Environmental Group Highlights “Extraordinarily Large” Benefits from Shale

This week, Resources for the Future (RFF), an environmentally-focused think tank, released a new report that takes a look at the economics of shale gas development. Although it shouldn’t come as a surprise, the study is packed with fantastic news that stretches from direct market impacts to positive externalities. Here’s what the authors conclude:

“[T]he likely scope of economic benefits (from shale gas development) is extraordinarily large…” (emphasis added)

Of course, households that have been paying less in heating costs or lower electricity bills, American industries facing lower production costs (and thus increasing their competitiveness), and burgeoning hydrocarbon derivative businesses, such as the petrochemical industry, that are getting cheaper supplies—all because of the shale gas revolution—already knew that. To give a sense of the magnitude of just the reduced-price effect, the authors have this to say:

“Accordingly, a back-of-the-envelope estimate of the increase in consumer surplus over this period, based on the extra natural gas output resulting from fracking, is on the order of $5.5 billion.” (emphasis added)

But this is just the benefit from the consumer side of the equation of the isolated gas market. To estimate the broader societal gains, the authors point out, other significant factors include: that the value of reserves has skyrocketed; that increased natural gas use has “attendant air quality benefits”; that abundant hydrocarbons reserves may reduce national security concerns from fossil fuel imports; and that significant increases in employment and regional economic activities for producing regions “have provided relief from the Great Recession”.  Here the authors acknowledge that

“all these elements (above) represent societal gains, and while we cannot estimate the sum of these gains, it has undoubtedly been very large. (emphasis added).

However, the study also drills into purported “negative externalities,” even including a section on “local boomtown disamenities”. But, other than episodic evidence, the authors struggle to show systematic negative patterns from shale gas development.

For instance, in terms of water sourcing, the authors conclude that (in stark contrast with what activist-driven media stories suggest) “the empirical evidence for negative externalities (due to shale gas development) directly related to freshwater extraction is thin”. To be even more conclusive, they cite a peer-reviewed study to point out that, “even in Texas, where water is scarcer, hydraulic fracturing amounts to less than 1 percent of statewide water withdrawals”.

When discussing potential water pollution, the authors state that poorly treated wastewater may contaminate rivers and streams. But, they also acknowledge that wastewater is most often recycled or disposed of in deep injection wells “dramatically reducing these risks.” The authors also note that some states have “banned shipments of wastewater to municipal sewage treatment plants”, further diminishing this risk. Moreover, as producers across the U.S. continue to increase recycling, they are also reducing the volume of water withdrawals.

Likewise, when the authors took a look at potential groundwater pollution, their conclusions are fairly positive for shale gas development. While they bring up the risk of well integrity issues, they also acknowledge “the potential for the movement of fracking fluids from deep shale formations to overlying aquifers through natural or induced fractures is actually quite low”. Put differently, the risk that shale development as a practice poses to groundwater is not only manageable but—in contrast to what anti-fracking activists suggest—actually quite small.

Finally, in terms of air quality impacts, the authors point to another peer-reviewed study from Pennsylvania, where the booming Marcellus field is located.  As the authors explain,

“[I]n the case of Pennsylvania in 2011, estimates of the quantity of these emissions suggest they are only a small fraction of total statewide emissions in Pennsylvania (Litovitz et al. 2014).”

Again, a powerful reminder that science is repeatedly contradicting activists’ claims.

In balance, the study shows that the benefits from shale gas development greatly outweigh the costs. As the authors from RFF put it:

“The magnitude of benefits suggests a very high ‘burden of proof’ for those who would support forgoing, or very significantly constraining, shale gas production on economic grounds.”

EID’s translation? When you weigh all the facts, opposition to shale just doesn’t make sense.

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