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

September 13, 2018

$30 Billion In Savings To Keystone State Residents & Businesses From 2006 To 2016

The massive increase in domestic shale development, led by hydraulic fracturing (“fracking”), has caused natural gas prices to plummet in Pennsylvania, according to a September 2018 Consumer Energy Alliance (CEA) report. Consequently, Keystone State residents and businesses saved more than $30.5 billion from 2006 to 2016.

In 2016, natural gas prices were 62 percent lower in Pennsylvania than 10 years prior, leading to $13.3 billion in savings over that period for residential consumers. This is significant because 1.6 million Pennsylvanians live in poverty, and the average Pennsylvania 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 saved $17.2 billion.

“Pennsylvania’s energy industry creates jobs in a number of fields including construction, manufacturing, and logistics,” the report notes. “In 2017, high production rates in the Marcellus region generated high demand for pipeline transport of natural gas supplies. Because of this increase, Pennsylvania saw the oil and gas pipeline industry grow 153.5 percent—creating jobs for over 21,000 workers.”

It should come as no surprise that shale development is spurring economic growth across Pennsylvania. Hydraulic fracturing activity delivers $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,” according to a December 2016 study conducted by researchers at the University of Chicago, Princeton University, and the Massachusetts Institute of Technology. 

Furthermore, a 2016 Chamber of Commerce study estimated that the fracking revolution generated $13 billion in state GDP, $7.2 billion in wages, and over 117,000 jobs. Additionally, the oil and natural gas industries supported more than 322,000 jobs in Pennsylvania in 2015, producing $23 billion in wages and $44.5 billion in economic impact, according to a 2017 American Petroleum Institute study prepared by PricewaterhouseCoopers.

Despite claims from anti-fracking groups, shale development in Pennsylvania is also environmentally safe, as most recently shown by peer-reviewed studies released earlier this year.

Moreover, a Penn State University study analyzed data from 11,000 groundwater samples taken from 1,385 natural gas wells in Bradford County, Pennsylvania. The researchers found “no statistically significant deleterious impact on ten analytes related to the aggressive increase in development of unconventional shale-gas since 2008.” They also found “an overall trend of improving water quality in the county, “despite heavy Marcellus Shale development.”

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 remains a leading energy producer well beyond the twenty-first century. Therefore, Pennsylvania policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Keystone State’s economy.

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

Everyday Energy for Pennsylvania
https://consumerenergyalliance.org/cms/wp-content/uploads/2018/08/CEA-Pennsylvania-Report.pdf
This report from the Consumer Energy Alliance examined how the shale revolution across the Marcellus region has provided benefits to Pennsylvania’s energy consumers by boosting disposable income and revitalizing communities, saving residential users $13.3 billion, and commercial and industrial users $17.2 billion.

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 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.

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