Shale gas by the numbers

Add another report to the growing number that say shale gas is an economic boon to the United States.

A paper by a group of economic graduates from Yale University, published this month in Oil & Gas Investor, estimated that consumers saved $100 billion a year in 2011.

Prices have dropped since then, so the savings should be greater now.

But the group, writing as the Yale Graduates in Energy Study Group, acknowledges that the drilling comes with costs to society, too.

They attempt to assess the cost-benefit ratio of shale gas in their latest paper, The Arithmetic of Shale Gas, a wonky piece of economic analysis that looks at the benefits — increased tax revenues and lower energy costs for manufacturing, trade and household consumption — as well as the risks, including spills, contaminated groundwater and air pollution.

Even considering the cost of reparations for any accidents, one group member, University of Houston energy economist Edward Hirs III, said a report released earlier this week by PricewaterhouseCoopers US understated the benefits of shale gas drilling.

That report predicted shale gas drilling would cut costs significantly for the chemical industry and ultimately ripple through the rest of the manufacturing chain, even prompting some companies to move production back to the United States.

Hector Rivera, president and CEO of the Texas Chemical Council, said
low natural gas prices related to the shale gas boom have spurred an estimated $15 billion in planned expansions at Texas chemical companies.

Hirs said in an email that plants in Pennsylvania, Illinois and Indiana also are expanding.

But he and his fellow Yale economists acknowledge that the economic gains have a downside.

They said they reviewed current studies and reports on “accidents, misuse of technology and poor well design and installation” and relied upon a 2011 report prepared by an advisory board for the Secretary of Energy which found 19 instances of problems with water contamination associated with hydraulic fracturing in recent years.

Relying on that and several other studies, the Yale study group’s report finds relatively little risk but ultimately assumes that the cost of cleanup in a given year would be roughly $250 million.
Overall, they conclude, the economic benefit of shale gas drilling exceeds cost to the community by 400-to-1.