The People of America's Oil and Natural Gas Indusry

An Economic Lift, Thanks to Fracking

Mark Green

Mark Green
Posted March 27, 2013

Thanks, shale and hydraulic fracturing!

Two news items prompt today’s gratitude. First, a new study of Texas’ Eagle Ford shale play shows the dramatic economic lift being provided by oil and natural gas development. Second, a Reuters article underscores the point that affordable natural gas – again, thanks to fracking and shale – is spurring a U.S. manufacturing renaissance – in this case, attracting investment in this country from foreign companies.

The Eagle Ford study by the University of Texas at San Antonio has these numbers:

  • More than $61 billion in total economic impact in 2012 across a 20-county region from oil and natural gas development, up from $25 billion in 2011.
  • 116,000 jobs supported in 2012, up from 48,000 in 2011.
  • Projections of 127,000 jobs supported and an economic impact of $89 billion for Texas in 2022.
  • More than $1 billion in revenue to local government and $1.2 billion in state tax revenue in 2012.
  • Eagle Ford will produce 527,000 barrels of crude oil a day this year and is projected to produce 771,000 barrels/day in 2022.

Bloomberg quotes Tom Tunstall, the study’s lead researcher:

“I think we’re sort of in unknown territory. Previous oil and gas exploration has been conventional. Shale is different. Drilling folks will probably be in the area longer than conventional plays.”

AEI’s Mark J. Perry has a chart showing rapid oil production growth from Eagle Ford since 2008:

Perry:

What makes the Eagle Ford Shale story so amazing is how fast development, investment, and production has taken place there. As the chart above illustrates, the Eagle Ford Shale oil boom didn’t even really start until 2011, and then oil output almost tripled in just a single year. Suddenly, Eagle Ford Shale became the “single largest oil and gas development in the world” last year and created an unexpected $61 billion economic “windfall” for Texas that came out of nowhere. One of the strongest reasons to be optimistic about America’s economic future is the energy revolution, which is best illustrated by the amazing job- and prosperity-creating shale formations of Eagle Ford in Texas, the Bakken in North Dakota and the Marcellus in Pennsylvania.

America’s shale energy revolution is boosting U.S. manufacturing – while also luring investment from manufacturers in other countries, Reuters reports – attracted by lower energy costs for new facilities as well as affordable feedstock for various products:

When Wolfgang Eder and his team started looking around for a site for a new plant for Voestalpine, the Austrian steelmaker he heads, they had 17 sites in eight countries on their list. This month, after more than a year of looking, they settled on the U.S. state of Texas, after a boom in the production of natural gas from shale extraction brought gas prices down to just a quarter of what companies paid in Europe. … With cheap shale gas making the United States a magnet for industrial companies like Voestalpine, many economists are positing a return to industrialisation for the world's biggest economy after more than a decade of consumption-led growth. "America is currently seeing a renaissance of production," said Felix Schuler, a partner at Boston Consulting Group (BCG) based in Germany who specialises in the industrial goods sector.

According to Reuters, other foreign companies are eyeing the U.S. because of affordable energy – much of it developed from shale with hydraulic fracturing:

  • South African petrochemicals group Sasol may spend up to $7 billion on an ethane cracker complex in the U.S.
  • Egypt’s Orascom Construction Industries is building a $1.4 billion fertilizer plan in Iowa.
  • Taiwan’s Formosa Plastics has expanded plans for a new ethylene plant in Texas.
  • Japanese oil refiner Idemitsu Kosan and trading house Mitsui & Co may operate a petrochemical plant in the U.S.

Thanks to shale and hydraulic fracturing, the United States has the opportunity for significant economic and energy benefits. To realize those benefits we need a true all-of-the-above approach to energy development that expands domestic access to resources, implements common-sense regulatory and permitting processes and, quite simply, leadership thatembraces and manages the energy wealth we have. API’s Erik Milito, group director for upstream and industry operations:

“Oil and natural gas present a valuable opportunity to the nation. Now is the time for presidential leadership, and we urge President Obama to support an American energy policy that takes advantage of this opportunity – that will spur growth in jobs, generate more revenue (for government) and add to our long-term energy security by providing reliable, affordable supplies of energy for generations to come.”

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.