Hydraulic Fracturing and Regulation

Kyle Isakower
Posted March 1, 2012

Shale oil and natural gas development in the United States has been a clear economic success story during a time when successes have been few.  Our industry has been producing energy, jobs and revenue at a strong clip.  And yet we’ve only begun to realize the benefits of energy from shale.  

The industry is committed to producing this energy safely and responsibly, and in addition to strong industry standards, there are appropriate federal and state regulations in place for oil and natural gas operations, including those that employ hydraulic fracturing.  And many state rules have recently been strengthened. 

So it is a concern that there are now 10 separate federal government agencies looking to study and potentially add new and unnecessary layers of regulations on hydraulic fracturing, the technology on which 70 percent of future gas wells depend. 

Unnecessary layers of federal regulation could increase costs and delays for operators, which could harm new projects, sacrificing thousands of new jobs and depriving government of billions in revenue.

We are strongly encouraging policymakers and elected officials to keep shale energy development moving forward.  So during this election year, we will encourage voters to learn more about energy and about the candidates’ positions on energy policies, and to make energy a ballot box decision in 2012.

The benefits of shale energy development are indisputable.

• Just yesterday, a new study in Ohio said development of the Utica Shale could mean 65,000 new jobs in the next two years.
• In Pennsylvania, development of the Marcellus Shale created 72,000 new jobs from late 2009 to early 2011.   
• In North Dakota, shale development helped drive down unemployment in the state to the lowest level in the nation, helped produce a state budget surplus of $1 billion, and elevated North Dakota to the nation’s fourth largest oil producer.  
• In Arkansas, shale development has boosted state revenue by more than $1.5 billion over the last few years. 
• Houston is the first metropolitan area in the United States to regain all of the jobs lost during the recession, an analysis by the Texas Workforce Commission has concluded.  Many of the new jobs likely relate to the oil and natural gas industry and to shale development.
• A study by former Census officials of U.S. household income in nine geographic regions between 2007 and 2010 found it increasing only in the four-state oil patch region: Louisiana, Texas, Oklahoma and Arkansas – all centers of shale energy development.
• Nationwide, shale gas development was supporting 600,000 jobs in 2010, according to a December IHS-Global Insight report.
• Also, natural gas prices have fallen by half from their level three years ago.  That is benefiting families that heat their homes with natural gas, as well as businesses and consumers that buy their electricity from utilities that generate it with natural gas.  
• Low natural gas prices are also benefiting chemical manufacturers and other businesses that use natural gas a raw material, and they are encouraging businesses to locate new facilities in America rather than overseas.  Dow Chemical, for example, plans to reopen an ethylene production plant near Hahnville, Louisiana, this year and build another one on the Gulf coast by 2017.  It also plans to build a new propylene plant in Texas by 2015.

And there is every reason to believe we could see more of all of these benefits in the future.  The IHS-Global Insight study estimates that the shale gas industry alone could support 1.6 million jobs by 2035, driven by capital investment approaching $2 trillion.

Finally, an analysis from PricewaterhouseCoopers concludes that shale gas development – and more affordable natural gas supplies – could support about one million U.S. manufacturing jobs in 2025.

To realize the full extent of this promise, therefore, we must be thoughtful about any changes to an already robust regulatory structure for hydraulic fracturing.  We don’t need unnecessary or duplicative rules from multiple federal agencies. 

The administration has been advocating more oil and natural gas development.  It has also called for streamlining regulations.  We believe they could do much to achieve both objectives by taking a critical look at what its various agencies are proposing to do on hydraulic fracturing and shale energy development. 

The direction they’re headed in won’t be conducive to the development of energy we know our nation will need and the production of which could provide tremendous additional benefits to our economy. The administration needs to reconsider the wisdom of adding unnecessary layers of federal regulation on this truly game-changing opportunity.  A significant change of course is needed.