Natural gas boom projected to fuel job growth

A nationwide boom in natural gas production is set to fuel nearly 900,000 jobs and add roughly $1,000 to annual household budgets by 2015, according to a new industry study released today.

The boom in shale gas production nationwide – exemplified by modern-day drilling boom towns that have sprung up in Pennsylvania, North Texas and western states – is a bright spot in the U.S. economy, said the study’s lead author, John Larson, vice president of IHS Global Insight, an energy research firm based in suburban Denver.

“Shale is really proving to be a very big job creator. It really stands in sharp contrast to many sectors of the economy,” Larson said. “During a significant economic downturn – the most significant since World War II – that’s pretty remarkable.”

Broader look

Although previous reports have focused on the economic boosts in specific regions where natural gas production has surged, the IHS analysis commissioned by America’s Natural Gas Alliance is the broadest look at nationwide effects. The alliance is an industry group that promotes increased use of natural gas.

Roughly one-third of the natural gas produced in the U.S. is extracted from dense shale rock, such as the Marcellus formation in the Northeast and the Barnett in North Texas. But government and independent energy analysts widely expect that volume to grow as shale production costs drop below those for conventional gas wells.

IHS predicts that shale gas will make up 60 percent of domestic production by 2035, with much of it extracted using horizontal drilling and hydraulic fracturing techniques that involve blasting water, sand and chemicals deep underground to break up rock and release the fossil fuels trapped inside it.

According to the IHS report, capital expenditures tied to shale gas production amounted to $33 billion in 2010 and will total $1.9??trillion over the next 25 years.

The firm also concluded that shale gas production supported 600,000 jobs in 2010, including oil field workers directly employed by the industry, as well as indirect pipe fitting, steel manufacturing and other jobs.

Multipliers at issue

Some lawmakers have been critical of multipliers used to predict the add-on jobs tied to workers directly employed by the industry. Larson defended IHS’ accounting techniques as conservative.

The assumptions underpinning the study, for instance, discount potential shale discoveries that haven’t been made. IHS also assumed that there would be no new production after 2010 in New York state, where policymakers are considering a broad natural gas drilling ban.

Natural gas backers such as America’s Natural Gas Alliance have widely touted a 100-year supply of the fuel in U.S. borders.

But environmental concerns about the techniques used to extract natural gas are one possible check on growth. Conservationists warn about the high water demands of hydraulic fracturing and have raised concerns about disposal and treatment of wastewater.

There also are risks that methane could escape from wells and contaminate groundwater supplies.

Fears about those problems are feeding the possible drilling ban in New York state and have spread to regions that have long histories with the industry. For instance, Southlake, Texas, just imposed tough drilling rules that Chesapeake Energy cited in deciding to abandon production in the town.

Other findings

Among the study’s other findings:

Shale gas production contributed $76 billion to the U.S. gross domestic product in 2010, but IHS predicts that will jump to $118 billion by 2015 and $231 billion in 2035.

Tax revenue from shale gas production, which accounted for $18.6 billion to federal, state and local governments last year, is projected to hit $57 billion annually by 2035 – or $933 billion total over the next 25 years.

Benefits also include cheaper power bills for consumers. Savings from lower gas prices are projected to add an annual average of $926 per year in disposable income to U.S. households between 2012 and 2015.