Jan. 26 (Bloomberg) -- The boom in natural gas produced from shale rock will add U.S. jobs, though whether it supports as many as President Barack Obama predicts depends on how you count them, economists say.
In his State of the Union address this week, Obama said hydraulic fracturing, in which a mix of water, sand and chemicals is injected underground to free gas trapped in rock, could support more than 600,000 jobs by the end of the decade.
The estimate was based in part on a forecast by energy researcher IHS Global Insight, which counts people who actually drill as well as “indirect jobs” in associated industries such as lawyers, cement makers and real estate agents, said John Larson, a vice president at IHS and the study’s lead author.
“Our preference is to stick to direct jobs,” Mark Muro, policy director of the Metropolitan Policy Program at the Brookings Institution in Washington, said in an interview. “Once one gets into indirect and induced, it becomes very hard to sort out truly new from reconfiguration of existing jobs.”
According to the IHS report, shale gas production in 2020 will be responsible for 248,721 direct jobs, 369,882 indirect jobs and 504,738 so-called induced jobs, up from 148,143 direct jobs, 193,710 indirect jobs and 259,494 induced jobs in 2010.
Induced jobs are driven by gains in direct drilling jobs and include work in areas such as food services, entertainment and housing, according to IHS.
By Trade Group
The December study was prepared for America’s Natural Gas Alliance, a Washington-based industry group.
“We have a supply of natural gas that can last America nearly 100 years,” Obama said in the Jan. 24 address. “And my administration will take every possible action to safely develop this energy.”
While jobs are being added in oil and gas extraction, the sector is “relatively labor-unintensive,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., wrote in a Jan. 20 research note.
“Because oil and gas extraction is so capital intensive, it is a big deal for the capital spending outlook,” Feroli wrote. “The flip side is that it probably won’t be a major driver of employment.”
Payrolls in mining last year rose by 89,300, the most since 1981 and up 13 percent from 2010. Oil and gas extraction accounted for 25,200 of those jobs, the biggest gain in 30 years, according to the Labor Department.
North Dakota Growth
New jobs in oil and gas were added in places such as North Dakota, where producers have spurred a fivefold increase in the Bakken, a geologic formation that stretches from southern Alberta to the northern U.S. Great Plains, and in Pennsylvania, where drillers are tapping the Marcellus Shale, a formation that may hold enough gas to supply the U.S. for six years.
Still, job gains in oil and gas are likely to be small compared to the overall economy, according to Feroli.
According to the IHS report, the shale gas sector will account for 1.1 million jobs in 2020, an 87 percent increase over 2010, when so-called induced jobs are counted, Larson said.
“Look at a small town somewhere where a major manufacturer has left and see all the businesses shuttered up,” Larson said in an interview. “These are real jobs. They’re meaningful jobs. They’re important jobs.”
Larson said he briefed White House officials on the report last week.
Hydraulic fracturing or fracking has been criticized by environmental groups such as Boston-based Environment America, for threatening drinking-water supplies. Stephen Fuller, director of the Center for Regional Analysis at George Mason University in Arlington, Virginia, said job forecasts may not include potential environmental harm from fracking.
“It could be the environmental cost is enormous and totally outweighs the economic benefit that’s been touted,” Fuller said in an interview. “People do count things differently, sometimes to make their case.
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