Shale gas can help grow jobs
A stable supply and competitive pricing are especially vital to chemical manufacturers, the largest industrial consumer of natural gas in the United States. The chemistry industry uses natural gas both for fuel and as a raw material – it is the essential ingredient that goes into 96 percent of all domestically-manufactured goods, including life-saving medical equipment, protective gear for soldiers, consumer electronics, lightweight automobile parts and energy efficient lithium batteries.
The President needs only to look back five years to understand the impact of natural gas prices on jobs. Between 1999 and 2005, the price of natural gas quadrupled. When energy prices climbed, the United States lost more than 5.5 million high-wage manufacturing jobs, 140,000 of those jobs in the chemistry industry alone. As new supplies of shale gas have surged, average natural gas prices have plummeted 50 percent from 2005-09, giving U.S. chemical manufacturers an enormous global competitive edge. In 2010, chemical industry exports increased 17 percent, reversing a $100 million trade deficit two years ago into a $3.7 billion surplus in 2010. Plastics exports alone climbed 10 percent in the last year.
This is only the beginning. An American Chemistry Council study released earlier this year found that a reasonable increase in natural gas supplies of 25 percent would add nearly 400,000 new jobs in the chemical sector and among suppliers, boost U.S. petrochemical industry capacity by 25 percent and increase total U.S. economic output by approximately $132 billion. These new investments would generate a payroll of $27.3 billion.
The evidence goes beyond numbers churned out by economic models. Dow Chemical has announced plans to build three new manufacturing facilities and restart another that idled during the recession. Eastman Chemical has restarted a plant that had been shuttered in recent years. Shell Chemical announced it is considering a new facility in Appalachia to process Marcellus shale gas. Executives from Bayer are in talks with companies interested in building new ethane crackers at its two industrial parks in West Virginia, and other companies including, Occidental Chemical, Chevron Phillips Chemical and LyondellBasell have said they are considering expanding operations in the U.S.
These are real investments and real jobs. The areas of the country that stand to gain the most include those hardest hit in recent years — Pennsylvania, West Virginia, Ohio, Michigan and the Gulf Coast.
But shale gas is not without its critics. A significant effort is underway to constrain production or impose stifling new regulations at the state and possibly the federal level.
Shale gas can and should be produced in an environmentally responsible way through effective state-based rules to ensure best practices are employed and appropriate oversight is provided. But in many cases, proposed legislation or regulations could keep this precious resource in the ground. If shale gas isn’t produced, the incentive for chemical manufacturers to grow and hire in the United States disappears and new jobs along with it.
After Thursday’s speech there will be ample debate by economists and commentators about whether the President’s plan will work. There is one thing President Obama can do that is already proven to grow manufacturing jobs – he can commit to support shale gas production and work hard to encourage states to do the same. With 14 million Americans out of work, we need real solutions. Shale gas provides one of them.
Dooley is President and CEO, American Chemistry Council, Washington, and a former Democratic Member of Congress from California.
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