Marcellus Natural Gas Lowers Bills For All Americans
“In terms of cost, shale gas has been a clear win for consumers," Christina Simeone, Director of policy and external affairs, University of Pennsylvania’s Kleinman Center for Energy Policy
I've already shown here how more natural gas usage thanks to the Marcellus shale play centered in Pennsylvania (where 80% of the play's production takes place) has slashed the state's CO2 emissions by 30%, but in this post I want to bring in some other key benefits provided, namely lower cost energy. The Marcellus is the foundation of lowered energy and electricity prices for families and businesses across the entire country. The Marcellus is the heart of why our gas natural gas prices aren't expected to come anywhere close to the high prices that we saw pre-shale days, as I document here.
Up from virtually nothing a decade ago, Pennsylvania now accounts for 20% of all U.S. natural gas. The Marcellus is the driving force behind America’s projected 40% increase in gas production by 2040. Just take the past few months. It's been the Marcellus that has been leading the recent rise in U.S. output, now at record levels over 76 Bcf/d, compared to a stubbornly persistent 70-71 Bcf/d range for the first half of 2017. More permitting and drilling activity in Pennsylvania and Appalachia is mainly being encouraged by new interstate pipeline projects that I document here coming online. More midstream will increase production to meet commitments, allowing local gas to be transported to higher-priced market centers outside of the region.
Indeed, more pipelines and the rising ability of Pennsylvania to export is crucial, now able to export 11-12 Bcf/d. In fact, my home state should consider changing its nickname from The Keystone State to The Giving State because it's the Marcellus that's allowing the entire country to increasingly turn to natural gas, a cleaner, lower cost energy source that also has the flexibility to ramp up in minutes to back up wind and solar power. Pennsylvania is critical to our gas-based manufacturing renaissance and why U.S. gas exports will continue to increase to help lower emissions globally and reduce our own trading deficit.
Not surprisingly then, Pennsylvania in 2016 had the lowest natural gas prices to generate electric power, at $1.95 per Thousand Cubic Feet, compared to $2.99 for the national average. It's also no wonder then that a just released study from the University of Pennsylvania’s Kleinman Center for Energy Policy credits the Marcellus for costs for Pennsylvanians falling much faster than the national average, here. As we head into winter and ramped up gas demand via heating, this report couldn't be more timely. From summer to winter, for instance, U.S. gas needs can double to over 140 Bcf/d. Here are just a few of the highlights of the UPenn study; from 2007-2016:
- Annual Pennsylvania natural gas production boomed by 2,800%
- The gas price that utilities are charging residential customers dropped ~75%
- There was a 40% percent cost reduction in natural gas bills for Pennsylvanians
Since 2006, U.S. gas demand in the power sector has surged from 17 Bcf/d to 27 Bcf/d. And looking forward, The Bard was right: "What's past is prologue." Nationally, gas is rising from being almost 45% of total U.S. generation capacity to soon being 50%. There's 90,000 megawatts of new gas coming online over the next few years, a 20% rise or so in current gas capacity. By 2022, some 35 U.S. states will rely on natural gas as their primary fuel for electricity. Pennsylvania itself is leading the way: new gas plants will bring in around $12-14 billion in new investments and 13,000 MW of new capacity in the next few years alone.
Indeed, gas-based, importing states like California and especially nearby New York and those of New England owe a debt of gratitude to The Giving State (and of course to The Lone Star State). This explains why Pennsylvania Governor Tom Wolf's proposed severance tax for the shale industry - which for years has understandably been unable to gain any traction - would have been a national problem.
The advantages of affordable energy are really invaluable: so important that they cannot be measured. That's because disposable income is the basis of our economic growth, and money is the basis of our health. The U.S. Energy Information Administration projects that our power rates will remain below 14.5 cents per kWh for decades to come, here. In contrast, prices today in struggling Europe are in the 30-40 cent range. The competitive advantage of this is immense.
Yet, not just offering lower costs, a massive low cost shale resource base gives us stable prices, an underrated concept that is critical for family and business budgeting. The truth is clear: as fracking grows, energy prices drop. Check these Brookings and The Boston Consulting Group reports detailing the economic benefits of shale, which are too numerous for me to document here...but just know that they go far beyond huge job creation.