By Robert Bryce
Friday, December 19, 2014
Amid the many explanations offered by New York governor Andrew Cuomo and his various lieutenants about their reasons for imposing a permanent ban on hydraulic fracturing in the state, one of them made me laugh out loud.
“We lack the necessary data,” said New York’s health commissioner, Howard Zucker. I’ll discuss why that claim made me chuckle in just a moment. Before turning to that, let’s be clear: Cuomo’s decision is not surprising, and it’s not very significant either.
It’s hardly surprising that a liberal Democratic governor in one of America’s most liberal states chose to ban fracturing. Indeed, in most liberal/left groups, hatred of the oil-and-gas sector isn’t just popular, it’s a membership requirement. On Thursday morning, Dan Henninger of the Wall Street Journal put it exactly right when he told Charles Payne on Fox Business that “the Democrats have been captured by the Greens.”
New York has had a moratorium on hydraulic fracturing for years. To change that policy now, after all the campaigning that has been done in the state by environmental groups, would have been a truly surprising move. That Cuomo formalized that moratorium and made it official is not surprising in any way.
As to the significance of the move, it has made environmental groups giddy and added a tiny dollop of political theater to the discussion about domestic oil and gas development. It’s also clear that the move is negative for the economy of upstate New York. In 2011, Timothy Considine and two colleagues were asked by the Manhattan Institute (where I’m a senior fellow) to estimate the economic opportunities of shale development. Considine’s report found that shale-gas drilling in New York would spur more than $11 billion in economic output and create as many as 18,000 jobs. Now, thanks to Cuomo’s move, the possibility of that economic development — along with those thousands of jobs — has vanished, probably for decades.
But in the big picture, the ban on fracturing in New York won’t matter much for domestic energy production. To understand why that’s true, we need only compare the attractiveness of New York as a place to get into the oil-and-gas sector with that of other states. Given the political risks of operating in New York, drillers have simply opted to take their rigs, workers, and capital and put them to work elsewhere. Sure, New York has lots of oil and gas in the Marcellus shale that could be extracted. But there are plenty of hydrocarbons in the Marcellus shale in Pennsylvania, too. Ohio has the Utica shale, North Dakota has the Bakken, Texas has the Eagle Ford, Louisiana has the Haynesville. Why would a driller consider locating in New York, given the political uncertainty? The answer is obvious: They haven’t, and now, thanks to Cuomo, they won’t.
Look at what has happened in New York’s neighbor to the south, Pennsylvania. Oil- and gas-related jobs in the Keystone State now outnumber steel-related jobs. More than 21,000 Pennsylvanians are currently working for oil and gas companies. And they are making good money — about $71,000 per year, on average.
Further, the amount of natural gas now being produced in Pennsylvania is staggering. Since about 2009, gas production from the Marcellus shale in Pennsylvania alone has grown by nearly 16 billion cubic feet per day. That volume of natural gas is roughly equal to the amount of gas being produced by Iran.
On the national level, the number of jobs that have been created in the drilling sector is similarly impressive. According to the energy consulting firm IHS, between 2008 and 2012, the natural-gas industry alone added 2.1 million jobs here in the U.S. And last fall, Wallace Tyner, an energy economist at Purdue University, estimated that the shale revolution was adding some $473 billion per year to the U.S. economy, or about 3 percent of GDP. That’s a huge stimulus, and all of it has happened without New York.
As for Zucker’s claim that there’s a lack of data about hydraulic fracturing, let me explain why it’s so ludicrous. The process has been used more than 1 million times on oil and gas wells here in the U.S. If fracturing is as dangerous as many environmental groups are claiming, then hundreds, perhaps thousands, of domestic water wells would have been contaminated by now. And surely the public would have been made aware of those many contaminated wells. That hasn’t happened.
In 2011 Lisa Jackson, who then headed the federal Environmental Protection Agency, testified before the House Oversight and Government Reform Committee. During that appearance Jackson said, “I’m not aware of any proven case where the fracking process itself has affected water.”
In 2011, the MIT Energy Initiative released a 170-page report on natural gas that addressed hydraulic fracturing directly. It said:
The fracturing process itself poses minimal risk to the shallow groundwater zones that may exist in the upper portion of the wellbore. . . . The physical realities of the fracturing process, combined with the lack of reports from the many wells to date of fracture fluid contamination of groundwater, supports the assertion that fracturing itself does not create environmental concerns.
What’s clear about Cuomo’s decision to permanently ban hydraulic fracturing in New York is that politics — and by that, I mean the politics of hard-left Greens – has triumphed over sensible energy policy and economic development.
The good news in this story is that New York’s ban won’t stop the shale revolution. Thanks to the ongoing development of shale oil and shale gas in other states, the U.S. has effectively broken OPEC. In addition, it now has an energy-price advantage over nearly every other country in the world.
So let’s agree to ignore the news out of New York. The ban on hydraulic fracturing is not at all surprising, and in the long run, it’s not going to be that significant to the U.S. economy.