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

September 24, 2018

Over $4 Billion In Savings To Mountain 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 West Virginia, according to a September 2018 Consumer Energy Alliance (CEA) report. Consequently, Mountain State residents and businesses saved more than $4 billion from 2006 to 2016.

In 2016, natural gas prices were about a third lower in West Virginia than 10 years prior, leading to $1.6 billion in savings over that period for residential consumers. This is significant because almost 320,000 West Virginians live in poverty, and the average West Virginia resident at or below the poverty line spends around a third of their take home pay on energy costs. Commercial and industrial consumers also saved $2.7 billion.

“More than just consumer savings, West Virginia’s shale energy revolution is also creating thousands of family-sustaining jobs across the state,” the report notes. “Since 2010, West Virginia’s core shale-related industry employment increased 77.54 percent, employing nearly 12,000 West Virginians.  In comparison, all industries in West Virginia only experienced a 15.74 percent change in employment during the same time frame.”

“This report highlights how West Virginia’s families and energy users benefit from the production of West Virginia’s natural resources and the ability to transport that energy through pipeline infrastructure, all of which provides millions of dollars annually to fund our schools, hospitals, roads, and communities,” said Chris Ventura, CEA Midwest’s executive director, in an accompanying press release. “The mining and production of traditional energy resources, like natural gas, have supported communities throughout the state for generations and has been integral in bringing affordable energy to the rest of the country for years.”

It should come as no surprise that shale development is spurring economic growth across West Virginia. 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 without the fracking revolution $548 billion in annual GDP would disappear, 4.3 million jobs would not have been created, electricity prices would be almost a third higher, and residential natural gas prices would be 28 percent higher. Additionally, the oil and natural gas industries supported more than 70,900 jobs in West Virginia in 2015, producing almost $3.5 billion in wages and $8 billion in economic impact, according to a 2017 American Petroleum Institute study prepared by PricewaterhouseCoopers.

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, West Virginia policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Mountain State’s economy.

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

Powering West Virginia
https://consumerenergyalliance.org/cms/wp-content/uploads/2018/09/CEA-West-Virginia-Report-091418.pdf
This report from the Consumer Energy Alliance examined how the shale revolution across the Appalachian Basin has provided benefits to West Virginia’s residents by boosting disposable income and revitalizing communities, saving residential users $1.6 billion, and commercial and industrial users $2.7 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