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Shale Gas Revitalizing U.S. Manufacturing Industry…While Environmentalists Have Their Say

Although some states are rolling back or banning fracking due to potential environmental impact, overall, U.S. shale gas development and production is surging and helping to trigger a resurgence in manufacturing.

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Among the states that have approved hydraulic fracturing — or fracking — to extract natural gas from the shale rock layers deep beneath the earth’s surface are North Dakota, Ohio, Pennsylvania, Texas, and Louisiana. All of these states have seen economic and job growth as a result of the fracking activity.

Nevertheless, health and environmental risks posed by fracking have been cited by those who have tried to roll back and/or ban the practice in states including California, Illinois, Maryland, and North Carolina. In late December, New York decided to ban fracking, concluding that the environmental costs outweigh the economic benefits. Opponents of fracking agree, saying that the process allows dirty water to escape into public water resources. Proponents of fracking disagree, citing a Yale University study that indicates shale gas development would add billion a year to the national economy at current production rates, and that environmental mishaps could be limited and mitigated.

When it comes to manufacturing, shale gas development has been a boon. According to a report by PwC released in early December 2014 — Shale Gas: Still a Boon to U.S. Manufacturing? — the surge in shale gas production will save manufacturers billions of dollars annually and will result in long-term manufacturing employment gains.

PwC estimates an annual cost savings of $22.3 billion by 2030, assuming a high natural gas recovery and low price scenario. In its 2011 study, PwC had estimated an annual cost savings of just half that amount — $11.6 million.

In terms of job creation, PwC estimates that continued shale gas activity could create 930,000 shale-gas-driven manufacturing jobs by 2030 and 1.41 million by 2040. In its 2011 study, PwC had projected some one million jobs by 2025.

“There’s no doubt that the shale gas boom in the U.S. helped trigger a resurgence in manufacturing,” said Robert McCutcheon, PwC’s U.S. industrial products leader. “Reducing costs, creating jobs, and supporting investments and innovations are among the many impacts this game-changing resource has brought to the U.S. manufacturing space. Assuming shale continues to serve as a catalyst for the manufacturing sector, we revised our cost savings and longer-term employment estimates significantly upward, and could see those numbers go even higher as more businesses and global interests look to exploit shale opportunities.”

Among the industries continuing to benefit are energy-intensive manufacturing sectors such as metals, chemicals, and petrochemicals, which all use natural gas as feedstock. According to the report, growing prospects for building pipelines for the infrastructure that’s needed to support natural gas demands in the U.S. could also bring additional benefits to U.S. manufacturers who support those build-outs.

“More companies are publicly disclosing a link between natural gas production as a material advantage for their business and a source for growth in demand for their products,” noted McCutcheon.

“Thanks to the shale gas production boom, the United States is the most attractive place in the world to invest in chemical and plastics manufacturing. It’s an astonishing gain in competitiveness,” said Cal Dooley, president and CEO of the American Chemistry Council in an American Chemistry Council press release.

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