This is What Recovery Looks Like
***Originally published in Niobrara Report***
President Obama’s Treasury Secretary Timothy Geithner recently offered an interesting assessment of the state of the U.S. economy – one worth remembering as we debate the future of energy policy.
“The economy now is actually looking quite resilient,” Geithner told NBC News, before adding that two of the biggest reasons are domestic oil and gas production and domestic manufacturing. “If you look at what’s happening in energy, enormous boom,” Geithner said. “In manufacturing, [the country is having] one of the strongest periods in manufacturing revival that we’ve seen in almost a generation.”
It’s not a mere coincidence that energy and manufacturing are surging together. Earlier this year, the Geneva-based World Economic Forum released a report which found “the availability of a secure supply of low-cost natural gas in the United States is restoring a global competitive advantage for many domestic gas-intensive industries.” In fact, companies that make steel, aluminum, glass, cement and other products “are beginning to invest in the expansion of their U.S. operations based on the availability of low cost gas” from deep shale formations, according to the WEF.
These findings echoed an earlier analysis by international consulting firm Price/Waterhouse/Coopers. “An underappreciated part of the shale gas story is the substantial cost benefit to manufacturers,” PWC said in a December 2011 report. Factories consume about one-third of all the energy produced in the United States, so “this relatively abundant domestic energy source has the potential to drive an uptick in U.S. manufacturing over the long term and create new jobs in the sector.”
This isn’t just a theory. It’s real, and the men and women of the oil and gas industry are making it happen. For example, Encana Oil & Gas recently closed a $3.6 billion deal to provide steelmaker Nucor with natural gas from Colorado’s Western Slope for more than 20 years. Nucor needs an affordable and reliable supply of gas to support a new $3.4 billion facility in Convent, La. The new plant is expected to create as many as 1,250 jobs, with average salaries of $75,000 a year, according to estimates from Louisiana state officials. But the impact of this long-term gas deal will be felt across all of Nucor’s operations, which span more than 20 states. The company says with this deal, it should have access to “enough natural gas to equal Nucor’s usage at all of our steel mills in the U.S.” That means the jobs of roughly 12,000 Nucor employees across the country are more secure today because of natural gas produced in Colorado.
The Encana-Nucor agreement is just part of a much bigger trend. According to PWC’s shale-gas report, U.S. manufacturers stand to save $11.6 billion a year in energy costs, and demand for their products will rise thanks to the growing demand for the materials and equipment needed to produce and deliver domestic oil and gas. This will likely create one million more U.S. manufacturing jobs by 2025, PWC says. Some of America’s largest and most iconic manufacturing companies are welcoming the good news after many challenging years. “It has become clear to me that the responsible development of our nation’s extensive recoverable oil and natural gas resources has the potential to be the once-in-a-lifetime economic engine that coal was nearly 200 years ago,” said John Surma, the chairman of Pittsburgh-based U.S. Steel, said earlier this year.
In fact, domestic natural gas production has dramatically cut the nation’s dependence on coal. Ten years ago, coal-fired power plants generated 50 percent of the nation’s electricity. Today, coal’s share has fallen to 37 percent, as electricity generated from gas-fired power plants has increased, according to data from the U.S. Energy Information Administration. Gas-fired plants emit about half as much carbon as coal-fired facilities, and the EIA says that’s helped push the nation’s greenhouse gas emissions to 20-year lows. For Americans who are concerned about the impact of carbon emissions on the climate, this is exceedingly good news, and it simply could not have happened without the combination of hydraulic fracturing and advanced drilling technologies to get natural gas out of shale and other tight rock formations.
The construction of more power plants that run on natural gas also supports the expansion of renewable energy sources, such as wind farms and solar arrays. The Obama administration says the country “has nearly doubled renewable energy generation from wind, solar, and geothermal resources” in the past four years, a period which also saw large increases in gas-fired electricity. According to the Paris-based International Energy Agency, “natural gas has an important role to play in complementing low-carbon energy solutions by providing the flexibility needed to support a growing renewables component in power generation.”
By “flexibility,” the IEA means that wind and solar need other power sources to back them up quickly when weather conditions change. And according to a 2010 report from Colorado energy officials, natural gas is the “quick-starting fuel” for the job. “Reducing the time needed to bring power online allows utilities to acquire power from intermittent sources such as wind and solar,” the report says. “This increased generation flexibility ultimately will allow use of more renewable sources, which will further improve air quality, improve human health and reduce environmental impacts.”
The report was prepared in connection with the Clean Air-Clean Jobs Act, which passed the Colorado legislature in 2010 with broad bipartisan support and the backing of industry and environmental groups.
The law called for the closure of old coal-fired power plants, which would have needed hundreds of millions of dollars in new pollution controls to meet air quality standards, and their replacement with cleaner and highly efficient natural gas turbines. The law also authorized a competitive bidding process which led to Xcel Energy signing a long-term natural gas supply contract with Anadarko Petroleum Corp. By allowing for “higher penetrations of renewable energy sources such as wind and solar,” the Clean Air-Clean Jobs Act is “a critical component of Colorado’s much-heralded New Energy Economy,” which includes a renewable electricity standard of 30 percent by 2020, the report says.
It’s clear that domestic energy production is supporting the U.S. economic recovery, creating jobs, and benefiting the environment. But all this progress is threatened by reckless calls from fringe environmental groups to ban hydraulic fracturing, because they claim it’s unsafe. This claim isn’t based on facts, just an ideology that wants to eliminate domestic oil and gas development, no matter where it takes place or how it’s done.
As the energy debate continues, let’s keep in mind another assessment from a member of President Obama’s cabinet, Interior Secretary Ken Salazar, a former Colorado senator and attorney general. “There’s a lot of hysteria that takes place now with respect to hydraulic fracking, and you see that happening in many of the states,” Salazar testifiedto Congress earlier this year. “My point of view, based on my own study of hydraulic fracking, is that it can be done safely and has been done safely hundreds of thousands of times.”