Protecting Louisiana’s Economy From The Effects Of Offshore Drilling Ban

In order for the economic devastation the Gulf oil spill will cause Louisiana to be minimized, energy sector jobs similar to those lost to the ban on offshore drilling need to be created on land and in shallow waters.  One of the most promising ways to do that is with the expansion of natural gas production, accompanied by campaigns to increase the market share of that energy segment.

 

Louisiana has been blessed with a recently discovered natural gas play in the Haynesville Shale near Shreveport.  It has been one of the few bright spots in an otherwise blighted state economy, and its contribution to that economy are not insignificant.  As Dr. Loren Scott, noted and respected economist, reports –

 

Much excitement has been created in Louisiana’s oil and gas extraction sector by the discovery of the Haynesville Shale deposit in the northwestern part of the state. In Louisiana, it is located primarily in four parishes—Caddo, Bossier, DeSoto, and Red River. What has especially bolstered excitement about this play is the first estimate of its size. One estimate suggests it holds 251 tcf of natural gas, making it the largest natural gas find in the U.S. Some of the initial wells have produced prodigious amounts of natural gas—as high as 24 mmcfd—though the average decline rate in the first year has been calculated at 80.4 percent.  The purpose of this report is to capture and measure the direct and indirect effects on the Louisiana economy from the activities of the extraction firms operating in the Haynesville Shale in 2009. We received data from seven firms representing about 70 percent of the wells drilled in 2009. On the basis of this large sample, we estimated total expenditures by all firms operating in the shale and plugged these data into the RIMS II model to estimate the annual impacts on: (1) new sales for firms in the state, (2) new household earnings for residents in the state, (3) new jobs in the state, and (4) tax collections by the state and local governments.

 

We can summarize the impacts on the Louisiana economy in the following way:

 

• We estimate that during the year 2009, the extraction activity of these seven firmsgenerated approximately $10.6 billion in new business sales within the state of Louisiana.

• New business sales in turn created new household earnings for residents of the state. As a result of these activities, nearly $5.7 billion in household earnings was created in 2009.

 

Almost $11 billion in new business within Louisiana, with no significant growth into new markets!

 

And Louisiana is not alone.  Texas is reaping the benefits of the Barnett Shale play, and New York, Pennsylvania, Maryland, West Virginia and Kentucky sit on a 34 million acre shale formation knows as the Marcellus play.

 

The formation is estimated to hold as much as $7 trillion in recoverable natural gas, “enough to pay off the national debt,” according to Rep. Paul Kanjorski, D-PA.

You might expect there would be dancing in the streets in Pittsburgh and Philadelphia, but rather there are moves afoot to limit the production of that gas; moves that will detrimentally affect Louisiana and others as well.  Legislation has been introduced by Sen. Bob Casey, D (of course) – PA to significantly limit the use of hydraulic fracturing, the means by which gas and other fossil fuels have been recovered from shale for over 50 years and representing over a million wells.  He is arguing (incorrectly) that the drilling process creates a threat to groundwater safety, especially in Pennsylvania, where private shallow wells for drinking water are common.

 

Never mind that fracturing occurs thousands of feet below the bottom of those wells, and that casing segregates the well and protects the aquifer.  Never mind that with over a million wells drilled, no instance of groundwater contamination has ever been linked to the process.

 

We have described the process of hydraulic fracturing before, but briefly, the process entails drilling a vertical well thousands of feet deep, turning it horizontally through the shale formation, forcing water containing about ½% benign chemicals into the shale to fracture it and hold the fractures open, and extracting the gas.  The process is more clearly explained in this graphic.

 

But as is, unfortunately, so often the case, facts do not outweigh ideology, and Sen. Casey is simply another opponent of fossil fuels who will try any means to stop their production.  He is joining others who are citing the “hazardous” chemicals added to the frac’ing water.  This article and its fact sheet describe the truth about those chemicals.

 

So the production of natural gas from shale is environmentally safe, and it provides one of the cleanest burning fossil fuels available.  It has contributed to the wealth of Louisiana and helped protect the state’s economy from what could have been, and may yet become, a devastating economic downturn.  We use it to heat our homes and workplaces, to power industries, and to generate electricity.  What else can we do to increase the share of the energy market held by natural gas?

 

One of the best available but woefully underutilized uses for natural gas is as a transportation fuel.  Vehicles fueled with natural gas suffer no loss of performance compared to their diesel and gasoline powered brethren, and require less maintenance because the fuel burns cleaner.  We’ve endorsed the use of CNG (compressed natural gas) at this site before, most notably here and here, and will continue to.  We believe that every fleet vehicle in Louisiana should be fueled by CNG – police vehicles, fire vehicles, EMS vehicles, transit buses, school buses, taxis, delivery trucks…  The list is almost endless.  Louisiana needs to encourage municipalities and private investors to install the infrastructure fueling stations and to utilize the relatively simple and inexpensive conversion process to make this possible.

 

With the coming recession in the oil exploration industry, Louisiana should lead the nation in the conversion of fleet vehicles to natural gas, thus providing new jobs that will be sorely needed, and a new market for this abundant natural resource.

 

Hat Tip – Mark Tapscott, LOGA

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