The White House last week credited the U.S. natural gas industry with helping to fuel recent gains in domestic manufacturing.
In its report, “Investing in America,” the White House noted that U.S. manufacturing had improved its cost competitiveness compared to other countries, in part because of domestic natural gas production.
“The surge in domestic natural gas production can lower energy costs, reduce pollution and drive investment in the industries that supply equipment to the natural gas sector and those that use natural gas as an input to production, like the chemical industry,” the report noted. It cited recent data compiled by the Energy Information Administration, which indicated that between 2006 and the end of 2011, gas extraction had increased by more than 24%.
In the 16-page report, the authors noted that only a few years ago “fears of a looming natural gas shortage led to significant investments” to rapidly construct liquefied natural gas import facilities to ensure there would be enough domestic supply. However, the discovery of new gas reserves from basins including the “Marcellus Shale, and the development of hydraulic fracturing techniques to extract natural gas from these reserves has led to rapidly growing domestic production and relatively low domestic prices for households and downstream industrial users.”
The White House noted that “appropriate care” would have to be undertaken to ensure the resources were extracted safely and in an environmentally responsible manner. “Provided these precautions are taken, the potential benefits to the U.S. economy are substantial.”
Said the report, “Of the major fossil fuels, natural gas is the cleanest and least carbon-intensive for electric power generation. By keeping domestic energy costs relatively low, this resource also supports energy-intensive manufacturing in the United States. In fact, companies like Dow Chemical and Westlake Chemical have announced intentions to make major investments in new facilities over the next several years. In addition, firms that provide equipment for shale gas production have announced major investments in the U.S., including Vallourec’s $650 million plant for steel pipes in Ohio” (see related story).
The report noted that an abundant local supply of gas translates “into relatively low costs for the industries that use natural gas as an input. Expansion in these industries, including industrial chemicals and fertilizers, will boost investment and exports in the coming years, generating new jobs. In the longer run, the scale of America’s natural gas endowment appears to be sufficiently large that exports of natural gas to other major markets could be economically viable.”
The White House report sees overall costs in the United States improving with productivity growth.
“U.S. manufacturing productivity — which has always been strong — continues to improve, rising nearly 13% since the first quarter of 2009.” With labor costs increasing in other countries, the relatively lower costs in the United States have led industry to bring home some functions that had been outsourced to other countries.
The report noted that the manufacturing sector has recovered faster than the rest of the economy, adding 334,000 jobs over the last two years, and “a new, promising trend of ‘insourcing’ is beginning to take shape. While ‘insourcing’ is often used to describe a company bringing activities back in-house, we use the term to refer to bringing activities and jobs back to the U.S. or choosing to invest in the U.S. instead of overseas.”
America’s Natural Gas Alliance (ANGA) and the American Chemistry Council (ACC) praised the White House briefing paper.
“We applaud the Obama administration for its commitment to domestic natural gas production,” said ANGA CEO Regina Hopper. “The White House briefing paper correctly notes the significant economic benefits natural gas production brings to our country.
“And it rightly points out that the surge in domestic natural gas production lowers energy costs for consumers, cuts pollution in our communities and drives investment and creates jobs not only in the natural gas sector, but across a range of important American industries that are now more competitive thanks to our nation’s vast and affordable supplies of natural gas.”
The gas industry is providing a “much needed boost to our economy” by creating jobs in communities and powering downstream industries. She noted that in 2010 “the shale gas industry alone supported more than 600,000 jobs, according to a recent IHS Global Insight report,” a figure expected to grow to 1.6 million by 2035″ (see Daily GPI, Dec. 7, 2011).
The gas industry, said Hopper, “also shares the Obama administration’s desire to ensure that natural gas continues to be produced in a safe and responsible manner. That is a central commitment of our companies. Thanks to the many benefits of responsible natural gas production, our nation does not have to choose between economic growth and environmental stewardship.”
The ACC noted that the report “identifies the chemical industry as one of the manufacturing sectors benefiting from the natural gas production boom. Just several years ago, said the report, ‘leaders of the domestic organic chemical industry predicted that shortages in natural gas would dramatically raise the domestic price of natural gas, one of their key inputs. Without the prospect for adequate domestic supplies of natural gas at reasonable prices, companies increasingly pointed to overseas operations where they could access large quantities of low cost natural gas.'”
ACC CEO Cal Dooley said the chemistry industry was “glad to see the White House connecting the dots linking stable and plentiful natural gas supplies to U.S. economic prosperity and jobs. We’re now looking to the Obama administration, Congress and state officials to make sure policies and regulations allow us to capitalize on this significant domestic energy source while protecting our environment.”
The report cited several chemistry companies that have announced plans to make major investments in new U.S. facilities over the next several years.
“Access to untapped supplies of natural gas is one of the most important domestic energy developments in 50 years,” said Dooley. “This report is further evidence that natural gas is a game changer — for the chemistry industry, U.S. manufacturers and America.”
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