Shale Energy Pocketbook Impacts

By The Bakken Magazine Staff | October 04, 2013

The U.S. unconventional oil and gas industry is making an economic impact outside of the country’s major shale plays. IHS Inc., a global energy research firm, has completed a series of reports on the evolution and role of unconventional oil and gas in the U.S., and according to IHS, American households are receiving a positive financial boost. In its report, “America’s New Energy Future: The Unconventional Oil and Gas Revolution and the Economy,” IHS research shows that by 2020, 3.3 million jobs will be supported by unconventional oil and gas. Last year, the average U.S. household’s disposable income increased by $1,200 as a result of unconventional oil and gas developments. The income increase is related to the energy savings harbored by energy providers utilizing U.S.-based shale-energy. By 2015, the average U.S. household will see an increase in its disposable income of $2,000 and by 2025, that number will reach $3,500.

In the areas of manufacturing and chemical production, processes that rely on natural gas and petroleum for use as feedstock for process power, shale energy supports roughly 377,000 jobs. In the development of shale plays, the study shows that another 1.7 million jobs are supported. Karen Alderman, president and CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy, called the IHS shale reports an indicator of the effect of shale on the U.S. economy. The study shows the increase in disposable income, she said, but it also provides further evidence that energy is America’s true stimulus.

Daniel Yergin, vice chairman of IHS, calls the shale industry “not only an energy story,” but also, “a very big economic story that flows throughout the U.S. economy in a way that is only now becoming apparent.”

According to the study, workers earnings from unconventional energy development and chemical production activity totaled nearly $150 billion in 2012, but by 2015, that number will increase to $207 billion. The midstream and downstream segments of the unconventional oil and gas industry will gain roughly $346 billion in investment between 2012 and 2025. Almost $216 million of that total investment will be placed into 47,000 miles of new or modified pipeline infrastructure.
Overall, the IHS study helps to illustrate the undeniable role of unconventional oil and gas to the U.S. “It [the study] puts the unconventional revolution in context as an important, but little understood pocketbook issue for all Americans.”

Fighting for Shale’s Future   
The economic stimulation created by shale energy could be in jeopardy, however. The U.S. Department of the Interior’s Bureau of Land Management continues to draw attention from the shale industry for it’s proposed regulation of hydraulic fracturing on federal lands. The current perspective shared by several state leaders opposed to the BLM’s frack rules declares that states should hold the power to regulate hydraulic fracturing. Sens. John Hoeven, R-N.D., and Heidi Heitkamp, D-N.D., along with Rep. Kevin Cramer, R-N.D., recently wrote to the BLM in an effort to share their sentiment on the issue. “The federal government should allow states and tribes to continue to move forward with their own sophisticated regulatory framework instead of stifling them with a generic blanket of federal regulations,” they wrote.

Earlier this year, John Dunham and Associates, a New York City-based economic consulting firm tried to assess the impact of new BLM proposed fracking rules on an individual well basis. The new rules, JDA pointed out, would affect the disclosure of chemicals used in fracturing activities along with well-bore integrity, flowback and cement bond testing. The assessment revealed that the regulations would add an average of $96,913 to each well. The largest portion of those costs could come from additional intermediate casing. JDA estimated that additional intermediate casing could total roughly 2,350 feet on average. And, in its assessment, JDA also said that some operators believe the additional casing average could approach 8,000 feet. Additional casing cost per foot is approximately $37/ft. JDA said in its assessment that the proposed regulations “will have a significant impact on the oil and gas production industry even without considering future discounted costs.”

Barry Russell, Independent Petroleum Association of America president and CEO, said the rules would cost the industry $345 million per year. “This bureaucratic burden will discourage independent producers from exploring for natural gas and oil on federal lands,” he said.

The IPAA also believes that the proposed rules, if put in place, would put the western portion of the U.S. (that includes the Williston Basin) at a disadvantage for further development, jobs and economic activity.