Opinion: Economic consequences of a fracking ban
At a time when you thought we would be celebrating the shale production that has reduced U.S. dependence on imported oil and gas and lifted our economy and created millions of jobs, Joe Biden and Bernie Sanders are talking about clamping a national ban on fracking.
Any kind of ban on fracking would cause severe damage to our stressed economy and would result in negative environmental impacts.
Fracking is the technique of injecting water and sand and some chemical additives into natural gas and oil wells in order to fracture the rock and capture trapped oil. This allows oil and gas to be extracted from areas beyond the large pools traditional drilling aimed for. It also allows for obtaining oil and gas from old wells that had been abandoned using the traditional drilling technique.
Today, approximately 95% of US wells are drilled using fracking.
Fracking has led to the United States becoming the largest producer of oil, at 17.9 billion barrels per day. Saudi Arabia is second at 12.4 billion and Russia third with 11.4 billion.
Since 1998, U.S. natural gas production has risen by 78.3% primarily due to fracking and horizontal drilling. This has had a massive effect on natural gas prices. They have fallen from $7.97 per 1,000 cubic feet in 2008, to about $2.00 in the face of a rising demand.
As natural gas prices plummeted, coal-fired power plants have been shut down and replaced with plants that use natural gas, which emit far less carbon dioxide than coal-fired ones. Carbon dioxide emissions from electric power energy consumption has dropped from 2,321 million metric tons of carbon dioxide in 2008 to 1,593 tons in 2019, despite an increase in gross domestic product (GDP) of 46%.
The reduction in the price of electricity has saved consumers several thousand dollars in energy costs and the reduction in energy costs reduces the cost of producing a vast array of goods and services.
A ban on fracking would reverse the enormous gains that have come from such a large reduction in the cost of oil and natural gas. One study found that banning federal leasing and fracking on public and private lands would cost 7.5 million American jobs, and a cumulative loss in GDP of $7.5 trillion by 2030, among other economic disruptions.
The primary negative aspect of fracking is the possibility of contamination of groundwater by the chemical additives, which make up less than 1.5% of the injections.
The wells have a large amount of safety design built into them, and the injections normally occur far below any groundwater. An EPA 2016 study on the potential impact of fracking on drinking water found that, while there are exceptions, such as the Powder River Basin in Montana, the large majority of wells are thousands of feet below ground water.
If there is a concern regarding drinking water, then enacting limited regulations in the few areas where the well may be close to groundwater is the solution, not an outright ban.
As for earthquakes, the U.S. Geological Survey has found that “fracking causes extremely small earthquakes but they are almost always too small to be a safety concern.”
There may be areas where regulation is appropriate, but these are few, and a total ban on fracking would result in unintended consequences that would impose large costs on every American.
Gary Wolfram is the William Simon Professor of Economics at Hillsdale College.