America’s economic recovery is being fueled by energy. Increased natural gas production is at the center of our energy revolution, creating new opportunities at home and abroad.
Not long ago, conventional wisdom was that America’s natural gas production would decline over time. Terminals were planned and built in anticipation of the need to import natural gas from overseas. Now, these facilities are either being converted to export terminals or are idle.
Obviously, things have changed — and for the better. The combination of hydraulic fracturing and horizontal drilling made accessing unconventional oil and gas much easier, safer, and cost effective. More and more formations were discovered, and now, natural gas extracted from shale makes up over one-third of total U.S. natural gas production. Over time, this trend will continue to increase to about half of our natural gas production by 2030.
The results of this shale boom on our economy are staggering, and there is the potential for much, much more. According to a study by the respected global information firm IHS, shale energy production is already supporting 2.1 million jobs and has increased the real disposable income of every American household by $1,200. By 2035, 3.5 million Americans will owe their jobs to shale energy production.
In this time of economic deficits, it is also worth noting how much government revenue shale development will generate. Between now and 2035, IHS found that shale energy development will contribute more than $2.5 trillion in tax revenue, more than half of which will go to states and localities.
It is interesting to note that the benefits from shale aren’t just felt in states that directly produce oil and natural gas. Non-producing states benefit because many of their businesses are part of the supply chain that provides goods and services that support unconventional energy development. Currently, these supply chain activities support about 475,000 workers in 32 non-producing states. Florida, Illinois, Michigan, Missouri and New York each have more than 35,000 workers.
As we’ve seen over the past year, natural gas production in the United States also has major geopolitical implications. The last edition of the Energy Institute’s annual International Index of Energy Security Risk, which ranks major economies on how secure their energy supplies are, ranked Ukraine dead last just before the conflict with Russia. The index found that the Ukraine’s energy instability stemmed from being far too reliant on others, mostly Russia, for its energy supply.
It was not surprising, then, that Russia began exploiting Ukraine’s energy scarcity almost immediately, exacerbating the international conflict. Furthermore, Russia’s status as a major natural gas supplier to other nations, especially those in Europe, has caused newfound and deep concern over energy as a 21st century weapon.
The willful exploitation of energy by Russia underscores the opportunities America has to use its abundant natural gas not just to energize the economy, but to help stabilize the globe. Recently, the U.S. government has begun licensing liquefied natural gas (LNG) export terminals, which will allow America to sell natural gas to global markets and become an alternative supplier to other nations. While some have expressed concern about exporting natural gas because it could increase prices, studies have shown that impact to be minimal; moreover, exports would be a benefit to the U.S. economy, lowering the trade deficit.
All these benefits from increased natural gas production cannot be taken for granted. For starters, virtually all of the new activity has occurred on private and state lands — not federal, which are still overly restricted. Even worse, the Environmental Protection Agency is studying whether it should develop its own federal regulations on hydraulic fracturing, a process regulated by the states for well over six decades. Given the amount of new activity, states with significant natural gas production have already updated their extensive regulations. The geography of each state is unique, and one-size-fits-all federal regulations make little sense and could have a negative impact on production.
The rise of natural gas also creates new challenges, especially in the area of infrastructure. Natural gas electricity production surged from 20 percent in 2005 to 28 percent in 2013, and it is expected to grow further into the future. This has created a need for more pipeline infrastructure. Some regions of the country, such as New England, are already strained. Unfortunately, building any kind of energy infrastructure in the United States is very challenging, with the potential for red tape and lawsuits at every level. To meet energy demands over the coming decades, the nation must seriously address this approach to permitting.
It is also important that the United States maintain a diverse energy supply, which includes other sources of electricity such as coal. One reason for America’s competitive edge is its lack of reliance on any single source of energy. Coal remains an affordable, reliable part of this mix, though it is clearly threatened by EPA regulations on emissions. As the largest source of clean energy, nuclear power is also an essential piece of our energy picture.
In fact, a different analysis by IHS found that if these two sources of energy were not part of our mix, more than 1 million jobs would be lost, and every household would see a reduction of over $2,000 in annual income. Furthermore, retail power prices would be 25 percent higher and far more volatile for consumers.
The growth of natural gas is an exciting development for America from every angle. Moving forward, sound policies that support the growth of this industry will create millions of new jobs, trillions of dollars in new revenue and a multitude of new industries, ensuring that our future is bright.
Karen Alderman Harbert is president of the Institute for 21st Century Energy.
