With the 2012 presidential election just around the corner, the top issue remains that of job creation. To that end, the shale gas sector says that it is poised to bolster the nation’s wealth in the form of jobs and gross economic output.

The topic is arising at the same time that the nation is trying to shake off the great financial crisis of 2008, which many would say is the direct result of a banking and mortgage sector that had been allowed to run amok -- something that more federal oversight would have prevented. With that in mind, the various stakeholders are at odds over just what the Environmental Protection Agency’s function should be when it comes to regulating shale gas.

“While natural gas holds promise for an increased role in our energy future, the EPA believes it is imperative that we access this resource in a way that protects drinking water sources and surface waters,” says Cynthia Dougherty, with EPA in congressional testimony.

Consider that shale gas in 2008 comprised about 11 percent of all natural gas production. But by 2010, that number jumped to 27 percent and by 2015, it will be 43 percent. That’s according to IHS Global Insight, which says that by 2035 shale will amount to 60 percent of all natural gas production.

EPA says that such prominence requires more of its attention. Specifically, it wants to cut volatile organic compounds, or smog levels, by 25 percent. But the EPA says that would be done by using proven technologies that can capture natural gas that currently escapes into the air -- gas that would be made available for sale. It goes on to say that this would result in an additional $30 million annually in sales for the gas industry -- more than enough to compensate the developers.

“The ozone benefits are illusory, greatly inflated and would be dwarfed by the costs.  The standards may not be achievable and, worse, could destroy millions of American jobs.” says Howard Feldman, director of regulatory affairs for the American Petroleum Institute.  

Meantime, EPA is studying the effects that the drilling for shale gas will have on drinking water. When developers use hydraulic fracturing, called fracking, to ply loose the shale from the rocks where it is embedded, they pump a concoction of water, sand and chemicals deep underground.

Multiplier Effect

Industry’s general viewpoint is that the states are in a better position to oversee shale gas extraction and that the federal government’s involvement will only complicate the situation. It also says that EPA is acting too aggressively and too quickly and that the agency is not permitting the stakeholders the time to give a proper response.

This debate over the relationship between environmental regulation and job creation is coming during a time of persistently high unemployment. That’s why the shale gas sector says that now is not the time for EPA to muddy the waters.

The IHS Global Insight study that is funded by gas developers emphasizes that shale gas production supported 600,000 last year and that this number will rise to 870,000 by 2015. It adds that the shale gas contribution to the U.S. gross domestic production was about $77 billion in 2010. That amount will be $118 billion in 2015 and $231 billion in 2035.

A key reason for the shale gas industry’s profound economic impact is its high “employment multiplier”—the indirect and induced jobs created to support an industry. For every direct job created in the shale gas sector, more than three indirect and induced jobs are created, a rate higher than the financial and construction industries, the report finds.

“The rapid growth in shale gas production—currently 34 percent of total U.S. production—is one of the most significant energy developments in recent decades and is having a significant impact on the nation's economy in terms of stimulating job creation and economic growth,” says IHS Vice President John Larson, the lead author of the study.

The EPA readily acknowledges that the states have led when it comes to natural gas development. But it is arguing that because shale gas is such a game changer that the federal government must work with all the stakeholders to ensure that its extraction is safe and responsible. It is in everyone’s interest, it adds, to reduce emissions and to ensure that such harmful elements as metals and salts do not infiltrate the drinking water supplies.

Right now, large segments are dissatisfied with industry’s positions. The White House does not see its actions as disrupting progress but rather, as helping to reassure a wavering public. If the affected communities are uneasy, then this promising industry could fail to reach to its expectations.


EnergyBiz Insider is the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists.

Follow Ken on  www.twitter.com/ken_silverstein

energybizinsider@energycentral.com

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