Recent University of Chicago report found fracking generating “enormous benefits” to local economies near shale development
By Seth Whitehead, EnergyInDepth
President Obama penned an article in Science this week titled “The irreversible momentum of clean energy” that — based on the headline alone — would suggest he believes renewable energy is solely responsible for what he lauds as “the first sustained period of rapid GHG emissions reductions and simultaneous economic growth on record.”
But a close examination of President Obama’s article reveals that he actually gives much of the credit for U.S. GHG reductions to increased use of natural gas made possible by the shale revolution. From the article:
“The American electric-power sector—the largest source of GHG emissions in our economy—is being transformed, in large part, because of market dynamics. In 2008, natural gas made up ~21% of U.S. electricity generation. Today, it makes up ~33%, an increase due almost entirely to the shift from higher-emitting coal to lower-emitting natural gas, brought about primarily by the increased availability of low-cost gas due to new production techniques.”
Data illustrating what the latter shift has meant for U.S. greenhouse gas emissions really couldn’t be much clearer. According to U.S Environmental Protection Agency (EPA), the U.S. has decreased overall CO2 emissions by 700 million metric tons, or 11.5 percent, since 2005.
And the U.S. Energy Information Administration (EIA) has noted 68 percent energy-related CO2 reductions since 2005 are attributable to increased natural gas use for electrical generation, as the following EIA graphic illustrates.
So it’s no wonder why President Obama has previously stated natural gas “not only can provide safe, cheap power, it can also help reduce our carbon emissions” and that “the fact that we’re transitioning from coal to natural gas means less greenhouse gases.”
Interestingly, in emphasizing in his article that the U.S. should not step away from the Paris Climate agreement, President Obama acknowledged there are “multiple” paths toward achieving our Paris goals, directly contradicting the “Keep It In the Ground” (KIITG) movement’s rigid assertion that a 100 percent renewable energy conversion is the only option,
“Were the United States to step away from Paris, it would lose its seat at the table to hold other countries to their commitments, demand transparency, and encourage ambition. This does not mean the next Administration needs to follow identical domestic policies to my Administration’s. There are multiple paths and mechanisms by which this country can achieve—efficiently and economically—the targets we embraced in the Paris Agreement.”
And clearly, one such path increased natural gas use, considering we are already on pace to meet our Paris commitment of cutting carbon emission levels between 26 percent and 28 percent below 2005 levels by 2025. In fact, according to the American Petroleum Institutes (API) 2017 State of American Energy report, the United States is already one-third of the way to that goal thanks in large part to increased natural gas use.
Notably, President Obama’s article even provides proper context on methane leaks from oil and gas production, which fracking opponents have long falsely claimed “erase” the climate benefits of natural gas, stating,
“Although methane emissions from natural gas production are a serious concern, firms have an economic incentive over the long term to put in place waste-reducing measures consistent with standards my Administration has put in place, and states will continue making important progress toward addressing this issue, irrespective of near-term federal policy.”
President Obama’s comments seem to concede that the industry has, and will continue, to effectively reduce methane emissions regardless of whether or not his much maligned methane regulations (which appear to have a bleak path forward) ever see the light of day. And the data back up this conclusion.
Several studies from the Environmental Defense Fund — the group that has pushed hardest for the Obama Administration’s methane rules — show the current methane leakage rate (between 1.2 to 1.6 percent) is well below the 2.7 percent threshold for which EDF has determined natural gas loses its climate benefits.
EPA data also show methane emissions from natural gas production have fallen as production has skyrocketed over the past 10 years.
And as stated earlier, President Obama’s article also lauds the fact that the U.S. has been able to reduce greenhouse gas emissions during his presidency at the same time the economy has grown,
“Since 2008, the United States has experienced the first sustained period of rapid GHG emissions reductions and simultaneous economic growth on record. Specifically, CO2emissions from the energy sector fell by 9.5% from 2008 to 2015, while the economy grew by more than 10%.”
“The importance of this trend cannot be understated. This ‘decoupling’ of energy sector emissions and economic growth should put to rest the argument that combatting climate change requires accepting lower growth or a lower standard of living.”
And although President Obama doesn’t directly credit fracking for economic growth, there is no shortage of data (much from his own agencies) directly tying the shale revolution to this historic decoupling trend.
A recent Brookings Institution report found that between 2000 and 2015, the U.S. expanded its gross domestic product (GDP) 30 percent while cutting its carbon emissions 10 percent, with the report noting that “Emissions decoupling has clearly become more frequent amid the ongoing large-scale switch from coal to natural gas — driven by the hydraulic fracturing (“fracking”) boom.”
Much of this economic growth has been spurred by a manufacturing renaissance made possible by fracking, as several recent studies have highlighted.
President Obama’s own White House National Economic Council recently released a report that found since early 2010, U.S. manufacturing has added over 800,000 direct jobs.
The White House links this directly to shale production, stating: “The surge in American natural gas production has lowered energy costs for manufacturers and driven job growth.”
And because fracking has made natural gas — a feedstock fuel for manufacturing — cheap and plentiful, U.S. industrial electricity costs are 30 to 50 percent lower than those of foreign competitors, according to a 2015 study from the Boston Consulting Group (BCG).
Fortune also recently reported that American manufacturing costs are now 10 to 20 percent lower than those in Europe and could be 2 to 3 percent lower than China’s by 2018.
A recent study by researchers from the London School of Economics (LSE) also found that for every two jobs directly created by fracking, at least one more is created in the manufacturing sector.
Looking ahead, the outlook for U.S. manufacturing is even brighter, thanks to shale. A 2014 PricewaterhouseCoopers report found that the annual cost savings to the manufacturing sector from shale gas could mean $22.3 billion by 2030 and $34.1 billion by 2040.
This saving, in turn, would lead to 930,000 shale gas-driven manufacturing jobs by 2030 and 1.41 million jobs by 2040, according to the report.
Fracking has also spurred economic growth by allowing Americans to save money on their monthly fuel and energy bills, putting more disposable income in their pockets.
A 2016 EIA analysis shows that since 2008 — roughly the start of the energy renaissance — average annual energy costs per household in the United States have dropped by more than 14 percent.
According to an IHS Economics and the National Association of Manufacturers (NAM) Center for Manufacturing Research report, American families saved, on average, $1,337 in 2015 through lower home energy costs as well as lower costs of goods and services as a result of the abundant supply of North American natural gas.
The American Automobile Association (AAA) has reported Americans on average saved an average of more than $550 on gasoline costs in 2015 due to increased production from hydraulic fracturing and horizontal drilling.
The API’s 2017 State of American Energy report also notes that industry supports around 9.8 million jobs and makes up eight percent of the country’s Gross Domestic Product (GDP), and a recent analysis from IHS and API projects that over the next 20 years, about 1.9 million new jobs will be created in the oil, natural gas and petrochemical industries, with regulatory and private-sector experts tying much of this projected growth to increased U.S. crude and liquefied natural gas (LNG) exports.
On a local level, a recent University of Chicago report found fracking is generating “enormous benefits” to local economies near shale development and to average shale-area households “by roughly $1,300 to $1,900 per year.”
It also found counties with a high level of fracking had up to a seven percent increase in average income driven by wage increases and other factors such as royalty payments.
The study also found that employment also increased 10 percent and property values increased significantly as well. The group concludes “that the average local benefits from hydraulic fracturing outweigh the costs.”
All of this overwhelming data considered, it is obvious why President Obama states the current trend of GHG reductions and economic growth “cannot be understated.” And although the President doesn’t come right out and say it, a close look at his article further confirms that shale development deserves much of the credit.