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December 7th, 2012

Trickle-Down Benefits from Exporting Fracked Gas? Don’t Bet on It

By Hugh MacMillan

A new report, commissioned by the U.S. Department of Energy and conducted by NERA Economic Consulting, touts the supposed net benefits to the U.S. economy of allowing exports of liquefied natural gas (LNG). The study is incredibly out of touch.

The headline that LNG exports are unequivocally good – the more exports the better! – gives a huge gift to the oil and gas industry, and to its backers on Wall Street, but the devil is the details. Look closer, and you see that the narrow economic analysis does the public a disservice. As our Executive Director, Wenonah Hauter, has put it, “NERA’s report not only sweeps under the rug the public costs of more drilling and fracking, it insults us with the argument that the benefits enjoyed by the oil and gas industry and its financiers will trickle down.”

First, LNG exports will mean higher natural gas prices for American consumers, but the NERA report claims that on average, Americans will benefit because the gains will be so large for the oil and gas industry. This is the old “Bill Gates walks into a bar” illustration of lying with statistics.

In essence, the NERA analysis is that, while 10 million Americans would likely pay $100 each, a couple of oil and gas industry executives and banking executives could pocket a couple billion dollars, so if you take an average over everybody, it works out to everyone getting an extra $100. How the net economic benefit is distributed is completely lost. To its credit, the report does acknowledge that those Americans who rely on income from wages “might not participate in these benefits.” That says it all—how many people do you know that don’t make a living from wages, but who instead live off of their oil and gas industry investments? Not many? I didn’t think so.

Second, the NERA report has an appendix called “Factors That We Did Not Include in the Analysis,” but it needs another appendix. Perhaps it could be called: “Factors That We Did Not Include in the Factors-That-We-Did-Not-Include-in-the-Analysis Appendix.” 

LNG exports also mean more widespread and destructive drilling and fracking, but the costs to local communities exposed to this drilling and fracking – the long terms costs of a legacy of pollution – are ignored in the NERA report. These communities will be worse off when the fracking boom goes bust. They will face long term risks to their public water resources. And all of us will bear the escalating costs of global climate change that will come from giving the oil and gas industry its wish, and allowing it to drill and frack for as much fossil fuel as possible, as fast as it can.

Finally, it’s no surprise that more drilling and fracking would be projected to increase GDP, especially given that all the destructive and costly negative impacts are externalized, foisted on to the public and not included in NERA’s calculations. But increased GDP is not a measure of economic welfare.

The Natural Gas Act mandates the U.S. DOE swiftly authorize applications to export natural gas to countries with which the United States does have a Free Trade Agreement. The unbalanced findings of the NERA Economic Consulting report are being used by the U.S. DOE to evaluate whether LNG exports to countries with which the United States does not have a Free Trade Agreement are actually in the public interest. The potential impact on U.S. energy security is also being considered by the U.S. DOE as it decides whether or not to authorize LNG exports.

Our recent report, U.S. Energy Insecurity: Why Fracking for Oil and Natural Gas is a False Solution, exposes the misconceptions, falsehoods and misleading statements behind the oil and gas industry’s claims that modern drilling and fracking can deliver U.S. energy security. We show that the 100 years of natural gas is a dangerous mirage. There are a lot of threads to the industry’s claims that are unwound in our report, but above all else, the industry’s plans to export shale gas, America’s supposed ticket to energy security, are the most revealing. The only thing the industry seeks to secure is its bottom line. NERA’s report, commissioned by the U.S. DOE, moves them one step closer.

The U.S. DOE will be making an enormous mistake if it adopts the unbalanced and shortsighted conclusions of this study. The agency must not allow the oil and gas industry, and its Wall Street backers, to write federal energy policy to benefit its bottom line at the public’s expense.

The oil and gas industry will simply extract as much natural gas as possible, as fast as possible, for maximum profit, while fighting tooth and nail to prolong America’s destructive dependence on fossil fuels. Then, once U.S. natural gas is gone, the global oil and gas industry will simply convert the export facilities back to import facilities and bring in foreign sources of fracked natural gas to feed the entrenched U.S. dependence.

It is not too late for the United States to avoid going down this self-destructive path. Long-term U.S. energy security and independence can only be achieved by getting off of fossil fuels, but the country needs to act now to deploy existing energy efficiency and renewable energy solutions, invest in public transportation systems to reduce energy demand, and invest in future technologies that build on these proven solutions.

The U.S. DOE will be considering public comments on the NERA report until mid-January, and Food & Water Watch will be working with allies to urge the agency to reject the unbalanced and shortsighted economic study. Food & Water Watch will also be calling on you in the coming weeks to make your voices heard.

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