Fracking Ban? Not a Pretty Picture|
A ban on fracking has been proposed by leading candidates for President, the House and the Senate. So far none have defined what that might mean for Americans, our economy and our national security. Drawing from previously published data sources, we have compiled a picture of what a fracking ban might mean.
Banning fracking would mean the end of all US production of oil, natural gas and natural gas liquids from shale within about four years, the time it would take from the start of the ban until existing shale wells are played out.
A ban would result in the loss of 70%, or 9 out of 13 million barrels per day, of U.S. crude oil production; 70% or 70 out of 100 billion cubic feet per day (bcf/d) of natural gas production; and 60%, or over 4 out of 6.5 million barrels per day of natural gas liquids such as propane, ethane and butane.
Here are some of the potential major impacts we see.
There will be massive loss of jobs in crude oil production, infrastructure construction and the supply chain. In the construction and production supply chains alone, more than 1.6 million jobs will be lost, or 200,000 jobs per each million barrels of oil per day not produced. Jobs will be lost in all 50 states. In natural gas production and related infrastructure and its supply chain, over 600,000 jobs would be lost at a rate of 10,000 jobs per bcf/d not produced. Over 750,000 jobs would be lost from cancelled shale gas-dependent chemical industry production facilities, along with $57 billion of lost payroll annually. Hundreds of thousands more construction jobs would be lost from cancelled pipeline, LNG and crude oil export terminal projects now planned or under construction.
World crude oil prices will likely rise to pre-shale levels of $100 - $150 per barrel or higher. This will cause fuel prices to at least double, with gasoline prices rising to the vicinity of $5 per gallon. About 70% of the price of gasoline is in the cost of crude oil. Natural gas prices for home heating and cooking will quadruple, driven by market prices now under $2.50 per thousand cubic feet (mcf) rising back to the vicinity of $10.00 that was typical in the 2003 - 2008 pre-shale timeframe. Electricity prices will follow suit as the cost of fuels rise. Rising household energy costs will reduce consumer purchasing power. Increased energy costs to business and industry will add to the price of food, goods and services and the overall cost of living. The cost of everything that arrives by ship, train, plane or truck will rise and be passed through to consumers in the price of goods. Airline ticket prices will rise. About 20% to 30% of airlines' operating cost is jet fuel. Expect ticket prices to jump by a similar amount.
Until far more renewable capacity can be brought online, America will likely be more reliant on coal for a greater portion of our power generation. In 2006, coal supplied 50% of power versus 20% for natural gas, compared to 27% and 35% respectively today. That positive trend will be reversed. Returning a larger share of power generation to coal would add up to 1 billion tons annually of carbon dioxide emissions into the atmosphere, reversing the historic gains in CO2 reduction achieved over the past two decades from fuel switching. Developing Asian countries, by far the greatest source of greenhouse gas emissions, will be deprived of natural gas from US LNG, and will pay higher prices for LNG from other nations in the absence of American supplies. This will drive greater dependency on coal for power generation with resulting greatly increased carbon emissions. Without access to affordable US LNG, growing populations in the poorest nations - particularly in South Asia and Africa - will continue to burn wood and other biomass resulting in higher carbon emissions and ongoing deforestation.
Recent and planned investments in the vicinity of $200 billion in US shale gas-dependent petrochemical manufacturing capacity will be stranded or cancelled. The same will occur with LNG and crude oil export infrastructure in place, under construction or planned - with loss of another $200 billion of investment - because of unavailability of natural gas and crude oil for export. Hundreds of billions of dollars of production infrastructure investments - well complexes, gathering systems, storage and separation assets would be stranded. Large fleets of well drilling, pumping, hauling and storage equipment and specialized pipeline construction equipment would be devalued. In all such cases, investors large and small would see their investments - both in physical assets and equities, greatly devalued or rendered worthless.
The U.S. Economy
Loss of employment, investment, purchasing power and household wealth would likely tip the economy into recession. Before fracking, in 2008 the U.S. imported over $400 billion dollars of crude oil and petroleum products more than we exported. A ban will result in an early return to that greatly increased trade deficit, and along with it upward pressure on interest rates.
America's Geopolitical Standing
We will return to dependency for oil on the Middle East and particularly the Persian Gulf. This will again make us hostage to the geopolitical instability of the region, and reliant on our military to defend Middle Eastern producing allies and sea lanes. We would rely heavily on imported LNG from Russia and the Middle East, at substantially higher cost than US shale gas, and produced under much less careful environmental controls. Without access to US LNG, Europe will remain completely dependent on Russia for natural gas.
Loss of local, state and federal tax and royalty revenue
Billions of state severance tax and impact fee revenues will be lost, negatively affecting producing states' budgets and public services. State and federal income tax revenues will be lost from laid off energy workers' incomes and loss of energy producer and infrastructure company corporate incomes. Royalty revenues from oil and gas production on federal or state-owned land will be lost to federal and state governments. Property tax revenues will be lost resulting from stranded, abandoned or removed physical energy infrastructure. Royalty income to private mineral rights owners will be lost, along with income taxes on those royalties.
Taken together, these frack-ban outcomes paint a picture of profound impact on the American people, our economy and our national security. Please join us in spreading the word.