Finding In Favor Of Shale Gas

on June 08, 2011 at 11:30 AM

The current U.S. boom in shale-gas extraction has significant economic benefits that heavily outweigh the costs of air and water pollution caused by the industry, a new report said on Tuesday.

The analysis from the Manhattan Institute, a free-market advocate, said a typical well in the gas-rich Marcellus Shale field yields about $4 million in economic benefits compared with only $14,000 in environmental costs.

“The cost of these environmental impacts is far smaller than the economic benefits that drilling can provide,” the report said.

It argues that the economy of New York, the only state to impose a moratorium on shale-gas drilling, is being unnecessarily deprived of thousands of jobs because of worries that shale drilling carries environmental risks.

“The current moratorium is far costlier than its proponents, or even its opponents, realize,” said the report, which was released ahead of the July 1 target date for a revision of an environmental impact statement on shale drilling released in 2010 by the New York state Department of Environmental Conservation.

Hydraulic fracturing (“fracking”) coupled with horizontal drilling has unlocked vast domestic reserves of shale gas, potentially reducing U.S. dependence on imported petroleum while cutting greenhouse-gas emissions.

But critics argue that the drilling industry is contaminating ground water and air with chemicals used in fracking, endangering the health of people who live near gas wells. Opponents say the industry should face tighter regulation, or even a national moratorium, until scientists establish whether the process is safe.

The industry contends there has never been a confirmed case of water contamination from fracking, saying that chemicals are shielded from aquifers by multiple layers of steel and concrete in drill casings, and are released into the shale thousands of feet below domestic water supplies.

Jan Jarrett, president of PennFuture, an environmental group, said the economic benefits of shale gas could exceed the environmental costs if the industry was tightly regulated but that the report significantly underestimates the environmental damage caused by shale drilling.

“This report low-balls the environmental costs,” Jarrett said.

She rejected an estimate used by the report that clean water is worth $341 a year to the average home owner, saying that contaminated water can erase the value of a house, and so clean water should be valued much more highly than stated.

“If you don’t have potable water, you can’t sell your house,” she said.

The report bases its conclusions on development of the Marcellus Shale in Pennsylvania where some 2,900 wells have been sunk since 2008. It estimates the average economic value added per well at $3.96 million in 2010 dollars.

It adds $46,000 per well based on the avoidance of burning coal and the community health impacts that will be avoided by cleaner-burning natural gas.

The environmental costs per well average $2,796 in air impacts for upstream emissions; $7,245 in air impacts for diesel use during fracking; $193 in water pollution, and $3,943 in forest disruption, totaling $14,178, the study found.

If New York approved fracking in its portion of the Marcellus, it could expect the industry to add $862 million to the state’s economy by 2015, generating more than 15,000 direct and indirect jobs, according to the study. Tax revenues would grow by $214 million over the same period.

In May 2010, Pennsylvania State University estimated that the Marcellus industry would add 111,000 jobs and $987 million in tax revenues to the state by 2011, rising to 211,000 jobs and $1.87 billion in tax revenue by 2020.