IOWA CITY, IA – SEPTEMBER 19: Democratic presidential candidate Sen. Elizabeth Warren (D-MA) … [+]
On my first day as president, I will sign an executive order that puts a total moratorium on all new fossil fuel leases for drilling offshore and on public lands. And I will ban fracking—everywhere.
And just like that, the oil price fear premium disappeared. The temporary rise in crude prices that took place in the wake of the alleged September 14 Iranian missile attacks on Saudi Arabian oil infrastructure, which at one point had added a 15% premium over the September 13 WTI close of $54.85, had been completely erased on Wednesday morning as markets responded to a larger-than-expected increase in U.S. crude inventories.
Thus, at least in the short-term, the lone impact to U.S. consumers from what the Energy Information Administration reported was the largest sudden oil supply interruption in world history will be a small, temporary rise in the price of gasoline at the pump. There will be no shortages of gasoline or other crude by-products, no long lines for drivers waiting to gas up their cars, no significant damage to the U.S. economy.
That is an amazing story of success for the American oil and gas industry, which has more than doubled domestic oil production in the last decade, with the largest annual gains taking place during a time of comparatively low commodity prices. That has all materialized as a result of the shale revolution, a revolution that has been entirely dependent on the ability to engage in hydraulic fracturing operations. This incident and its aftermath provides a first-hand example of how hydraulic fracturing – or “Fracking” – has improved U.S. energy security and benefits consumers, and a clear argument as to why fracking must remain legal.
At the same time, however, we have a battle taking place between more than 15 candidates for the Democratic Party’s presidential nomination. Almost all of those candidates have endorsed the so-called “Green New Deal” introduced in February by freshman congresswoman Alexandria Ocasio-Cortez and her senate co-sponsor, Senator Ed Markey, a plan that contemplates outlawing fracking operations in the United States.
Several of the candidates, such as senators Elizabeth Warren and Kamala Harris, as well as Texans Beto O’Rourke and Julian Castro, have given the issue elevated emphasis, promising to make ending fracking, either over time or immediately, a centerpiece of their initial agenda upon assuming office. None of the Democratic contenders have chosen to modify their positions in the wake recent events.
It’s important to note that the elimination of fracking would have widespread negative impacts far beyond the destruction of U.S. energy security gains made over the last decade. Its elimination would raise utility bills as natural gas prices inevitably shoot up when the commodity becomes increasingly scarce. Higher natural gas prices would also end the renaissance of U.S. chemical, plastics, fertilizers and other industries that use the product as feedstock in their operations, cancelling billions of dollars in new investments and thousands of new jobs that have been created during the recent years of low prices.
The simple fact of the matter is that legal, properly-regulated fracking has produced a phenomenal amount of energy abundance in America since 2009; making it illegal will inevitably create energy scarcity. Scarcity of any resource almost invariably results in higher prices, and in this society, higher prices for consumers bear heaviest on those who are economically disadvantaged.
We should also recognize that the cancelling of fracking would in turn cancel all the financial benefits it is providing to state governments, much of which goes into those states’ education systems. On September 17, New Mexico Governor Michelle Lujan Grisham announced a plan to provide free tuition to in-state colleges and universities to all residents of the state. These New Mexico Opportunity Scholarships will be funded via the massive influx of new revenues from the state’s share of oil and gas production in the booming Permian Basin. The continuation of that revenue stream relies directly on the continuation of legal hydraulic fracturing operations.
In Texas, both The University of Texas and Texas A&M University systems rely heavily on hundreds of millions of dollars in oil and gas revenues from their mineral holdings in the Permian Basin to keep in-state tuition levels low. In July, UT-Austin was able to announce a new initiative to provide free tuition for students of families making $65,000 or less in annual revenue. The school’s Board of Regents will fund the program via an allocation of $160 million from the Permanent University Fund into which those Permian Basin “fracking” revenues flow. Texas A&M has provided free tuition to students from families with income of $60,000 or less since 2011 through a similar funding mechanism.
If fracking goes away, all of that free tuition will go away with it. If Democrats really want to turn Texas “blue” in 2020, they might want to reconsider their positions on this issue.
The benefits from fracking aren’t limited to higher education. In Texas, New Mexico and other states with shale development, local taxing districts for public schools, junior colleges, county governments, hospitals and other medical facilities also benefit from every well that is drilled within their boundaries. If fracking disappears, the impacts on those tax bases will be severely dimished.
These and many other examples provide compelling reasons why fracking must remain legal and properly regulated in the United States. Acting otherwise is simply self-destructive.
