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Fracking in Pennsylvania and the Effects of Exporting Liquefied Natural Gas

March 10, 2015
Most Pennsylvanians, and increasingly more Americans, are familiar with the fracking debate. Hydraulic Fracturing, commonly called fracking, is a method of extracting natural gas from deep rock formations by applying pressure to the underground rock in order to create small cracks and release the gas. The finished product is used for fuel. In 2008 drillers began to tap into the vast natural gas reserves of the Marcellus Shale, a rock formation that spans through Pennsylvania, Ohio, West Virginia, New York, and even parts of Maryland and Virginia.

By Helen Levins, SAS’14

Since then, the industry has grown rapidly in Pennsylvania. In 2008, there were only 200 wells in operation in the state, but by 2013, there were over 6,600.[i] Critics of this trend have reason to be concerned. There is a risk of contaminating drinking water reserves, disrupting forests and private property from drilling and laying pipelines, and generating seismic activity that has been linked to earthquakes. Yet, proponents of natural gas have plenty of reasons to support expansion. The industry creates jobs and generates revenue. Natural gas emits less carbon than alternatives like coal and its vast domestic supply has the potential to make the country energy self-sufficient. Health and environmental concerns are a huge part of the ongoing debate, but in this post, I will focus on the impact of current trends on Pennsylvania’s economy, in particular the exporting of liquefied natural gas.

Pennsylvania has a lot at stake. It sits atop of 35% of the Marcellus Shale, more area than any other state, and its lawmakers have been more accommodating to the oil and gas industry than its neighbors. New York and Maryland, for example, halted drilling until thorough environmental and public health assessments could be drawn. A main reason why Pennsylvania invited the industry was because many of its counties’ economies were struggling. For more than a century, areas of the state have experienced harsh economic declines after the collapse of their once-booming industries. The oil, steel, timber, and coal industries were once significant sources of revenue and jobs but when business dwindled, they left many small cities to become blighted ghost towns. The Marcellus Shale offered the hope of new growth, capital, and energy self-sufficiency in many of these regions.

Unfortunately, not all financial reports have been optimistic. Some gas companies have experienced less than ideal returns on their investments. In 2012, Exxon and other gas companies reported that increasingly low prices for the product in the United States resulted in net losses for producers.[ii] Thus, companies began to look abroad where prices were higher and they could begin to make profits again. Companies pushed for permits to lay pipelines across the state so that liquefied natural gas could travel to refineries and be processed for shipping abroad. In Pennsylvania, this is where the idea of self-sufficiency becomes muddled. If Pennsylvania begins to fast track the building of pipelines and export centers, will it lose sight of its goal to provide clean energy for itself at home? Will it inadvertently cause prices to rise for domestic consumers and become a pseudo colony that exploits its natural resources for sale abroad? There are no guarantees for a bright future. But despite worries, exporting natural gas does not have to be a zero-sum game. Voices from the natural gas lobby report that exporting natural gas could create 110,000 new jobs and $20 billion dollars annually, while still allowing the U.S. to use natural gas for their own consumption.[iii] Recently, the GOP controlled House approved legislation that would favor liquefied natural gas exports by allowing them to automatically ship to countries that do not have free-trade agreements. Similar bills have not yet been approved in the Senate. As this political debate unfolds, energy companies will continue to use pipelines to export natural gas to Canada and Mexico and ship elsewhere to the extent that their permits allow.[iv]

Figure 1

Major Trade Movements 

So what can Pennsylvania regulators do to make the most of their abundant natural gas reserves?  For starters, they should support projects that exemplify the model of energy self-sufficiency that they originally admired. Currently there is one such success story. In 2013, the Mehoopany Proctor and Gamble manufacturing plant in Northeastern Pennsylvania (which makes Pampers, Bounty, and Charmin products) became 100% energy self-sufficient off of natural gas from the Marcellus Shale.[v] While this example shows the huge effort needed to make small changes, it also shows that sustainability and self-sufficiency goals can be achieved. Next, lawmakers must ensure that Pennsylvanians are not exploited for their resources. The interests of the oil and gas industry are important, but investment strategies, tax schemes, and impact fees should be designed to provide long-term benefits for the Pennsylvania counties that host drilling operations.

By taking these factors into account and considering the health, environmental, and other socio-economic concerns, lawmakers will be able to make energy decisions with better foresight. Natural gas is likely here to stay, and its worldwide use will increase before it decreases. By making responsible decisions today, Pennsylvania could benefit from providing natural gas for years to come.

 



[i] Environmental Law Institute. Washington & Jefferson College Center for Energy Policy and Management. Getting The Boom Without The Bust: Guiding Southwestern Pennsylvania Trhough Shale Gas Development, 2014, http://www.eli.org/sites/default/files/eli-pubs/getting-boom-final-paper-exec-summary-2014-07-28.pdf.

[ii] Jerry A. Dicolo and Tom Fowler. “Exxon: ‘Losing Our Shirts’ on Natural Gas.” The Wall Street Journal, June 27, 2012, http://online.wsj.com/news/articles/SB10001424052702303561504577492501026260464?cb=logged0.8380982591770589.

[iii] Toby Mack. “Compelling case for exporting crude oil and LNG.” The Hill Blog, August 6, 2014, http://thehill.com/blogs/congress-blog/energy-environment/214364-compelling-case-for-exporting-crude-oil-and-lng#ixzz3A2xa2Que.

[iv] “U.S. Natural Gas Exports and Re-Exports by Country,” last modified July 7, 2014, http://www.eia.gov/dnav/ng/ng_move_expc_s1_a.htm.

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