A Fracking Ban Would Hurt Farmers, Families, and Western States
A nationwide ban on fracking would have significant negative impacts on America’s economy including decreases in household income, job losses and GDP decline according to a new industry study this week. The American Petroleum Institute (API) warned Thursday that a nationwide fracking ban like the ones proposed by several Democratic presidential candidates would lead to 7.5 million lost jobs by 2022 and painful increases to the cost of living for American families.
According to the new analysis by economic modeling firm OnLocation, which relied on a model originally developed by the Entergy Information Administration, a fracking ban would slash household incomes by $5,400 annually. The cumulative economic loss would be $7.1 trillion by 2030.
“The effects of a fracking ban wouldn’t just affect energy workers, it would affect those that rely on energy, which is everyone,” said Frank Macciarola, senior vice president of policy at API. “Increased costs for energy are going to affect every business in this country and every person in this country.”
Since more than 95 percent of U.S. oil and gas wells are developed through hydraulic fracturing, banning the technology would reduce the supply of energy, raising prices for consumers and operating costs for businesses.
“You can’t eliminate the very technology that has enabled the American energy revolution without damaging economic consequences,” said Lessly Goudarzi, founder and CEO of OnLocation. “As our analysis shows, assuming a full ban on fracking would threaten a U.S. recession and force American consumers to rely more on foreign energy rather than energy produced here in the U.S.”
One of the clearest of these economic consequences would be higher energy prices. The study found that the average American household is projected to spend $618 more per year on gasoline, heating fuel, electricity, and natural gas. Even though energy consumption is projected to decrease 12 percent in the next decade, energy costs would grow 14 percent in the same time.
These increased costs would reflect a shift from domestic to foreign sources of energy. Without fracking the U.S. would shift from being a net exporter of energy to importing almost 30 percent of its natural gas by 2030. This would not only increase consumer prices, but also have adverse environmental impact since energy would be produced overseas in areas with more lax environmental protections before being shipped thousands of miles to its end destination.
More directly, a fracking ban would cause massive job losses in states where energy is a major industry. Considered as a share of overall employment, these losses would be especially painful for several states in the Mountain West. Colorado would face 353,00 lost jobs, New Mexico 149,000 jobs, North Dakota 76,000 jobs and Wyoming 48,000 jobs.
“To put in context what we’re talking about, in 2022, we’re talking about job losses that are estimated to be three times the number of job losses in the worst year of the Great Recession, which was the worst year of job losses in the United States since 1945,” said Macchiarola.
“We really hope we’re wrong. This is really devastating potentially to the American economy. And it’s not simply about energy jobs, it’s about all of our jobs.”
Higher energy costs would also adversely impact farmers and manufacturers. Since farming is an energy-intensive industry, direct and indirect energy costs account for 36 to 48 percent of the total production costs for crops like corn, wheat, and soybeans. Increases to the cost of natural gas, which is also used as a fertilizer, would raise costs of farming wheat by 64 percent, corn by 54 Percent and soybeans by 48 percent, changes that overall would decrease farm income by 43 percent.
API is hoping that the report will show lawmakers the very real impacts a nationwide fracking ban like those proposed by Sen. Bernie Sanders (I, Vt.), Sen. Elizabeth Warren (D, Mass.) and Tom Steyer would have on the American economy. In a call with reporters, API CEO Mike Sommers stressed that though anti-fracking legislation was unlikely to pass in today’s Congress, political realities could change.
“Just because the Congress as situated today would not impose a fracking ban does not mean a Congress situated after 2020 would not impose a fracking ban,” Sommers said. “We have to guard against and pendulum-proof against whatever political environment we may find ourselves in.”
API’s strategy is part of a broader industry push to promote the benefits of oil and gas during a Democratic primary that is increasingly hostile to energy production. Earlier in the week, Western Energy Alliance published an open letter to Democratic candidates in the New York Times, explaining the benefits of affordable American energy and arguing that it would be criminal not to produce oil and natural gas. (Western Wire is a project of Western Energy Alliance).
“Without oil and natural gas, people can’t get to school and work, the lights go dark, smartphones cease to exist, medicine cabinets and grocery store shelves go bare,” said Kathleen Sgamma, president of Western Energy Alliance. “We know that people don’t understand how oil and natural gas enables just about every product and service they use every day, but just because we’re taken for granted doesn’t mean we should be vilified.”