Policy Documents

Will 'Frackophobia' Kill America’s Resurgent Oil and Gas Industry?

Bernard L. Weinstein –
January 26, 2011

Will “Frackophobia” Kill America’s Resurgent Oil and Gas Industry?

*By Bernard L. Weinstein

Last year, America imported almost 4.4 billion barrels of oil, much of it from countries that don't particularly like us. The tab totaled $260 billion and accounted for roughly half of our trade deficit.

With the economy recovering and oil prices forecast to exceed $100 a barrel for the foreseeable future, imports will grow further and the cost in 2011 could easily exceed $300 billion. This growing dependence on imported oil is good neither for our economy nor our national security.

Fortunately, a technique known as hydraulic fracturing, or “fracking,” has dramatically boosted domestic output of both natural gas and oil over the past several years.  Hydraulic fracturing uses a high-pressure mix of water, sand and a small amount of hazardous chemicals to force oil and gas out of rock formations.  Just recently, the U.S. Department of Energy doubled its estimates of recoverable gas, mainly from shale formations, to 827 trillion cubic feet, enough to last 150 years at current usage levels.  And despite the drop in Gulf of Mexico oil production last year due to the drilling moratorium, domestic output actually increased for the third consecutive year due mainly to the application of fracking to tight rock formations in older fields located in Texas and North Dakota.  Oil companies are investing $25 billion this year to drill 5,000 new oil wells in tight rock fields and expect output to increase six-fold by 2020.

Twenty years ago, the Barnett Shale in North Texas was unknown. Today it's the largest producing natural gas field in the United States with output exceeding 4 billion cubic feet a day. What's more, the Barnett Shale has added a new dimension to the North Texas economy, supporting thousands of jobs and generating millions in tax revenue for local governments and school districts.

In terms of potential output and economic impact, the Barnett is dwarfed by the Marcellus Shale formation that stretches across large swaths of Pennsylvania, West Virginia and New York. Pennsylvania is already benefiting mightily from shale gas production, and several studies have recently documented the huge economic boost to the state in term of jobs, income and tax revenue.  Indeed, one study found that nearly 48,000 jobs related to Marcellus Shale activity have been created in Pennsylvania over the past year.  By contrast, New York State, with an effective moratorium on shale gas drilling, continues to hemorrhage jobs along its southern tier.

Unfortunately, a new propaganda-generated affliction called “frackophobia” is spreading through the media and seeping into regulation and legislation.  Some environmental groups are claiming that the chemicals used in "fracking" are contaminating local water supplies.  But of the nearly 100,000 natural gas wells drilled annually, water contamination occurs in only a handful of cases.   In those rare instances, responsible companies have provided clean water and compensation to affected families.  What’s more, careful studies by the Environmental Protection Agency and the Ground Water Protection Council haven't revealed a single case of drinking water contamination from shale gas drilling itself.

Nonetheless, public officials ranging from city council members across Texas, Pennsylvania, and Wyoming to federal regulators in Washington are currently considering new fracking regulations.  Both the White House and the EPA have recently set up “task forces” to study the fracking issue.  The danger, of course, is that “over-study” will result in “over-regulation.”

Is producing, gathering, processing and delivering oil and natural gas from shale formations completely risk free?  Of course not.  But these minimal risks must be weighed against the huge economic and national security benefits that can be realized by fully developing our domestic oil and gas resources.

*Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics at Southern Methodist University's Cox School of Business in Dallas (bweinstein@cox.smu.edu).