Research & Commentary: Study Shows Potential Economic Pain in Colorado if Fracking Is Banned on Federal Lands
$3.5 Billion In Lost Tax Revenue, $16 Billion In Lost Income, $35 Billion Lost Value Added Through 2040
A new study from the University of Wyoming lays out how a ban on hydraulic fracturing (“fracking”) on federal lands would lead to “significant fiscal and economic losses” in Colorado through 2040.
The Fiscal and Economic Impacts of Federal Onshore Oil and Gas Lease Moratorium and Drilling Ban Policies, commissioned by the Wyoming Energy Authority and the New Mexico Oil and Gas Association and released in December 2020, shows how the Centennial State would suffer under both a moratorium on new leasing ventures and an outright ban on fracking altogether, which President-elect Joe Biden has pledged to impose.
“Based upon…investment and production forecasts, a federal leasing ban would result in a $461 million reduction in oil and gas investment in Colorado during the first year,” the study notes. “These investment losses escalate to $708 million by 2025. Losses in federal oil and gas output escalate to $197 million and $169 million respectively by 2025. A leasing moratorium reduces annual oil and gas tax revenues by $79 million in 2025, which primarily affects rural local governments and special districts for conservation and health care.”
“Under a drilling ban, the losses in oil and gas investment and production are larger, reaching $746 million of lost investment during 2025 and $212 and $187 million in lost oil and gas production respectively,” the study continues. “As a result, oil and gas tax revenues are lower with losses of $53 million in 2021 and $85 million in 2025. If a drilling ban were to remain in effect, Colorado would suffer tax revenue losses over time, averaging $132 million in annual losses during 2026 to 2030. Annual tax revenue losses would be $205 million during the 2031 to 2035 period and rise to $285 million from 2036 to 2040. The cumulative loss in oil and gas tax revenue is $3.5 billion over the entire 20 year period, if a drilling ban remained in place.”
These would not be the only negative effects of a moratorium or ban. In 2021 alone, Colorado would see a $224 million loss of income, a $453 million loss in value added, and the loss of almost 3,000 jobs under a lease moratorium. Under a total ban, in 2021 alone, the state would experience the loss of $395 million in income, $805 million in value added, and more than 5,000 jobs. Cumulative losses under a moratorium through 2040 would reach $16.4 billion in income and $33.9 billion in value added, while under a fracking the total losses would reach $17.2 billion in income and $35.4 billion in value added.
This is not the only study to demonstrate what could happen to Colorado if a fracking ban went into place. As a November 2019 study by the Global Energy Institute at the U.S. Chamber of Commerce details, if a fracking ban took place, the Centennial State would experience the cumulative loss of 468,000 jobs thanks to higher residential and business energy costs and upstream production losses, as well as $187 billion in lost gross domestic product (GDP), and a $14.9 billion loss in state and local tax revenues by 2025. Over that same period, Colorado households would experience a $120 billion loss of income and Coloradans would suffer a per capita cost-of-living increase of $6,490.
These losses would naturally begin taking effect immediately. In 2021 alone, the study estimates 102,000 job losses, $14 billion in lost GDP, $1.14 billion in lost state and local tax revenue, and a $10 billion loss in household income.
A 2020 report from the American Petroleum Institute (API), with modeling data provided by the consulting firm OnLocation, has unemployment numbers in Colorado due to a fracking ban that mirror GEI’s study, with 353,000 lost jobs in 2022 alone.
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.
The development of shale reserves in Colorado has turned the state into the sixth-largest producer of natural gas in the United States, as well as the fifth-largest producer of crude oil. This massive increase in domestic shale development, led by fracking, has caused natural gas prices to plummet in Colorado, saving state residents and businesses more than $12.4 billion from 2006 to 2016, according to a 2018 study from the Consumer Energy Alliance.
“Overall,” the study concludes, “either a moratorium on new federal leases or an outright drilling ban would reduce tax revenues, income, and employment in Colorado. Moreover, these policies amount to a degradation of the Colorado’s long-term capacity to earn income from the oil and gas resources under federal lands. Moreover, given the location of federal oil and gas producing properties in Colorado, rural governments and special districts will likely bear most of the burden from the inevitable losses in tax revenues and employment.”
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 21st century. Therefore, Colorado policymakers should refrain from placing unnecessary burdens on the natural gas and oil industries, which are safe and positively impact the Colorado economy, and urge their federal colleagues in Washington, DC to do likewise.
The following documents provide more information about hydraulic fracturing and fossil fuels.
The Fiscal and Economic Impacts of Federal Onshore Oil and Gas Lease Moratorium and Drilling Ban Policies
This report from the School of Energy Resources at the University of Wyoming demonstrates how a fracking ban or leasing moratorium on federal lands like the one advocated by the Biden presidential campaign would severely harm the economies of eight western states.
What If…Hydraulic Fracturing Were Banned? (2020 Edition)
This study from the Global Energy Institute at the U.S. Chamber of Commerce says a ban on fracking in the United States would be catastrophic for our economy. Their analysis shows that if such a ban were imposed in 2021, by 2025 it would eliminate 19 million jobs and reduce U.S. Gross Domestic Product by $7.1 trillion. Tax revenue at the local, state, and federal levels would decline by nearly a combined $1.9 trillion. Natural gas prices would leap by 324 percent, causing household energy bills to more than quadruple. By 2025, motorists would pay twice as much at the pump for gasoline as oil prices spike to $130 per barrel, while less domestic energy production would also mean less energy security.
America’s Progress at Risk: An Economic Analysis of a Ban on Fracking and Federal Leasing for Natural Gas and Oil Development
The study from the American Petroleum Institute (conducted by economic modeling firm OnLocation) warns that banning federal leasing and fracking on public and private lands, which some presidential candidates have proposed, would cost up to 7.5 million American jobs in 2022 alone, lead to a cumulative GDP loss of $7.1 trillion by 2030, slash household incomes by $5,400 annually, increase household energy costs by more than $600 per year and reduce farm incomes by 43 percent due to higher energy costs. If a ban is enacted, the U.S. would flip from being a net exporter of oil and petroleum products to importing more than 40 percent of supplies by 2030.
The Importance of Affordable and Abundant Oil and Natural Gas for Colorado
This report from the Consumer Energy Alliance examined how the shale revolution across Colorado has provided benefits to Centennial State residents by boosting disposable income and revitalizing communities, saving residential users $4.3 billion, and commercial and industrial users $8 billion.
Debunking Four Persistent Myths about Hydraulic Fracturing
This Heartland Institute Policy Brief by Policy Analyst Timothy Benson and former Heartland communications intern Linnea Lueken outlines the basic elements of the fracking process and then refutes the four most widespread fracking myths, providing lawmakers and the public with the research and data they need to make informed decisions about hydraulic fracturing.
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.
Impacts of the Natural Gas and Oil Industry on the U.S. 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.
The U.S. Leads the World in Clean Air: The Case for Environmental Optimism
This paper from the Texas Public Policy Foundation examines how the United States achieved robust economic growth while dramatically reducing emissions of air pollutants. The paper states that these achievements should be celebrated as a public policy success story, but instead the prevailing narrative among political and environmental leaders is one of environmental decline that can only be reversed with a more stringent regulatory approach. Instead, the paper urges for the data to be considered and applied to the narrative.
Climate Change Reconsidered II: Fossil Fuels – Summary for Policymakers
In this fifth volume of the Climate Change Reconsidered series, 117 scientists, economists, and other experts assess the costs and benefits of the use of fossil fuels by reviewing scientific and economic literature on organic chemistry, climate science, public health, economic history, human security, and theoretical studies based on integrated assessment models (IAMs) and cost-benefit analysis (CBA).
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 Heartland’s Government Relations department, at firstname.lastname@example.org or 312/377-4000.