Skip Navigation

Research & Commentary: Fracking Creates Massive Consumer Savings and Investment in Ohio

August 29, 2018

$40 Billion In Savings To Buckeye State Residents & Businesses From 2006 To 2016

An August 2018 Consumer Energy Alliance (CEA) report states the massive increase in domestic shale development, led by hydraulic fracturing (“fracking”), has caused natural gas prices to plummet in Ohio. Consequently, Buckeye State residents and businesses saved more than $40 billion from 2006 to 2016.

In 2016, natural gas prices were 62 percent lower in Ohio than they were 10 years prior, leading to $15 billion in savings over that period for residential consumers. This is significant because 1.6 million Ohioans live in poverty, and the average Ohio resident at or below the poverty line spends more than a quarter of his or her take home pay on energy costs. Commercial and industrial consumers also experienced $25.3 billion in savings.

“In essence,” the CEA report notes, “energy production and the shale revolution in the region where the Utica and Marcellus are located, have provided a tremendous tax cut to every motorist, homeowner, and small business person in Ohio. That means more money to pay for school clothes, grocery bills, and perhaps even to take a vacation that has been put off for far too long.”

The report also highlights the “economic trends with direct and indirect links to the oil and gas industry,” which the Ohio Department of Jobs and Family Services has tracked since 2011. “In the seven years since this reporting began, shale-related industry employment increased 7.8 percent, employing over 389,000 Ohioans. Employment of Ohioans, however, does not tell the whole story. Average wages across the shale-related industries also increased to $98,613—over $49,000 greater than the average for all industries in the state.”

Over this 2011–2016 period, 700 shale-related businesses have stimulated $63.9 billion in economic investments in the Buckeye State.

It should come as no surprise that shale development is spurring economic growth across Ohio. A December 2016 study conducted  by researchers at the University of Chicago, Princeton University, and the Massachusetts Institute of Technology determined hydraulic fracturing activity brings $1,300 to $1,900 in annual benefits to local households, including “a 7 percent increase in average income, driven by rises in wages and royalty payments, a 10 percent increase in employment, and a 6 percent increase in housing prices.”  Additionally, a 2016 Chamber of Commerce study estimates that $10 billion in state GDP, $6 billion in wages, and over 114,000 jobs would not have been generated in Ohio if the fracking revolution had not taken place over the last decade.

Despite claims from anti-fracking groups, shale development in Ohio is also environmentally safe. In May 2018, researchers at the University of Cincinnati released a peer-reviewed study showing fracking is not contaminating groundwater in the Utica Shale region of Ohio. The researchers collected samples from more than two-dozen wells in Belmont, Carroll, Columbiana, Harrison, and Stark Counties from 2012 to 2015 and found “no relationship between [methane] concentration or source in groundwater and proximity to active gas well sites. No significant changes in [methane] concentration, [methane] isotopic composition, pH, or conductivity in water wells were observed during the study period. These data indicate that high levels of biogenic [methane] can be present in groundwater wells independent of hydraulic fracturing activity.”

Hydraulic fracturing enables the cost-effective extraction of once-inaccessible oil and natural gas deposits. These energy sources are abundant, inexpensive, environmentally safe, and can ensure the United States is the world’s largest energy producer well beyond the twenty-first century. Therefore, Ohio policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Buckeye State economy.

The following documents provide more information about hydraulic fracturing and fossil fuels.

The Benefits of Ohio’s Natural Gas Production to Energy Consumers and Job Creators
https://consumerenergyalliance.org/cms/wp-content/uploads/2018/08/080718_OH-CFAE-Natural-Gas-Report_FINAL.pdf
This report from the Consumer Energy Alliance examined how the shale revolution across the Marcellus and Utica regions has provided benefits to Ohio’s energy consumers by boosting disposable income and revitalizing communities, saving residential users $15 billion, and commercial and industrial users $25 billion. More than 700 new businesses have also been established statewide to support the shale industry, bringing in more than $63.9 billion in new investments.

The Local Economic and Welfare Consequences of Hydraulic Fracturing
https://www.heartland.org/publications-resources/publications/the-local-economic-and-welfare-consequences-of-hydraulic-fracturing
This comprehensive study published by the National Bureau of Economic Research says fracking brings, on average, $1,300 to $1,900 in annual benefits to local households, including a 7 percent increase in average income, a 10 percent increase in employment, and a 6 percent increase in housing prices.

Local Fiscal Effects of a Drilling Downturn: Local Government Impacts of Decreased Oil and Gas Activity in Five U.S. Shale Regions
http://www.rff.org/files/document/file/RFF%20Rpt-SPF.pdf
This study from Resources for the Future finds 82 percent of communities in the five largest shale regions in the United States experienced a net fiscal benefit from hydraulic fracturing despite there having been a large drop in oil and natural gas commodity prices starting in 2014.

Impacts of the Natural Gas and Oil Industry on the U.S. Economy in 2015
https://www.heartland.org/publications-resources/publications/impacts-of-the-natural-gas-and-oil-industry-on-the-us-economy-in-2015
This study, conducted by PricewaterhouseCoopers and commissioned by the American Petroleum Institute, shows that the natural gas and oil industry supported 10.3 million U.S. jobs in 2015. According to the Bureau of Labor Statistics, the average wage paid by the natural gas and oil industry, excluding retail station jobs, was $101,181 in 2016, which is nearly 90 percent more than the national average. The study also shows the natural gas and oil industry has had widespread impacts in each of the 50 states.

What If … Hydraulic Fracturing Was Banned?
https://www.heartland.org/publications-resources/publications/what-if-hydraulic-fracturing-was-banned
This is the fourth in a series of studies produced by the U.S. Chamber of Commerce’s Institute for 21st Century Energy. It examines what a nationwide ban on hydraulic fracturing would entail. The report’s authors found by 2022, a ban would cause 14.8 million jobs to “evaporate,” almost double gasoline and electricity prices, and increase natural gas prices by 400 percent. Moreover, cost of living expenses would increase by nearly $4,000 per family, household incomes would be reduced by $873 billion, and GDP would be reduced by $1.6 trillion.

What If … America’s Energy Renaissance Never Happened?
https://www.heartland.org/publications-resources/publications/what-ifamericas-energy-renaissance-never-actually-happened
This report by the U.S. Chamber of Commerce’s Institute for 21st Century Energy examines the impact the development of shale oil and gas has had on the United States. The report’s authors found that without the fracking-related “energy renaissance,” 4.3 million jobs in the United States may not have ever been created and $548 billion in annual GDP would have been lost since 2009. The report also found electricity prices would be 31 percent higher and gasoline prices 43 percent higher.

The Social Benefits of Fossil Fuels
https://www.heartland.org/publications-resources/publications/the-social-benefits-of-fossil-fuels
This Heartland Policy Brief by Joseph Bast and Peter Ferrara documents the many benefits from the historic and still ongoing use of fossil fuels. Fossil fuels are lifting billions of people out of poverty, reducing all the negative effects of poverty on human health, and vastly improving human well-being and safety by powering labor-saving and life-protecting technologies, such as air conditioning, modern medicine, and cars and trucks. They are dramatically increasing the quantity of food humans produce and improving the reliability of the food supply, directly benefiting human health. Further, fossil fuel emissions are possibly contributing to a “Greening of the Earth,” benefiting all the plants and wildlife on the planet.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact John Nothdurft, Heartland’s director of government relations, at jnothdurft@heartland.org or 312/377-4000.

Author
Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
TBenson@heartland.org @BenceAthwart