CRS Report: Shale Benefits the Economy and the Environment
A new report from the Congressional Research Service (CRS) examines the numerous avenues for economic growth resulting from American natural gas development, especially from shale. Thanks to a combination of factors – large resource base, affordability, environmental benefits, and manufacturing demand – natural gas is at the center of an economy built for the future. Strong yet fair regulation must also continue to play a role, but the CRS report makes clear that the economic benefits of shale are indeed very real.
For some quick background: the Congressional Research Service is a widely respected organization that provides policy analysis to the U.S. Congress. As a non-partisan entity that is housed within the Library of Congress, CRS is treated as an authoritative source by Democrats, Republicans, and independents, a reputation that the organization has enjoyed for nearly 100 years. You can learn more about CRS by clicking here.
Getting back to the CRS study, those who read the EID blog regularly won’t be surprised by its findings. We’ve cataloged the numerous studies and reports highlighting how responsible natural gas development from shale has helped revive America’s manufacturing base, created millions of jobs, and boosted local economies across the country.
So, what does the CRS have to say?
Benefit 1 – The United States has abundant supplies of natural gas, likely more than we think:
The term reserves has a specific industry definition that includes a technological component, an economic factor, and a probability of success among other criteria. To more fully understand the changes to the U.S. natural gas sector it is more appropriate to look at reserves and estimates for undiscovered, technically recoverable resources (UTRR) (see Figure 2). UTRR is an estimate of what can be extracted using current technology regardless of price. Using UTRR plus reserves, the United States has a natural gas resource base of 1,809 tcf or enough gas for approximately 79 years of production at 2011 levels. Compared with data from 2006, U.S. UTRR for natural gas has jumped almost 25%. Even this measure may not accurately reflect what will be extracted from the ground as technology is constantly changing. Just over the last few years, industry has been able to improve its shale gas extraction rate from about 5% to about 15%, thereby tripling what is recoverable. (p. 2-3, emphasis added)
In other words, when you hear people talk about how much energy we have in proven reserves – especially the misleading statistic that we only have “two percent of the world’s oil” – now you know that they’re actually understating U.S. energy capacity.
Benefit 2 – Consumers enjoying lower energy prices:
U.S. shale gas was beginning to come to market in 2007/2008 and by 2010/2011 it changed the trajectory of U.S. natural gas prices from those of the rest of the world. In 2011, the rest of world faced higher prices than in 2010 for natural gas, but the United States saw its natural gas price decline by 9%. U.S. natural gas prices have continued to trend lower ever since, and many analysts forecast U.S. natural gas prices to remain relatively low at least through the end of this decade and possibly for longer. (p. 6, emphasis added)
What does this mean, more specifically? CRS explains:
Expanded supply, coupled with low natural gas prices, has the potential to contribute to a transformation of important sectors of the U.S. economy. Increased output and employment, expanded investment, income growth, improved competitiveness, and a reduction in the foreign trade deficit are likely outcomes. These conditions in the natural gas markets are likely to benefit certain key industries directly, while many other industries could experience indirect benefits. (p. 13, emphasis added)
Benefit 3 – A cleaner environment:
An apparent consequence of the shift to more natural gas-fired electric power generation in the first quarter of 2012 has been a decrease of U.S. carbon dioxide emissions by almost 8% to their lowest levels since 1992. (p. 12, emphasis added)
Hear that, Sierra Club and Food & Water Watch? The United States is reducing CO2 emissions thanks to expanded and responsible development of our abundant natural gas supplies.
Benefit 4 – Increased U.S. competitiveness, including expanded domestic manufacturing:
In the international economy, those U.S. industries directly affected by expanded supply and low natural gas prices are likely to experience a competitive advantage over the producers of similar goods in other countries, resulting in increased exports from, and decreased imports to the United States. These effects would likely improve the U.S. trade deficit position. (p. 14, emphasis added)
In 2012, a number of chemical companies announced plans to invest in new plant capacity, expand existing facilities, or re-open plants near shale gas supplies. In April 2012, Dow Chemical announced $4 billion in expansions and new investment in Texas. Shell Chemical announced plans for an ethane cracking unit costing between $2 billion and $4 billion, to be constructed in Pennsylvania near Marcellus Shale natural gas supplies. Chevron announced plans for a $1 billion investment at its Baytown facility in Texas. In addition, Phillips Chemical, Westlake Chemical, and others announced investment plans related to low-cost shale gas availability. (p. 16, emphasis added)
For some additional context on the benefits to American manufacturers, here’s what the American Chemistry Council says about abundant natural gas supplies from shale:
Chemical manufacturers have already announced 50 new chemical projects to take advantage of new supplies of natural gas and expand their production. A recent ACC study found that the expected increase in natural gas production is not just revitalizing the chemical industry but could create 1.2 million new jobs across a broad sector of America’s manufacturing base.
Benefit 5 – Lower costs for America’s farmers:
Natural gas is the primary raw material in nitrogen-based fertilizer production. From 70% to 90% of the estimated cost of producing nitrogen-based fertilizers is related to the cost of natural gas. In the 2000s, when natural gas prices for industrial consumers more than doubled, closure of ammonia plants, which supply the raw material for fertilizers, followed suit, rising from 13 in 2002 to 26 in 2007. While some of this capacity moved overseas, some was permanently closed. It would take time and investment to reinstate U.S. capacity. If U.S. fertilizer production could recover and pass on lower costs to farmers, this could lower the cost of food and ethanol for use in transportation, and have employment benefits in the fertilizer industry as well as those industries whose costs had decreased. (p. 17, emphasis added)
CRS adds that “there are many other industries that stand to benefit that have not been addressed in this report.” Indeed, as we see in communities across the country, local businesses on Main Street have been given a boost through increased economic activity, from restaurants to hardware stores and everything in between.
A growing economy, more jobs, and a cleaner environment – all made possible by the responsible development of American energy. Opponents of oil and natural gas have done a masterful job pretending these benefits don’t exist, but at the end of the day, the facts speak for themselves.