*UPDATE* Shale Puts Russia, Saudis on the Defensive
The shale revolution is rapidly becoming global, but the Bear still refuses to be bullish on its prospects.
Most of us know about the enormous economic benefits being delivered to Americans every day thanks to the safe and responsible development of America’s shale resources. From creating jobs to reducing energy prices, and everything in between, expanded domestic production of natural gas and oil from shale has been one of the lone high notes in an otherwise bleak economic composition.
But there is another story unfolding about the shale revolution, one that’s been wildly unreported and yet one with enormous geopolitical implications: the weakening of Russia’s grip on the global natural gas market. We highlighted this phenomenon earlier this year when the Baker Institute released a study that found shale gas development in the United States and around the world could cut Russia’s market share in natural gas by more than half.
And according to the Wall Street Journal this week, Russia is starting to fight back, albeit with a hefty dose of debunked talking points about hydraulic fracturing contaminating water supplies:
Shale gas has revolutionized the gas business in the U.S., and industry experts and executives say the same could happen in Europe and Asia.
Russia, however, has repeatedly downplayed the role of shale gas and insisted it won’t hurt its lucrative model of extracting gas at deposits in West Siberia and pumping it through huge pipelines to consumers in Russia and Europe.
But in a sign the phenomenon is in fact being taken seriously, the board of directors at the world’s biggest gas producer, state-owned OAO Gazprom, this week highlighted environmental risks and the high costs of production in Europe.
“The production of shale gas is associated with significant environmental risks, in particular the hazard of surface and underground water contamination with chemicals applied in the production process,” Gazprom said in the statement following the board meeting.
Of course, such push back (which contradicts well-established facts about hydraulic fracturing) is not limited to the state-run gas company. At a recent event, Russia’s Prime Minister Vladimir Putin himself tried to undermine shale gas with his own environmental “assessment”:
Asked if development of shale gas resources threatened Russia’s dominance of Europe’s energy market, Mr Putin grabbed a notepad to draw diagrams of how “fracking” – the method used to extract such gas – could damage the environment.
Putin also allegedly said that where shale gas is extracted, “you will be sick” because production poses a “real threat to the environment.” He praised France for “recognizing” that link.
Hyperbolic rhetoric and cute drawings, however, aren’t Russia’s only strategies.
As the oil and gas market undergoes significant change (the United States is on track to beat its peak output of oil and natural gas by the end of this decade, and is also projected to become a net exporter of petroleum products by the end of this year), Russia is desperately looking for allies to help maintain its power. Last month, Putin announced that Russia will begin coordinating with OPEC, the organization that formed half a century ago in part to protect market share and control prices.
Russia and several OPEC countries also recently convened in Doha to discuss collaboration for natural gas pricing, a decision partially driven by growing global shale gas development, particularly in North America. As Platts points out, shale gas is “one of the major challenges facing the producers and exporters of conventional gas” present at the meeting.
The Saudis, meanwhile, are also viewing the shale revolution with concern, as the massive expansion of U.S. oil production in areas like the Bakken in North Dakota and the Eagle Ford in south Texas has reduced the need for imports from Saudi Arabia:
OPEC estimated in a recent report that global reserves of tight oil could be as high as 300 billion barrels, above Saudi Arabia’s conventional reserves of 260-billion barrels, which are currrently seen as the second-largest in the world after Venezuela.
Global output of non-conventional oil is set to rise 3.4 million bpd by 2015, still dominated by oil sands, to 5.8 million bpd by 2025 and to 8.4 million bpd by 2035 when tight oil would be playing a much bigger role. By 2035, the United States and Canada will still be dominating unconventional oil production with 6.6 million bpd, the group forecasts.
What’s the upshot here? Russia is scrambling to undermine the shale revolution, not only in its own back yard (Poland has enormous shale gas resources and is moving forward with development) but also throughout the world. If countries previously dependent on Russia or OPEC suddenly discover that they have more leverage over the prices these countries charge — or if they discover their own shale resources at home — the control once wielded by OPEC countries and the Russian Federation will be considerably reduced. And with that loss of power comes a considerable loss of public funding; the Russian government is heavily dependent upon oil and gas tax revenue (in 2008, one-third of Russia’s total government revenue came from oil and gas production), and in 2010 Saudi Arabia generated more than $180 billion in oil export revenues.
Creating jobs, growing the economy, reducing the deficit, and even weakening hostile regimes. Is there anything the shale revolution can’t do?
UPDATE (12/16/2011, 4:19pm ET) If there’s one thing autocrats don’t like, it’s competition, and the Wall Street Journal reports that Vladimir Putin is, indeed, feeling the pinch with respect to Russia’s (declining) energy hegemony. Apparently the Prime Minister is trying to learn all he can about hydraulic fracturing, the technology that is helping to loosen Russia’s grip on global natural gas markets, presumably so he can better campaign against it (though if he does take the time to learn the facts, he’ll discover that its alleged environmental impacts are dramatically overstated). After asking “What’s on Vladimir Putin’s mind?” the Journal gave, among others, this likely answer:
[P]erhaps he is worried about the impact of surging shale gas supply will have on state-owned gas giant Gazprom. It makes much of its revenues exporting gas to Europe, at prices linked to oil prices. If the U.S. were able to export gas to Europe, its market dominance could be eroded; Cheniere Energy recently signed a 20-year deal to supply gas to the U.K.’s BG Group. Europe, too, could eventually produce its own shale gas, particularly in Poland. The extra competition isn’t a great prospect for Gazprom – or Russian politicians, who rely on oil and gas tax revenues to balance the books.
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.
READ MORE
- EID Blog: “Desperation through Exaggeration”
- IHS Global Insight: The Economic Contribution of the Onshore Oil and Natural Gas Producers to the U.S. Economy
- NBC News: “Jobs Boom Brings Thousands to Small North Dakota Town”
- Fort Worth Chamber of Commerce: The Impact of the Barnett Shale on Business Activity in the Surrounding Region and Texas
SEAB Finds States Should Continue to Lead on Hydraulic Fracturing
Key advisory board acknowledges important progress made by industry and local officials with respect to the safe development of shale gas.
Last week the Secretary of Energy Advisory Board (SEAB) Natural Gas Subcommittee released its draft final report on hydraulic fracturing, a report that confirms many of the realities of shale gas development: states are effectively regulating the industry, including hydraulic fracturing; industry is committed to best practices and reducing impacts; and – as we here at EID have noted on numerous occasions – shale gas is an important source of American energy.
But if you caught any of the news about the release of the report, you’d likely be convinced that the sky is falling and the environment is being ruined beyond repair. Take, for example, this excerpt from a Reuters piece entitled, “US faces shale gas backlash without action – panel”:
A federal energy panel on Thursday warned that rigorous action must be taken if government and industry hope to prevent major environmental damage and subdue the public backlash against the U.S. shale gas boom. Charged with helping guide the future of U.S. shale gas development, the Energy Department subcommittee expressed disappointment that more had not been done on the 20 recommendations laid out in August in its initial report on the practice. (emphasis added)
The Wheeling News-Register piled on by stating that shale gas development could “significantly damage the environment unless companies reduce their impacts.” The Columbus Dispatch declared in its headline, “Fracking safeguards not followed.” Yikes.
To be fair, the Subcommittee did express concerns about what it considers gaps in current regulations.
Moving past the media hype, here are just a few examples of what the Subcommittee actually says about the industry, hydraulic fracturing, and the numerous examples of environmental mitigation already taking place:
- “The Subcommittee is mindful that state and federal regulators and companies are already deeply involved in environmental management.” (p. 2 )
- “Two existing non-profit organizations – the State Review of Oil and Natural Gas Environmental Regulations (STONGER) and the Ground Water Protection Council (GWPC) are two existing organizations that work to share information to improve the quality of regulatory policy and practice in the states.” (p. 3 )
- “The Subcommittee has recommended that $5 million per year would provide the resources to STRONGER and the GWCPC needed to strengthen and broaden its activities as discussed in the Subcommittees previous report, for example, updating hydraulic fracturing guidelines and well construction guidelines, and developing guidelines for water supply, air emissions and cumulative impacts.” (p. 3 )
- Federal funding “would also allow GWPC to upgrade its fracturing fluid chemical disclosure registry, Frac Focus, so that information can be searched, sorted and aggregated by chemical, by well, by company and by geography – as recommended by the Subcommittee in its 90-Day report.” (p. 5 )
- “The Subcommittee recognized the need for protection of legitimate trade secrets.” (p. 6 )
- “The Ground Water Protection Council and the Interstate Oil and Gas Compact Commission have taken an important step in announcing their intent to require disclosure of all chemicals by operators who utilize their voluntary chemical disclosure registry, FracFocus.” (p. 6 )
- Shale gas is “arguably the country’s most important domestic energy resource.” (p. 6 )
- “State and local governments should take the lead in experimenting with different mechanisms for engaging these issues [community concerns and local impacts] in a constructive way, seeking to be beyond discussion to practical mitigation.” (p. 8 )
- “Industry has always been interested in best practices.” (p. 9 )
- “Industry is taking a regional approach to best practice, building on local organizations, such as the Marcellus Shale Coalition. Shale companies understand the importance of involving non-industry stakeholders in their efforts and are beginning to take initiatives that engage the public in a meaningful way.” (p. 9 )
- “Industry is showing increased interest in engineering practice as indicated by the recent workshop on hydraulic fracturing sponsored by the American Petroleum Institute on October 4 and 5, 2011 in Pittsburg, PA.” (p. 9 )
What’s the upshot? Far from causing “major environmental damage,” the industry is already leading the way on developing best practices, reducing impacts, and working with non-profit organizations to expand community outreach. The website FracFocus.org is receiving well-deserved attention as just one component of the industry’s commitment to transparency, and the SEAB’s recognition of the need to protect proprietary information is an equally important conclusion. Organizations like STRONGER and the GWPC not only receive positive marks, but the SEAB also believes these organizations are doing such an effective job that they should be encouraged to expand.
And finally, the SEAB essentially confirms that state and local governments should continue to take the lead on regulating the industry, which as we all know has an impeccable record of protecting the environment while also allowing robust and responsible development.
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).
READ MORE
- Gonzales Research & Marketing Strategies: Maryland Statewide Poll on Natural Gas
- Marcellus Shale Coalition: “Mighty Marcellus Continues Impressive Job Creation Streak Across the Commonwealth“
- American Consumer Institute: “New Poll Reveals Consumers Support Expanding U.S. Energy Initiatives to Create Jobs“
- Quinnipiac University: New York State (NY) Poll (Oct. 27, 2011)
*UPDATE* New Study Debunks Cornell GHG Paper. Again.
Maryland joins Carnegie Mellon, Wood Mackenzie, and even U.S. Dept. of Energy in locating gaping holes in Howarth/Ingraffea paper
Earlier this year, researchers from Cornell University — Robert Howarth and Anthony Ingraffea — released a study that found emissions from shale gas production are worse than coal, based chiefly on the global warming potential (GWP) of methane. Of course, the study had more holes in it than big slice of Swiss cheese (read EID’s six-times-updated rebuttal here), with its conclusions resting on such a poor foundation that even a Sierra Club funded study found its premises to be flawed.
Yet the Cornell study continues to be used by ideological opponents of shale gas production, not just in the United States but also in Canada. Which is why we feel it’s imperative to highlight that yet another top-notch study — this one from researchers at the University of Maryland — is pushing the Cornell paper even closer to the ash bin of history.
The new study, entitled “The Greenhouse Impact of Unconventional Gas for Electricity Production,” has many noteworthy conclusions, including:
- “GHG impacts of shale gas are…only 56% that of coal” {p. 1}
- “Methane has the ability to trap large amounts of infrared radiation relative to CO2, but it also has a comparatively shorter lifetime in the atmosphere. As a result, methane’s 100 y GWP is much lower than its 20 y GWP.” {p. 5}
- “Two factors lead to an overall carbon intensity advantage for gas during the combustion stage. First, gas releases more energy per unit of carbon emitted. Second, the technology used for combustion of gas is more thermodynamically efficient than that used for coal, enabling a larger amount of chemical potential energy in the fuel to be converted to electricity.” {p. 5}
- “[A]rguments that shale gas is more polluting than coal are largely unjustified.” {p. 8}
- “[W]e have demonstrated that the fugitive emissions from the [shale gas] drilling process are very likely not substantially higher than for conventional gas.” {p. 8}
- “Evaluated solely on the criterion of GHG emissions from electricity generation, shale gas is not likely to be substantially more polluting than conventional gas.” {p. 8}
And as we said, this most recent study is only the latest to join the party. But don’t just take our word for it…
August 2011, Carnegie Mellon Univ. report on life cycle greenhouse gas (GHG) emissions from Marcellus shale production:
- “The GHG emission estimates shown here for Marcellus gas are similar to current domestic gas.”
- “For comparison purposes, Marcellus shale gas adds only 3% more emissions to the average conventional gas, which is likely within the uncertainty bounds of the study. Marcellus shale gas has lower GHG emissions relative to coal when used to generate electricity.”
- Lead researcher Paula Jaramillo (an ‘energy expert,’ according to ProPublica): “We don’t think they’re using credible data and some of the assumptions they’re making are biased. And the comparison they make at the end, my biggest problem, is wrong.” (as quoted by POLITICO [subs. req'd], Aug. 24, 2011)
August 2011, Worldwatch Institute study points out how Howarth and Ingraffea are the exception, not the rule:
- “Despite differences in methodology and coverage, all of the recent studies except Howarth et al. estimate that life-cycle emissions from natural gas-fired generation are significantly less than those from coal-fired generation on a per MMBtu basis.” (p. 9)
June 2011, Cornell Univ. professor Lawrence M. Cathles [report submitted for publication]:
- “[Ingraffea’s and Howarth's] analysis is seriously flawed in that they significantly overestimate the fugitive emissions associated with unconventional gas extraction…”
- “[T]he assumptions used by Howarth et al. are inappropriate and…their data, which the authors themselves characterize as ‘limited’, do not support their conclusions.”
May 2011, U.S. Dept. of Energy report: Emissions from natural gas are low compared to other fuels.
- “Howarth [and Ingraffea] found a large fraction of produced gas from unconventional wells never made it to end users, assumed that all of that gas was vented as methane, and thus concluded that the global warming impacts were huge. As the [Dept. of Energy] work explains, though, 62% of that gas isn’t lost at all – it’s ‘used to power equipment.’” (CFR blog, May 20, 2011)
May 2011, Wood Mackenzie study “Methane Emissions from Unconventional Well Completions”
- “Our analysis indicates that the Cornell study overestimated the average volume of natural gas vented during the completion and flowback stages by 60-65%. We conclude that the Cornell study overestimated the impact of emissions during well completions by up to 90%.”
- Howarth “used obsolete data and considerably overestimated Haynesville emissions that contributed to the overestimation of vented methane.”
May 2011, Navigant Energy Practice, “How does the Howarth team’s report affect natural gas development?”
- “[T]he report concludes that the average well [in the Haynesville Shale] spits 250 million cubic feet of methane into the sky. That’s about a million and a half dollars’ worth of gas at today’s prices. … I have to wonder whether the authors have ever seen a working drilling / fracturing operation.”
May 2011, Global Warming Policy Foundation, “The Shale Gas Shock“
- “[Howarth’s conclusion] requires unrealistic assumptions about: the quantity of methane that leaks during fracking, production and transport; the lack of methane leaks from coal mines; the residence time of methane in the atmosphere; and the greenhouse warming potential of methane compared with carbon dioxide. … And Howarth gets his numbers on high gas leakage from shale gas wells from unreliable sources, his numbers on gas leakage from pipelines from long Russian pipelines, and assumes that ‘lost and unaccounted for gas‘ is actual leakage rather than partly an accounting measure. He also fails to take into account the greater generating efficiency of gas than coal.” (p. 30)
John Hanger, former head of the Pennsylvania Dept of Env. Protection:
- “Professor Horwath’s conclusion that gas emits more heat trapping gas than carbon flies in the face of numerous life cycle studies done around the world.” (April 12, 2011)
- “Professor Horwath just adopted an extreme and false assumption of no flaring that conveniently moved the result of his life cycle analysis in the direction that he wanted.” (April 12, 2011)
- “Bit by bit the Howarth study is being consigned to the junk heap.” (Aug. 25, 2011)
Natural Resources Defense Council’s Dan Lashof rejects the Cornell study’s use of a 20-year time frame:
- “Moreover, while I can see an argument for using a time horizon shorter than 100 years, I personally believe that the 20-year GWP is too short a period to be appropriate for policy analysis because it discounts the future too heavily. I calculate that over a 50 year period, the GWP of methane would be in the range of 42-56, based on the IPCC and the Shindell et al. analyses.”
And, just as a refresher, here are Howarth and Ingraffea discussing the flaws of their own paper:
- Howarth: “They are limited data. These are not published data. These are things teased apart out of PowerPoint presentations here and there. So rather than try to extrapolate based on any complicated formula, we’ve ended up simply taking the mean of those values.” (Howath presentation to colleagues, 22:30, March 15, 2011)
- Howarth: “A lot of the data we used are really low quality, but I’m confident that they are the best available data.” (38:50)
- Howarth: “Let me just as an aside say that, again, the quality of the data behind that number [methane emissions during well completion] are pretty lousy. You know, they’re these weird PowerPoint sort of things.” (44:15)
- Ingraffea: “We are basing this study on in some cases questionable data.” (38:20)
- Ingraffea: “I hope you don’t gather from this presentation that we think we’re right.” (57:15)
- Howarth: “We did not look as carefully at coal. … We didn’t put anywhere near the amount of effort into them [coal numbers], but I’m sure they are lower than natural gas.” (39:10 – 40:08)
UPDATE: (11/3/2011, 5:02 pm)
A new study from the Department of Energy’s National Energy Technology Lab casts even more doubt on the Cornell study. A presentation of the study comes to the following conclusion: “Average natural gas baseload power generation has life cycle GHG emissions 53% lower than average coal baseload power generation” (p. 36). All forms of natural gas scored significantly lower on GHG emissions than coal-powered generation.
And what about the infamous 20-year time for global warming potential (GWP), which Dr. Howarth deemed “critical” for making a proper environmental impact assessment? NETL concludes: “Average natural gas baseload power generation has life cycle GHG emissions 42% lower than average coal baseload power generation on a 20-year time horizon” (p. 37). Once again, all forms of natural gas score lower than coal, even on the 20-year time frame.
READ MORE
- “Shale emissions better than coal – study” (E&E News [subs. req'd], 10/25/2011)
- EID fact check: Ithaca Is Gorges, But its Position on Hydraulic Fracturing is the Pits
- Council on Foreign Relations: Picking apart the Howarth study
- Fmr PA DEP Director John Hanger: Key Quotations From IHS CERA Debunking of Howarth
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.
Highlights From Yesterday’s US Senate Shale Gas Hearing
US Sen. Jeff Bingaman (D-NM), Energy & Natural Resources Committee Chairman
- “In recent years, a number of factors have raised the prominence of natural gas as a resource. Technologies such as horizontal drilling and hydraulic fracturing have led to more domestic natural gas production and led to a reassessment of the U.S. technically recoverable resources. The international focus on reducing greenhouse gas emissions has favored the lower carbon intensity of natural gas for power generation.” (Testimony, 10/4/11)
US Sen. Lisa Murkowski (R-AK), Energy & Natural Resources Committee Ranking Member
- “Natural gas is clean-burning and abundant; it’s well understood and scalable; and it’s clearly in our best interest to take steps to ensure that we maintain a stable and affordable supply into the future by encouraging its safe and responsible development. … We’ve witnessed game-changing technological innovations that have unlocked tremendous volumes of previously inaccessible natural gas. These resources are already benefitting our nation by further diversifying our energy supplies, growing our economy, and creating thousands upon thousands of well-paying American jobs. … Greater use of natural gas would move our nation in the right direction in terms of energy security, economic growth, and environmental protection.” (Testimony, 10/4/11)
- Wide variations in geology among shale gas formations mean that what works best in the Northeast might not make sense in Texas, Murkowski said. The U.S. shouldn’t “try to apply a one-size-fits-all” approach to shale gas extraction. (Houston Chronicle, 10/4/11)
- “Responsibly developing all our resources is of paramount importance to us,” Murkowski said. “These resources are already benefiting our nation by diversifying our energy jobs,” she added. “America should allow for this kind of ingenuity in the private sector.” (AOL Energy, 10/5/11)
US Sen. and Fmr. Gov. John Hoeven (R-ND), Energy & Natural Resources Committee
- “We need to [regulated hydraulic fracturing] it in a way that empowers the state and empowers the industry to move forward, versus falling back to the EPA stepping in and saying, ‘Everybody needs to do it this way.’” (Politico, 10/4/11)
Dr. Daniel Yergin, IHS Cambridge Energy Research Associates
- “Almost overnight, in energy terms, shale gas has become a major and critical national resource. … Today shale gas accounts for about 30 percent of total US natural gas production, and this is expected to rise dramatically in the foreseeable future. Natural gas itself is one of the backbones of our economy, providing about a quarter of the country’s total energy. … Shale gas—the unconventional natural gas revolution—has been called the biggest energy innovation of the past few decades.” (Testimony, 10/4/11)
- Industry officials have resisted calls for federal regulation of shale gas drilling and hydraulic fracturing, insisting that states are better poised to keep an eye on that work. The advisory committee members testifying today echoed that view. “There’s a gap in perceptions,” Yergin said. “There’s this view that oil and gas activities are not regulated. But we were all impressed by the quality and experience of the states in regulating oil and gas.” (Houston Chronicle, 10/4/11)
- Testifying before the Senate Committee on Energy and Natural Resources, subcommittee member Daniel Yergin, consultant and author, said, “We were all impressed with the states’ regulation of oil and gas.” Yergin added that the strength of state regulation of the industry was “not well recognized” by the general public. (Platts, 10/4/11)
- Yergin emphasized that fracking has been happening already for decades and in that time states have taken the lead in regulation. “I come out very impressed by the extent and seriousness of the states,” he said. The problem with regulating from the federal government: there is a danger, he said “of a superstructure on top of a superstructure.” (AOL Energy, 10/5/11)
Dr. Stephen Holditch, Petroleum Engineering Department Head, Texas A&M University
- I have been working on…hydraulic fracturing since 1970. … The United States has a real opportunity to develop it’s unconventional gas reservoirs to dramatically improve the energy security in the United States. The U.S. can use the abundance of Natural Gas to generate electricity and for motor fuel, which should reduce oil imports. … Horizontal drilling and hydraulic fracturing are currently being used in South Texas, West Texas, the Bakken Formation in Wyoming and North Dakota, and most recently in Ohio to increase oil production in the United States. Oil production in the Lower 48 states has increased during the past year for the first time in decades. (Testimony, 10/4/11)
- If you read recent news articles on hydraulic fracturing, the process is often described as pumping in a mixture of water and toxic chemicals under high pressure. This description is far from the truth. Most fracture treatment fluids consist of 99.5% percent pure water and sand. About 0.5% of the fluid is made up of gelling agents, surfactants, and biocides. Virtually all of these chemicals can be found in a typical home. Gelling agents are typically guar gum, which is used in many food products to viscosify the product. A surfactant is just soap, like Dawn dishwashing fluid. Biocides are use to kill bacteria, like the Clorox we use in our homes. … The concentration of these ‘chemicals’ is very minute and does not pose a danger to fresh water aquifers. … Current drilling and hydraulic fracturing activity does not adversely affect shallow drinking water aquifers. I have been working in hydraulic fracturing for 40+ years and there is absolutely no evidence hydraulic fractures can grow from miles below the surface to the fresh water aquifers. (Testimony, 10/4/11)
- Stephen A. Holditch…said the chemicals used in “fracking” generally make up less than 1 percent of the fracture fluids and that the process does not adversely affect shallow drinking water aquifers. Holditch said there was “absolutely no evidence hydraulic fractures can grow from miles below the surface to the fresh water aquifers.” (The Oklahoman, 10/5/11)
- “There is nothing broken with the [regulatory] system,” subcommittee member Stephen Holditch, the head of the petroleum engineering department at Texas A&M, said. (Platts, 10/4/11)
- As Dr. Stephen Holditch…said a the opening of his testimony: “shale gas is for real.” “The US has a real opportunity to develop its unconventional gas resources,” Holditch said. … Holditch said that one of the biggest concerns of the environmental community, that of chemicals in fracking water, was completely overblown. (AOL Energy, 10/5/11)
Dr. Mark Zoback, Department of Geophysics Professor, Stanford University
- I believe that utilization of domestic shale gas and…domestic shale oil, resources are extremely important to our nation. I personally believe that there is no question that they can be developed in a manner (utilizing horizontal drilling and multi-stage hydraulic fracturing) that protects the environment and minimizes impact on nearby communities. … It is unfortunate, however, that the concern about the safety of shale gas development has focused almost entirely on hydraulic fracturing. As Dr. Holditch testified, the chemicals used in hydraulic fracturing fluids are relatively benign, steps are being taken to make them even safer, and our committee recommends full disclosure of the composition of hydraulic fracturing fluids. … Drilling multiple wells from a single pad…not only greatly improves the efficiency of drilling and fracturing operations, it minimizes land-use, lowers the overall impact of drilling operations on local communities and makes regional planning easier to lessen the cumulative impact of shale gas development activities in a given area. (Testimony, 10/4/11)
- The process of fracturing shale rock to free trapped natural gas thousands of feet below the ground should not be the primary concern, the panel’s experts told the Senate Energy and Natural Resources Committee. “Hydraulic fracturing has sort of become a bumper sticker for everything we have to watch out for,” said Mark D. Zoback, a Stanford University professor of geophysics who has been studying hydraulic fracturing for 30 years. (The Oklahoman, 10/5/11)
- “Hydraulic fracturing has become a bumper sticker,” allowing some groups to object to gas extraction from shales. (Platts, 10/4/11)
Kathleen McGinty, Fmr. PA DEP sec. and White House CEQ chair to President Clinton
- Shale gas resources are abundant in the United States. Shale gas has already generated significant economic opportunity, substantially changed the equation with respect to energy security, and has begun to reshape electricity markets in a way that offers air quality benefits. This point with respect to the robustness of the resource, while perhaps evident, bears stating. Even until quite recently questions were presented as to whether shale wells might produce in a robust manner initially, but then decline rapidly, or alternatively, if they would have staying power. Experience to date in the field shows a very strong pattern of production. … Much attention has also been trained on the fear that fracturing can and has contaminated drinking water. … Yet, fracturing per se seems not to be the culprit. … We found that the initiative “FracFocus” (www.fracfocus.org) is very effective in the collection and presentation of fracturing fluid data–painstakingly reported on a well by well basis. FracFocus has come together in a remarkable way and in short order. (Testimony, 10/4/11)
- “There was nothing that led us to the glaring conclusion that there was [a regulatory] actor missing from the scene. … The states are doing a good job.” (Politico, 10/4/11)
- Kathleen McGinty, a private consultant who once served as secretary of environmental protection in Pennsylvania, said “frack fluids per se are very unlikely to contaminate drinking water.” (The Oklahoman, 10/5/11)
- Witnesses also warned that federal regulation could unduly burden the already heavily state-regulated fracking industry and could potentially slow the economic growth of the industry. “The issues in each state are different,” said witness Kathleen McGinty. “Geologic differences make a world of difference in terms of ensuring water and air safety issues.” (AOL Energy, 10/5/11)
NOTE: A webcast of yesterday’s hearing is available here.
Bountiful Barnett Continues To Churn Out Jobs, Revenues
In 1981, Mitchell Energy – led by legendary oilman and wildcatter George Mitchell, who’s widely considered the father or shale gas development – started drilling the Barnett Shale in an effort to unlock its enormous natural gas reserves. Today, thanks to the tireless efforts of Mitchell and others, the Barnett remains a powerful job creation machine and economic catalyst for Texas.
And it’s no surprise that a Fort Worth Chamber of Commerce-commissioned study released yesterday finds that the Barnett Shale has produced 9 trillion cubic feet of natural gas while enabling the creation of thousands of jobs and billions of dollars in investment over the past decade. The study — entitled “The Impact of the Barnett Shale on Business Activity in the Surrounding Region and Texas: An Assessment of the First Decade of Extensive Development” — takes an in depth look at the Barnett’s positive effect on the Lone Star State. Here are key findings from the study:
JOBS
- Regionally, Barnett Shale-related activity has created 100,268 jobs. For Texas as a whole, more than 119,200 jobs have been created. Over the 2001-2011 period, local taxing entities received an estimated $5.3 billion in tax receipts. The state received $5.8 billion.
SALARIES
- Personal income in the region is almost 8.5% higher than it would be in the absence of Barnett Shale-related activity. Wage and salary employment in the region is about 8.7% higher than it would be without the Barnett Shale.
TAX REVENUES
- Over the entire 2001-2011 period, The Perryman Group estimates that local taxing entities received an additional $5.3 billion in tax receipts, with another $5.8 billion to the State.
SCHOOLS GET MAJOR BOOSTS
- Independent school districts in the Barnett Shale region received approximately $2.7 million in royalty payments, $2.5 million in bonuses, and $45.8 million in tax revenue from natural gas and mineral rights last year. Indirect revenues from collateral development are even higher…At a time when most government entities and schools are facing difficult budgetary conditions, the Barnett Shale provides an important source of additional revenues.
Some maintain that shale gas development is only a “boom” and cannot be sustained. As thePhiladelphia Inquirer reports, “Daniel Yergin, one of the most influential voices in the world of energy, says shale gas is here to stay.” And this new study reinforces that fact:
- Only a small portion of total estimated production has occurred to date, and the Barnett Shale is expected to continue to generate economic stimulus for local area and state economies for decades to come.
With more than 70 rigs already drilling in the Barnett Shale, the new study reconfirms the positive impact of America’s natural gas industry on local, state, and regional economies. The Dallas Business Journalspoke with Fort Worth Chamber President and CEO Bill Thorton about the positive report:
“We commissioned the study to see how or if the economic downturn had impacted past projections about the industry,” said Bill Thorton . “What we found was that it’s a bulwark of our economy.”
Bud Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University, spoke to the Fort Worth Star-Telegram to further highlight Perryman Group’s findings:
“What’s important is that we have an industry in North Texas that basically didn’t exist a decade ago,” he said. “While gas prices have fallen over the last couple of years and the rig count is way down, and the Barnett may no longer be the biggest shale-producing play in the U.S., the technology of horizontal drilling and hydraulic fracturing has clearly added a new dimension to our economy, added thousands of jobs, and helped cities, counties, school districts.”
If it wasn’t clear already, this report confirms it. Responsible shale gas development in the United States has provided millions of jobs, generated billions of dollars in revenue, and is a vital part of our domestic energy and economic security. Texas found the lucky pot of gold at the rainbow – all thanks to hydraulic fracturing.
