Hydraulic fracturing — “fracking” — is revitalizing a number of American businesses that had previously been stagnant, or forced to relocate to other parts of the globe. Resourceful Earth has preached this “natural gas stimulus” before, though it’s worth revisiting as more and more evidence accumulates:
The shale gas revolution is firing up an old-fashioned American industrial revival, breathing life into businesses such as petrochemicals and glass, steel and toys.
Consider the rising fortunes of Ascension Parish, La.
Methanex Corp., which closed its last U.S. chemical plant in 1999, is spending more than half a billion dollars to dismantle a methanol plant in Chile and move it to the parish.
Nearby, a petrochemical company, Williams, is spending $400 million to expand an ethylene plant. And on Nov. 1, CF Industries unveiled a $2.1 billion expansion of its nitrogen fertilizer manufacturing complex, aiming to displace imports that now make up half of U.S. nitrogen fertilizer sales.
These companies all rely heavily on natural gas. And across the country, companies like them are crediting the sudden abundance of cheap natural gas for revving up their U.S. operations. Thanks to new applications of drilling technology to unlock natural gas trapped in shale rock, the nation’s output has surged and energy experts almost unanimously forecast that prices will remain low or moderate for a generation. The International Energy Agency says that by 2015, the United States will overtake Russia as the world’s biggest gas producer.
These companies cite the same factor — inexpensive natural gas — as the reason for their expansion:
Industrial companies are betting that the surge in the domestic production of natural gas is much more than a blip. Cheap and plentiful supplies of natural gas are flooding the U.S. market, and prices in the United States are as low as a quarter of what they are in Europe or Asia.
“For the foreseeable future, thanks to the recovery of vast U.S. underground gas deposits of shale, natural gas is likely to remain 50 to 70 percent cheaper in the U.S. than in Europe and Japan,” said a recent report by the Boston Consulting Group.
“That will translate into significantly lower costs for electricity generation, for fuel used to power industrial plants and for feedstock used across many industrial processes,” said Justin Rose, a BCG principal and co-author of the report.
And it need not be a temporary blip. The U.S. has enough shale gas to last quite a long time, keeping prices low enough to allow for these investments that are being made in areas that have not seen much manufacturing investment in recent years. And yet we still have those radical groups who want fracking to be stopped:
Others call it a detour, since it is still a fossil fuel and it is undercutting nuclear, wind and solar energy as well as coal. “Bridge to clean future or U-turn to dirty past?” said a headline on the blog of the environmental group Earthjustice. The United States has drilled more oil and gas wells than any other country, and the new wave of supplies has brought a new wave of rigs dotting the countryside and new crisscrossing pipelines.
For environmentalists, the abundance of shale gas poses a political and environmental dilemma. As new gas supplies fuel more and more industrial plants, new constituencies will have stakes in gas production, making it politically harder to impose new regulations. The Environmental Protection Agency is weighing whether to issue additional federal guidelines on various disruptive aspects of shale gas drilling, including the disposal of toxic water used to fracture formations and air pollution from drilling operations. The EPA might also issue rules requiring drilling techniques that would make contamination of water aquifers less likely.
It’s hard to know how to respond to these groups. Are they ignoring all of the benefits from fracking, mentioned above? Do they have a plan to replace the thousands of new jobs being created due to low natural gas prices? Because we watched the green energy industry try this, with government money, over the past few years and it wasn’t pretty, as we watched company after company enter bankruptcy despite receiving millions of dollars in government loans and grants.
Thankfully, it seems as if these groups are in the minority, and even Obama’s EPA has taken a cautious approach towards fracking and let it proceed largely on its own so far. Let us hope this doesn’t change.