Industry predicts natural gas boom will fuel growth
WASHINGTON — A nationwide boom in natural gas production is set to fuel nearly 900,000 jobs and add roughly $1,000 to annual household budgets by 2015, according to a new industry study released Tuesday.
The boom in shale gas production nationwide — exemplified by the modern-day drilling boomtowns that have sprung up in Pennsylvania, North Texas and western states — is a bright spot in the otherwise sour U.S. economy, said the study’s lead author, John Larson, vice president of IHS Global Insight, an energy research firm based in suburban Denver.
“Shale is really proving to be a very big job creator. It really stands in sharp contrast to many sectors of the economy,” Larson said. “During a significant economic downturn — the most significant since World War II — that’s pretty remarkable.”
Larson called the rapid growth in shale gas production “one of the most significant energy developments in recent decades.”
Although previous reports have focused on the economic boosts in specific regions where natural gas production has surged, the IHS analysis commissioned by America’s Natural Gas Alliance is the broadest yet to document the nationwide economic effects of the shale gale sweeping the United States. The alliance is an industry group that promotes increased use of gas.
Roughly one-third of the natural gas produced in the U.S. is now extracted from dense shale rock, such as the Marcellus formation in the Northeast and the Barnett in North Texas. But government and independent energy analysts widely anticipate that volume will grow as shale production costs drop below those for conventional gas wells.
IHS predicts that shale gas will make up 60 percent of domestic production by 2035, with much of it extracted using horizontal drilling and hydraulic fracturing techniques that involve blasting water, sand and chemicals deep underground to break up rock and release the fossil fuels trapped inside it.
Unlike some other sectors, including the financial and construction industries, the sheer capital intensity of shale gas production — and its relatively large domestic supply chain — means that dollars spent on extracting the fossil fuel are magnified within the U.S., Larson said.
“This is an industry that has a very broad supply base,” Larson said. “It’s also an overwhelmingly domestic supply chain. This is something where the U.S. is a leader, so that means that dollars spent here stay here and overwhelmingly support domestic jobs.”
According to the IHS report, capital expenditures tied to shale gas production amounted to $33 billion in 2010 and will total $1.9 trillion over the next 25 years.
The firm also concluded that shale gas production supported 600,000 jobs in 2010, including oilfield workers directly employed by the industry, as well as indirect pipefitting, steel manufacturing and other jobs tied to the supply chain.
IHS’s tally included jobs tied both directly and indirectly to the boom.
Some lawmakers have been critical of the “multipliers” used to predict the number of add-on jobs that are tied to workers directly employed by the oil and gas industry. But Larson defended IHS’ accounting techniques as conservative.
The assumptions underpinning the study, for instance, discount any potential new shale discoveries that haven’t yet been made. IHS also assumed that there would be no new production after 2010 in New York state, where policymakers are considering a broad natural gas drilling ban because of environmental concerns.
Larson also noted that the analysis also doesn’t include the potential economic benefits of chemical companies shifting production back to the United States to take advantage of inexpensive and abundant natural gas used as a building block for products as varied as fertilizer and fabric.
Dow Chemical is one of several U.S. firms that have announced or signaled they will expand domestic production capacity because of the natural gas surge.
Natural gas backers such as ANGA have widely touted a 100-year supply of the fossil fuel just within U.S. borders and urged power plants and chemical facilities to bet big on the fossil fuel’s new abundance, after decades of boom-and-bust production cycles.
But environmental concerns about the techniques used to extract natural gas are one possible check on its growth. Conservationists warn about the high water demands of hydraulic fracturing and have raised concerns about the disposal and treatment of wastewater used at drilling sites.
There also are risks that methane could escape from wells and contaminate groundwater supplies.
Fears about those problems are feeding the possible drilling ban in New York state and also have spread to regions that have long histories with the oil and gas industry.