulations and the federal Environmental Protection Agency studies the practice of hydrofracking.

Mr. Smith in an interview last month spoke positively of the Marcellus Shale’s natural gas as a “huge gift” and characterized reports of water contamination as exaggerated and distorted.

He called for vigorous oversight of hydrofracking by the DEC and said natural gas could help relieve global warming and reliance on dirtier-burning fuels like coal.

Hydrofracking opponents, such as Environmental Advocates, the Sierra Club and United for Action, objected, with some suggesting that Mr. Smith’s opinion is tainted because of his private work as an energy industry consultant.

The blowback apparently has made the Education Department uncomfortable enough to cite a protocol that requires employees to check with the agency’s communications office before talking to reporters, or face “appropriate administrative action.” The agency said it’s looking into Mr. Smith’s private work, too.

We’ve been down this unfortunate road before. The state’s former wildlife biologist, Ward Stone, endured official intimidation, including a threat of transfer, for his dogged pursuit of pollution. He was an important voice on issues like the state’s own now-defunct trash incinerator in downtown Albany, where his tests found evidence of pollution in residential neighborhoods. Environmentalists protested the state’s attempts to silence him.

Not here, though. They’re content to let a scientist they disagree with be gagged.

They should join us instead in calling on Education Commissioner David Steiner and the Board of Regents to relax their stifling policies and let public employees contribute to important public discussions without checking with official handlers. This debate should be all about finding the truth, not winning even at the cost of it.

THE ISSUE:

 

The state Education Department bars a knowledgeable employee from talking about gas drilling.

 

THE STAKES:

 

Informed public policy won’t come from silencing diverse views.

NOTE: Click HERE to view this editorial online.

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