Fracking And Utility Bills

This week the Toledo Blade ran an interesting story about fracking — the word used to describe horizontal drilling and using pressurized water to break up shale formations and free natural gas and other fossil fuels — and its effect on the utility bills of Ohioans.

IMG_1751The gist of the story is that there are abundant supplies of natural gas due to fracking, and as a result Columbia Gas is charging its lowest amounts in years. The story estimates that, without fracking, the cost would be somewhere between 65 to 129 percent more. In a winter that’s been brutally cold, with higher natural gas usage as a result, the lower monthly bills are welcome indeed.

As the Blade story indicates, environmentalists are concerned about whether fracking will have an impact on water and its potential for causing earthquakes. My sense, however, is that most Ohioans are happy with how the development of the Utica Shale formation in eastern Ohio has proceeded. There’s no denying that the discovery of apparently vast natural gas and fossil fuel supplies deep underground has produced an enormous amount of economic activity in a formerly economically depressed part of the state, producing new jobs and causing lots of money from other places to be spent in the Buckeye State. If fracking also is lowering utility bills, and Ohioans make that connection, it will further increase the support for the entire fracking enterprise.

The Utica Shale Effect

The latest report from the Ohio Department of Jobs and Family Services confirms what everyone living in eastern Ohio already knows:  the development of the Utica Shale formation far underground is producing an economic boom.

Although the just-released information is, inexplicably, almost a year old, it tells a powerful story about what the discovery and extraction of natural resources can do.  In the first quarter of 2012, jobs produced in the oil and gas industry increased 17 percent over jobs created in the same period in 2011.  There were more than 5,800 jobs in core industries like pipeline construction and oil drilling and ancillary businesses like freight trucking and environmental consulting.  Moreover, the jobs paid well:  the core industry jobs averaged annual salaries of almost $74,000 and the ancillary industry jobs paid, on average, almost $59,000 a year. Equally important, these are jobs that won’t be moved overseas, and they will last as long as there is shale oil and gas to extract, which is expected to be decades.

Those good-paying jobs were created by private companies footing the bill to collect a commodity that has a proven market, without the need for government programs or government direction.  If we want to grow our way out of our economic doldrums, we’d be well advised to pay attention to what is happening in eastern Ohio and in the Dakotas and letting private companies focus on finding, developing, and selling our natural resources — and employing our workers as they do so.

Another Impending Benefit Of The Utica Shale

Eastern Ohio is enjoying an economic boom from the discovery of apparently enormous natural gas deposits in the Utica Shale formation, far underground.  The discovery not only has led to economic growth and lower unemployment rates — as well as the promise of less dependence on foreign sources of energy — but it also is likely to have a significant positive environmental impact.

The U.S. Energy Information Agency, a part of the Energy Department, said this month that total U.S. carbon dioxide emissions for the first four months of this year fell abruptly to the lowest level in 20 years.  CO2, of course, is one of the dreaded “greenhouse gases” that are blamed for “global warming.”  The drop in CO2 emissions is attributed to power plants switching from coal to cheap, and plentiful, natural gas.  The discovery of large natural gas deposits elsewhere in the U.S. has caused the price of natural gas to fall dramatically in recent years.  With the Utica Shale drilling coming on line, the surge in the supply of natural gas means that the price should stay low — even if the demand for natural gas increases.

As the linked story indicates, businesses pay attention to price, and when it comes to behavior modification good intentions about reducing greenhouse gases can’t hold a candle to lower prices.

Mill, Baby, Mill!

In Ohio we are getting a first-hand look at the ripple effect in the economy when America’s energy resources are tapped — and it has been a real economic boon.

As I’ve mentioned before, eastern Ohio is home to the Utica shale formation, an incredibly deep layer of rock that apparently is a rich repository of natural gas, oil, and other highly valued “wet gases.”  Drilling wells requires steel pipe, and because the Utica shale formation is so deep underground it requires lots and lots of pipe.  As this New York Times article reports, the need for pipe caused by the resurgence in natural gas drilling in the continental United States has helped to fuel a resurgence in the Ohio steel industry, which has seen expanding steel mills and the hiring of new workers to handle the skyrocketing demand.

The effects don’t stop there.  The owners of the property on which the wells are being drilled have been paid for the privilege and therefore have more money to put into their local economies.  The fracking method used to extract the gas and oil requires lots of water, so trucking companies have expanded their tanker fleets to meet the demand.  And all of the truck drivers, oil drillers, geologists, and drilling engineers who work in Ohio’s oil patch have to eat and sleep and work, which means that hotels, motels, and restaurants in the area are busier than they’ve been in years and the demand for office space has increased, too.

In short, Ohio’s economy demonstrates the good things that can happen when energy resources are located and tapped.  As the Ohio story shows, developing our oil and gas resources — a proven commodity with a proven market that doesn’t require government subsidies or wasteful stimulus spending — is a sure means for an economy to grow its way out of this unending recession.

Thanks to Richard for sending me the linked article.

Upbeat About The Utica Shale

Eastern Ohio — home to many depressed communities and unemployed residents — is becoming a boom area thanks to a rock formation called the Utica Shale.

The Utica Shale lies far below the surface under parts of eight states.  Geologists believe that it may contain huge reserves of natural gas and oil and that one of the best areas to get at the resources is eastern Ohio.   Big oil companies are moving into the area, buying lease rights and getting ready to drill in earnest.  Today one of those companies, Chesapeake Energy Corp., said that initial wells in the Utica Shale showed strong production, which has heightened the interest even more.

Because the Utica Shale is so far below the surface, the companies use deep and horizontal drilling technology and then apply a technique called hydraulic fracturing, or “fracking,” to free the resources from the shale.  Environmentalists argue that fracking poses undue risk of groundwater contamination, but the oil companies contend the process is not dangerous and has been used safely for years.

For the citizens of eastern Ohio, the Utica Shale find is an economic godsend.  The sale of lease rights are making landowners wealthy, oil companies are setting up shop in the area, and the eventual extraction of the natural resources will produce a host of new construction and long-term blue collar and white collar jobs.  The state will want to ensure that the wells are operated safely, of course, but the impetus to develop the resources and bring jobs to the area seems irresistible.

It’s hard not to contrast the Utica Shale boom with the government effort to spur green energy.  Oil and gas companies are spending billions of dollars to get at natural resources that have proven value and can be obtained using established technology.  They have moved rapidly to identify the potential resources, obtain drilling rights, and erect rigs and start work.  And this burgeoning economic activity has not required costly government subsidies, slow-moving government bureaucracies, or politicized, heavily lobbied programs that advantage one manufacturer over another.

This textbook lesson in the speed, nimbleness, and efficiency of capitalism will create new wealth and lots of new jobs in Ohio that cannot be moved overseas.  All of which should lead everyone to ask:  if we want to immediately create jobs here in America, why isn’t the government making sure there are no unnecessary barriers to the development of our other existing natural resources?