Hydraulic Fracturing in The United States - Economic Impact

Economic Impact

Proponents of hydraulic fracturing tout its potential to make the United States the world's largest oil producer and make it an energy leader. Proponents say that hydraulic fracturing would give the United States energy independence. Globally, gas use is expected to rise by more than 50% compared to 2010 levels, and account for over 25% of world energy demand in 2035. Anticipated demand and higher prices abroad have motivated non-US companies to buy shares and invest in US gas and oil companies, and in some cases buy them, and their shale plays, outright leading to greater international control of US gas resources. Oil and natural gas companies have recently sought to build a new pipeline through Pennsylvania and Maryland to new liquid natural gas export terminals in Maryland, in order to increase profits by exporting gas to Europe and Asia (e.g., China and Korea). Such a move could potentially threaten national security.

Some geologists say that the well productivity estimates are inflated and minimize the impact of the reduced productivity of wells after the first year or two. A June 2011 New York Times investigation of industrial emails and internal documents found that the financial benefits of unconventional shale gas extraction may be less than previously thought, due to companies intentionally overstating the productivity of their wells and the size of their reserves. The same article said, "Many people within the industry remain confident." T. Boone Pickens said that he was not worried about shale companies and that be believed they would make good money if prices rise. Pickens also said that technological advances, such as the repeated hydrofracking of wells, was making production cheaper. Companies that specialize in shale gas have diversified into lucrative products such as propane and butane.

Lower natural gas prices in the US have reduced incentives to investigate renewable sources of energy, perpetuating dependence on gas and oil. In the interim, rather than pass the savings from lower natural gas prices on to US consumers, companies are reducing production to reduce supply and inflate natural gas prices in the US.

More locally, economic impacts of hydraulic fracturing include payments to property owners, an increase in jobs, and an increase in business. The EPA states that it is unclear on a local level how and for how long hydraulic fracturing affects a community economically. It is hypothesized that hydraulic fracturing may not provide jobs to local communities due to the specialized nature of hydraulic fracturing tasks. Also, communities’ local resources could potentially be taxed due to the increase in industry traffic or if an accident occurs. Concerns have also been raised regarding the terms and clarity of the leases energy companies are signing with landowners, as well as the manner in which they are sold and the tactics used by companies in implementing them.

Another question has been the effect the leases can have on mortgages, with some lenders becoming reluctant to loan money "for a piece of land that ends up storing the equivalent of an Olympic-size swimming pool filled with toxic wastewater from drilling" or making mortgages conditional on not signing a drilling contract.

Nationwide Insurance has issued a statement that its policies do not cover hydraulic fracturing related damage. The company said that it issued the memo because their research led them to decide that the financial exposure created by such coverage was too great. The company will not cover damages to land involved in hydraulic fracturing operations, damages resulting from hauling water, pipe, and lumber to and from drill sites, and damages resulting from the use of bulldozers, dump trucks and other vehicles used in conjunction with hydraulic fracturing. Company representatives said that they have historically not insured the oil and gas business, but added that they were uncomfortable with hydraulic fracturing's unique risks and could not provide coverage at a reasonable price. Jeffrey Hanneman, the director of environmental practice for Aon Risk Solutions, said the decision would be unlikely to signal a wider trend. Hanneman said that while some insurance companies have been reluctant to offer coverage to tracking and related activities, there have been no substantial claims except for rare claims against companies owning or operating wells. Mike Elmendorf, head of the Associated General Contractors of New York State said that AGCNY members did not welcome Nationwide's decision, and that it was hard to understand, anti-job creation, and had no factual basis. Simon Lomax, the research director for Energy In Depth, a petroleum industry group, has called the decision reckless and uninformed.

Geisinger Health System, a physician-led health care system, serves many patients who live in the Pennsylvania towns where Marcellus Shale gas drilling (hydraulic fracturing) is occurring. Geisinger has 2.6 million patients, many hospitals and clinics in the area, and an insurance program. It has archives that include historical health care data for the region. The company is concerned about future health costs that might be incurred due to the practice of hydraulic fracturing. In addition to drinking water quality concerns, in 2012 OSHA and NIOSH released a warning about worker exposure to crystalline silica, which is related to silicosis, and a 2012 OSH article outlined the risk of worker radiation exposure. Geisinger is currently conducting a study of the health impact of hydraulic fracturing using its database's capacity to examine links between drilling and health by dates and locations, as well as identify control populations.

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