Energy Industry: Let Us Frack or the Economy Will Suffer

Alex Brown

The boom in American oil and natural gas is helping the U.S. economy and its contributions could substantially increase by the end of the decade, says a study released Wednesday by several major players in the fossil-fuel industry.

But that boost, the report warns, comes with a caveat: Regulations on hydraulic fracturing could stifle those gains and push the industry's economic benefits below even today's levels.

The study, conducted by Colorado-based IHS Inc. for several trade associations, looks at the economic impact of "unconventional" oil and gas, energy sources extracted by using techniques other than traditional drilling. One example, hydraulic fracturing, is used in North Dakota's Bakken formation has helped spark the oil boom there, but has also been criticized for its environmental impact.

The economic benefits of unconventionally extracted fuels are significant, the study says. Among its findings:

  • More than 2 million workers are supported by their production, and that number could hit 3.3 million by 2020.

  • The industry's contribution to gross domestic product was $284 billion in 2012, and could clear $468 billion by the end of the decade.

  • State and federal governments collected $74 billion in tax revenues from unconventional oil and gas in 2012; that number could surpass $125 billion by 2020.

  • The industry was responsible for $1,200 in disposable income per household nationaide in 2012; that number could near $3,000 by 2020.

But that extra money in consumers' pockets (and the government's) isn't guaranteed. The study's predictions get much more dire as it factors in potential restrictions on land use or extraction methods. Supported jobs, it estimates, would fall to 1.2 million by 2020, a loss of 2.1 million jobs. GDP contribution, estimated to exceed 3 percent, would drop to less than 1 percent. And for the average consumer? The oil-and-gas-created disposable income, estimated to be above $2,500 for 2020, could drop below $500.

Backers of the study included the American Petroleum Institute, America's Natural Gas Alliance, the Natural Gas Supply Association, the U.S. Chamber of Commerce, and the American Chemistry Council.

In a statement accompanying the study, ISH Economics Vice President John Larson emphasized the industry's benefit to the consumer. The study "puts the unconventional revolution in context as an important but little understood pocketbook issue for all Americans," he said.

The American Petroleum Institute added its own statement on the economic dangers of imposing more regulations. "To unlock our full manufacturing potential, those in Washington must turn aside efforts that would impose duplicative regulations on shale development, raise production costs, and limit access to domestic resources," said Kyle Isakower, API vice president for policy and economic analysis.