A Tale of Two Energy Policies

Energy & Environment, Featured, Pelican Site Featured — By on January 16, 2012 9:49 pm
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Louisiana embraces natural gas production while Northeastern states take tentative approach

Instead of bowing down to green pressure groups that greatly overstate the environmental risks attached to natural gas production, policymakers in the northeast should look toward Louisiana as a model for economic renewal, industry and government officials recommend.

The vast supply of natural gas that exists within shale deposits are now within human reach thanks to innovative drilling techniques that have the potential to create about 35,000 jobs in Louisiana as energy companies mobilize to make use of these resources, according to the American Chemical Council (ACC).

Unfortunately, well-funded environmental organizations have persuaded elected officials in Pennsylvania, New York and New Jersey to pull back on further development of the Marcellus Shale, Don Briggs, president of the Louisiana Oil and Gas Association (LOGA), laments. The Marcellus Shale cuts across much of New York, Pennsylvania, Ohio and West Virginia.

“These green groups don’t have same kind of influence down here, and this means it’s not quite so easy to scare people about the oil and gas industry and put out misinformation,” Briggs said. “The culture of a state or region matters and you can see where lawmakers can be pressured into pursuing policies that don’t really make sense. Still, there’s great potential for a state like Pennsylvania, which is actually a very old oil province.”

Briggs recommends that policymakers in other states look to Louisiana as a model for energy policies that strike a healthy balance between increased production and environmental protection. He also points out that technological innovations often result in improved safety and cleaner operations.

These new techniques in question that have spurred environmental opposition in some parts of the country include horizontal drilling, which involves turning the drill horizontally after drilling down. This allows for multiple wells to be drilled at one time. The other technique known has hydraulic fracturing or “fracking” uses a mixture of mostly sand and water to create pressure within a well. This process cracks the shale rock and brings natural gas to the surface.

Briggs views hydraulic fracturing as an environmentally responsible method that makes the most of America’s resources. Wells that would have run dry many years ago, or that may not have been drilled at all, are now viable, he said.

Nevertheless, New York and New Jersey have both imposed bans on hydraulic fracturing in an effort to further assess the risks of contamination. Anti-drilling activists have also stepped up efforts in Pa. aimed at shutting down production, according to a report from the Commonwealth Foundation.

“Much attention has been paid to the efforts of gas companies to influence the political debate through campaign contributions and lobbying efforts,” the report says. “But anti-drilling activists—while claiming gas companies use their vast financial resources to weaken regulatory structures and silence poorly funded environmental groups— influence politicians through their own lobbying efforts and by spreading myths about drilling.”

Despite some initial missteps on the part of regulators and industry officials, Robert Bryce, a senior fellow with the Manhattan Institute, does see Pennsylvania moving in a positive direction. Over the past few months, he estimates that the drilling sector is responsible for creating thousands of new jobs for the state. The experience in Pennsylvania proves that the Marcellus Shale can be developed in a responsible and effective way, Bryce suggests

“If you want to talk about comparison, I would compare New York to Pennsylvania,” he said. “New York is moving far too slowly and the debate has been dominated by environmental groups that are using fear mongering to prevent the development of a much needed energy resource.”

The ban New York officials have imposed on new drilling and hydraulic fracturing have cost the state “tens if not hundreds of millions of dollars in tax revenue and tens of thousands of new jobs,” he said. “New York needs the revenue and the employment.”

Bryce also praised Louisiana state officials  for moving in a quick, but also highly responsible manner, to develop the Haynesville Shale. As a result of embracing new technology, “huge quantities of new gas have been introduced into the state’s market.” he observed.

Fracking has become ground zero in the battle between greens and energy producers, says Matt Patterson, senior editor at the Capital Research Center and Warren Brookes Fellow at the Competitive Enterprise Institute.

“The possibility of exploiting large, new reserves of fossil fuels, thanks to advances in technology like hydro fracking, terrifies the environmental movement,” says Patterson, who edits Green Watch for CRC, “because it undercuts the green argument that we are running out of such fuels, or that they are too expensive to exploit.  So they demonize the industry by exaggerating the dangers, hoping to scare the public and intimidate lawmakers.”

The natural gas obtained through shale “provides the opportunity for what will be a renaissance in chemical manufacturing in the United States, and Louisiana is uniquely positioned to capitalize on that,” ACC President and CEO Cal Dooley has said. “The $5.4 billion investment in expanded ethylene production capacity in Louisiana will generate a total of $10.9 billion in additional chemical industry output, bringing the state’s industry revenues to $56.9 billion and maintaining it as the country’s second-largest chemical-producing state.”

A December 2011 report from PricewaterhouseCoopers (PWC) concludes that the robust development of shale deposits could greatly reduce the price of natural gas and spark “a renaissance in U.S. manufacturing.” The report projects that “lower feedstock and energy costs could reduce natural gas expenses by as much $11.6 billion annually through 2025.”  PWC also anticipates that U.S. manufacturing companies could employ roughly one million more workers by 2025 as a result of increased demand for the products used to withdraw the gas.

Of special interest to Louisiana is the Haynesville Shale.

Since its development began at the site in 2008, Haynesville has resulted in the injection of over $22 billion into the local and state economy, according to LOGA.

“When the Haynesville Shale boom came to northwest Louisiana, it made an incredible positive economic impact on an area that already had a strong economy,” Department of Natural Resources Secretary Scott Angelle, has said. “Responsible exploration of this new prospect, even if it does not reach the same fever pitch, could mean a welcome strengthening of the northeast Louisiana economy and greater opportunities for businesses and jobs.”

Rep. William Cassidy (R-La.) is also keen on the idea of further developing shale deposits.
“Let’s start moving toward a natural gas economy,” he said. “It is a domestic energy supply with proven reserves available in an area of the world where we have the rule of law. Right now, we have a 40 year supply and the only reason we don’t go out and find more gas is because we have such a backlog. This is a clean fuel, which works well for Louisiana and the nation as a whole.”

Louisiana was placed in the top 10 percent of areas identified as the most attractive for exploration investments, according to a Fraser Institute survey of energy industry executives released last year.

Development of the Haynesville Shale figures prominently into this story.

“Louisiana’s long and distinguished history of providing energy is known throughout the world, Angelle said. “We are seeing the energy industry’s confidence in our ability to coordinate responsible management of our natural resources with economic development that benefits us all.”

Kevin Mooney is the capitol bureau reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and followed on Twitter.

 

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