Dec. 6 (Bloomberg) -- Producing natural gas from shale will support 870,000 U.S. jobs and add $118 billion to economic growth in the next four years, according to a report from IHS Global Insight.
Gas from shale, which accounts for 34 percent of U.S. output, also will contribute $57 billion in federal, state and local taxes by 2035, or $933 billion in the next 25 years, according to today’s IHS report, commissioned by America’s Natural Gas Alliance, a Washington-based industry group.
Shale gas is extracted using hydraulic fracturing, a process in which millions of gallons of chemically treated water and sand is forced underground, breaking up the rock to free trapped gas. Industry expansion is adding jobs in an otherwise disappointing economy, said John Larson, a vice president at Lexington, Massachusetts-based IHS, a management consulting company for the energy industry.
“Shale gas combines a capital-intensive industry with a broad domestic supply chain,” Larson said in an interview. “We think that these jobs through 2015 are net new jobs because of high unemployment.”
Environmental groups have said the process, also called fracking, has tainted drinking water in states such as Pennsylvania, where 4,100 wells have been drilled. About 1,900 people, most opposed to fracking, attended a New York City hearing on Nov. 30 to consider state rules for drilling.
Food and Water Watch, which advocates a ban on fracking, said IHS didn’t provide a detailed methodology, making it impossible to validate the projections. The report also ignores potential job losses, Emily Wurth, the Washington-based group’s water policy director, said today in an e-mail.
“The analysis fails to account for the job losses to agriculture and tourism caused by intensive shale gas development,” Wurth said.
Financial forecasts by IHS include direct jobs in the drilling industry plus an “employment multiplier.” For every direct job added, more than three indirect and induced jobs are created, according to the report.
The forecast excluded potential drilling in New York, which has placed a moratorium on fracking while it develops drilling regulations, or the impact of U.S. service companies supplying drilling in Canada, Larson said.
“Given those sort of factors, we feel that what we’ve presented here is a very conservative estimate,” Larson said.
The shale-gas contribution to U.S. gross domestic product will triple to $231 billion in 2036 from $76 billion last year, the report found. Lower natural gas prices as shale boosts supply will cut U.S. electricity costs by an average of 10 percent, the report found. Lower prices will raise industrial production 2.9 percent by 2017 and 4.7 percent by 2035.
“IHS appears to have included payments to landowners as capital expenditures by the gas industry that create direct jobs,” Wurth said. “Lease and royalty payments do not create direct jobs and do not lead to any indirect jobs.”
Food and Water Watch found in a November report that projections for the number of shale-industry jobs in New York led to a “gross exaggeration” of the gains, Wurth said.
A 2011 report by the Public Policy Institute of New York State, an Albany-based research group, found that by 2018, developing 500 shale gas wells a year in five counties would create 62,620 jobs. After correcting the “flawed” job multiplier, the number was closer to 6,656 jobs, Wurth said.
“Very few people have analyzed these reports,” Wurth said. “That’s unfortunate because a lot of elected officials take these studies as factually based.”
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