The People of America's Oil and Natural Gas Indusry

No Federal Role for Hydraulic Fracturing

Jane Van Ryan

Jane Van Ryan
Posted July 1, 2009

On the surface, the companion bills introduced into the U.S. House and Senate seem quite benign. They propose to regulate hydraulic fracturing under the Safe Drinking Water Act, adding federal oversight to the oil and natural gas field process. In actuality, they could be an economic disaster waiting to happen.

First, some background information. Hydraulic fracturing is the process in which a liquid is pumped down the well to make tiny fissures in the rock and prop the cracks open with sand or another proppant. This practice has been in use for more than 50 years and is a routine step in the production of oil and natural gas that's trapped in hard, non-porous rock formations such as shale. Hydraulic fracturing, like other oil and natural gas development practices, is regulated under state laws, and the Ground Water Protection Council recently released a study that found regulation is best accomplished at the state level where regional and local conditions are understood.

Here's a video that explains the process of hydraulic fracturing:

So what's wrong with having the federal government oversee hydraulic fracturing? Plenty. Consider the results of part two of a three-part study from IHS Global Insight, which examines the economic impact of potential legislation.

IHS Global Insight looked at three possible federal regulatory scenarios and compared them with leaving oversight in the states' hands:

1. Elimination of hydraulic fracturing: This scenario would reduce Gross Domestic Product (GDP) by $374 billion in 2014, reduce jobs by nearly 3 million in 2015, and expand the federal deficit by $139 billion in 2014 because the United States would have to rely on more imported oil and natural gas than ever before. Demand for imported energy would increase by nearly 60 percent by 2018.

2. Restriction of the fluids that can be used for hydraulic fracturing: Under this scenario, GDP would be reduced by $172 billion, the federal deficit would grow by $66 billion, jobs would be reduced by 1.4 million, and demand for foreign energy would rise by almost 30 percent. By the way, water with small amounts of chemicals is the primary fluid used in hydraulic fracturing.

3. Implementation of federal underground injection control compliance regulations on top of the existing state regulations: IHS Global Insight projects that this scenario would lead to a GDP reduction of $84 billion, an increase of $32 billion in the federal deficit, the loss of 676,000 jobs, and a 14 percent increase in demand for imported energy.

And this could happen during a time when the U.S. economy is struggling and millions of people are unemployed.

The third IHS Global Insight study, also released today, found that while the impact would be felt throughout the United States, some states would be harmed more than others. Texas could lose up to 364,000 jobs; New York with its large economy would suffer one of the worst economic hits; Virginia, Arkansas, Utah, and other states that depend on consumer spending, transportation and construction would receive severe indirect effects including job losses, and; West Virginia and Wyoming would experience a significant decrease in natural gas production.

The bottom line of the study is clear: applying federal regulations to hydraulic fracturing would hurt the economy, kill jobs, lower domestic energy production, increase the federal deficit and reduce U.S. energy security.

Before proposing hydraulic fracturing legislation, perhaps the bills' sponsors should have asked themselves whether these measures would improve the life or livelihood of anyone in America. It appears the answer would have been no.

For more information, read the first part of the IHS Global Insight study.