Appalachian Basin

Rising Tide: Study Shows Natural Gas Pushes U.S. Trade and Manufacturing Growth

A recent study by the American Chemistry Council confirms a fact of which many Americans are increasingly well aware. The development of the nation’s enormous natural gas supplies would lead to an economic resurgence that could revive entire regional economies- the likes of which the nation has not seen in decades.  The study, “Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and U.S. Manufacturing”, finds that responsibly developing this resource would create a “tremendous opportunity to strengthen U.S. manufacturing, boost economic output and create jobs.”

Specifically taking a look at expected investments in the petrochemical industry (and related industries) as a result of onshore exploration, the study found the development of natural gas could in itself create 400,000 jobs, generate $132.4 billion in new U.S. economic output and send nearly $43.9 billion to state, federal and local governments in the form of new tax revenue.  Given the limited scope of the study, it’s fair to assume that the longer-term benefits to the economy from continued development of our nation’s massive shale resource base would be significantly larger.

The study reached its findings by examining how a 25 percent increase in available domestic ethane supplies would impact the U.S. economy — using current trends and expected investments developed in collaboration with many key industry partners. The study found:

  • 17,000 new high-paying,  knowledge intensive jobs, would be created directly in the U.S. chemical industry
  • 395,000 total jobs would be created including approximately 85,000 jobs in the U.S. manufacturing sector, a critical and beleaguered part of the U.S. economy
  • These include nearly 230,000 jobs providing $14.2 billion in payroll from needed capital investments by the chemical sector.  Most of these opportunities would be in the construction industry whose unemployment rate hasn’t sunk below 10% since the beginning of the recession
  • A $43.9 billion increase in additional federal, state and local government revenues over a 10 year period
  • Increased U.S. economic  output by $132.4 billion

The study also highlighted current investments generated due to the development of natural gas, and natural gas liquids, from shale.  It showed that major U.S. petrochemical manufacturers are already realizing economic benefits from production of this valuable resource and are re-investing these benefits in areas of the country that have been hit hardest by the ongoing recession.

The discovery, and development, of shale formations throughout the United States has led to a more abundant supply of natural gas that, among other things, has significantly lowered the price of natural gas, ethane, and other commodities needed by the petrochemical sector.  The industry uses these supplies as raw material or “feedstock” to make thousands of every-day products used by Americans including items ranging from pharmaceuticals to fertilizers.  The study found,

 “[A]ccess to vast, new supplies of natural gas from previously untapped shale deposits is one of the most exciting domestic energy developments of the past 50 years” that will “create a competitive advantage for U.S. based petrochemical manufacturers leading to greater U.S. investments”.

Examples of this success can already be seen as U.S. exports of basic chemicals and plastics were up 28% in 2010 due primarily to an increase in affordable ethane supplies from shale deposits.  This fueled a trade surplus of $16.4 billion in chemicals and plastics exports from the United States. This is already leading several companies to make significant investments in places like the Marcellus Shale where this resource is being developed safely in abundant quantities.  For example, a recent San Jose Mercury News article , highlights Shell’s plans to build a world-class ethane processing facility in one of the “rust belt” states of Pennsylvania, West Virginia or Ohio. The plant would help process natural gas liquids into commodities to be exported and sold on the global market. This project alone is expected to create more than 17,000 jobs, up to $16 billion in private investment and billions in tax revenue.  There is also this recent news report from NBC’s central West Virginia affiliate WMOY which provides a succinct summary corroborating this study’s finding that “Areas in western Pennsylvania, New York and/or West Virginia could become the next petrochemical hub of the United States.”

The study and both these examples provide credence to the study’s findings that “big industry may be coming back to the northeast United States”.  Of course, continued responsible development of our nation’s natural gas resources could provide similar opportunities to other areas of the nation as well. This limited, and conservative, study proves that by focusing on just one sector of the U.S. economy.

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