The American oil and natural gas boom of the last few years is driving down energy costs and creating hundreds of thousands of new jobs, congressional testimony on Thursday revealed.
Energy sector experts and those with direct experience of the boom’s effects discussed the implications of the discovery of unconventional reserves of natural gas and oil with a subcommittee of the House Small Business Committee.
"The advent of new technologies and changes to market fundamentals has led to a paradigm shift in the energy outlook of the United States," said subcommittee chairman Scott Tipton (R., Colo.). "Where there was once energy scarcity, there is now a potential energy bounty."
U.S. production of oil and natural gas has risen dramatically over the past few years. Domestic oil production has risen 46 percent in the last five years, while natural gas production rose 27 percent in the last seven, testified John Larson, vice president of HIS Economics and Country Risk Group.
The activity around exploring and tapping the unconventional reserves is sustaining 1.7 million jobs, Larson said. He estimated that this number could rise to 3 million by 2020.
The increases have primarily come from "tight oil" and "shale gas" which require hydraulic fracturing, or fracking, to access.
Larson said that the effects of America’s energy boom extend well beyond the energy industry.
"Nearly 30 percent of all jobs associated with the unconventional energy revolution are found in states with no appreciable unconventional activity," he said in his written testimony.
A metal forging industry representative exemplified Larson’s claim.
"Increased exploration for oil and gas is not only beneficial to our cost structure, through lower priced energy, but also leads to increased demand for our forgings," said Simon Ormerod, CEO of Ajax Rolled Ring and Machine.
Ormerod’s forging company makes some component parts for oil and gas drilling, and the demand for the forged rings his company produces has risen by 20 to 30 percent in the past two years, he said.
His company also uses natural gas to heat its forges, and the drop in the price of natural gas as a result of the increased supply has been beneficial.
"The stable, adequate supplies of less expensive domestic natural gas means that there is more activity in many sectors, whether for defense applications, rail applications or general industry, and the long term benefits will be significant," Ormerod said.
The abundance of natural gas is helping industries across the country. Larson estimated that industrial production will increase by 2.7 percent by 2015, and then another 2 percent by 2035.
Businesses often face a great regulatory burden from state and local governments despite the opportunities. Oil and gas companies in Colorado do three times as much work on private land as federal land, even though the leasing cost is 8.5 times greater on private land, noted Charles Grobe, a county commissioner for Moffat County in Colorado.
The regulation is not just limited to the federal government, Grobe noted. State and local governments can and often have increased the regulations on drilling companies.
Energy policy was a point of contention in the 2012 presidential campaign. Republican challenger Mitt Romney accused President Barack Obama of limiting the use of unconventional drilling methods like fracking and instead encouraging alternative sources of energy like solar, which benefitted his supporters financially.
A Government Accountability Office report last May emphasized the opportunity America has by predicting that the United States’ oil shale reserves could be as plentiful as the rest of the world’s oil reserves combined.