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AEI: Weigh fracking’s economic benefits against environmental fears

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Politics,Beltway Confidential,Michal Conger

Fracking may be an environmentally controversial issue, but there’s nothing controversial about its economic effects, according to a new study by the American Enterprise Institute.

Shale drilling has contributed to a dramatic increase in oil and gas production in the last decade, particularly in natural gas. Jobs, money from increased production and trade balance are all direct effects of that increase, according to the study by AEI scholars Kevin A. Hassett and Aparna Mathur.

“This significant increase in production of oil and gas energy has direct economic effects that are relatively easy to quantify and potentially broad reaching indirect effects as well,” they wrote.

The energy industry has been a significant boost for employment since the recession.

“As other industries have sputtered in the aftermath of the 2008 recession, oil and gas has been a remarkably bright spot in the US economy, with employment at the end of 2012 at its highest since 1987,” Hassett and Mathur wrote.

Fracking also has a direct effect on trade. The U.S. has imported less natural gas since 2007, and the Energy Information Administration predicts that by 2020 the U.S. will be a net exporter of natural gas.

The industry also injects billions of dollars into the economy each year. In 2011, the U.S. produced 8,500,983 million cubic feet of natural gas from shale gas wells. With an average price of $4.24 per thousand cubic feet, shale gas alone produced about $36 billion.

Because natural gas produces less carbon dioxide than coal, the fracking boom also could also have environmental benefits, AEI notes.

“According to the Environmental Protection Agency, natural gas-fired electricity generates half the carbon dioxide of coal-fired production,” the study said. “An estimate of the indirect benefit of fracking should include an estimate of the potential social gains from this reduction.”

A great deal of attention has been paid to the potential environmental impacts of fracking, with opponents pushing the idea that the drilling practice is unhealthy and dangerous, Hasssett and Mathur note. New York, Vermont and New Jersey are all firmly opposed to it, and several other states are evaluating the costs and benefits. The AEI study looks at the benefits of fracking to help offer balance in the debate.

“If the debate over fracking is to be dominated by reason rather than emotion, researchers must refine our thinking of the economic benefits of rapid expansion of energy production, and improve our estimates of the potential environmental costs as well,” the authors concluded.

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