A new study published by the American Gas Association outlining the positive economic impact the expanding supply of natural gas has had in the U.S. In 2011, 150,000 new jobs were created in the shale gas industry. Another 194,000 jobs sold goods and services to the industry. Overall, consumers are saving money on their natural gas bills, and jobs are being created in an economic recession, thanks to hydraulic fracturing and shale gas.

1. EA 2012-03 May 22, 2012
IDENTIFYING KEY ECONOMIC IMPACTS OF RECENT INCREASES
IN U.S. NATURAL GAS PRODUCTION
I. Executive Summary
The recent success of shale gas and oil production in the United States coupled with
only modest demand growth has resulted in measurable declines in domestic natural gas
prices, which has benefitted both gas customers as well as the overall economy. Lower natural
gas commodity prices have in part:
Led to savings of almost $250 billion for end-use natural gas customers over the
past three years;
Provided a typical residential customer more than $175 in savings during 2010
alone;
Helped the average commercial customer to save more than $1,100 in their 2010
annual bill;
Contributed to the creation of 334,000 jobs in natural gas dependent industries
during the past two years;
Contributed to an analytical vision that the shale gas revolution may be responsible
for bringing a million new manufacturing jobs to this country by 2025; and,
Pointed to production activities of oil and gas in the United States that were
responsible for nine percent of new U. S. jobs growth in 2011.
Whether these crucial economic impacts can be sustained depends on the responsible
and sustainable development of natural gas resources in the United States and the recognition
of natural gas as a foundational component to lower carbon energy solutions in our future. This
brief analysis examines, in particular, the benefits seen in our current economy as the shale gas
revolution has gained a foothold during the past five years.
See final page for notices and copyright.
Copyright © 2012 American Gas Association. All Rights Reserved.

2. II. Examining Natural Gas Supply
During the early 2000’s, most analysts forecasted that domestic natural gas supplies
would be insufficient to keep up with demand. Production from existing wells was in decline
and the next great increment of natural gas supply required to meet growing demand was
expected to come from imported liquefied natural gas (LNG). Access to potential supplies was
restricted in many areas, particularly on federal lands. Some of the most promising reservoirs
were located miles offshore where drilling expenses are quite high. In addition, imports from
Canada, which had averaged more than ten percent of total U.S. supply, were expected to
decline due to similar supply scarcity expectations. For the most part, the above referenced
market vision turned out to be incorrect and the expectation for sustained higher natural gas
costs to consumers materialized only temporarily.
Figure 1
By 2009, however, a market realization that U.S. natural gas production (Figure 1) had
assumed a position of strength compared to only modest demand increases had developed
and, as shown in Figure 2, natural gas commodity prices steadily declined. As domestic
natural gas production has grown and been sustained, forecasters have continued to
moderate future natural gas price expectations. Of course, the primary reason for production
growth has been centered on the development of onshore shale reservoirs and remains the
principle reason for future domestic supply optimism.
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3. Figure 2
Natural Gas Price Projections Drop Each Year
Natural Gas Price Projections Are Much Lower
Than Past Years Due to an Expanded Resource Base
AEO2011 AEO2012
STEO4-2012
2
III. Market Impact on Retail Natural Gas Prices and Customer Bills
Since natural gas utilities are not allowed to profit from the price of natural gas, the above
referenced wholesale price declines were passed directly to the customer. However, local gas
utility supply portfolios are not comprised entirely from spot purchases, so the retail price decline
does not match exactly wholesale price decreases. With that said retail prices have dropped
about $4/MMBtu since 2008. (See Figure 3)
Figure 3
Retail Natural Gas Prices
($/Mcf)
$16
$14
Residential Commercial
$12
$10
$8
$6
$4
Source: Energy Information Administration
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4. The retail price decline had a substantial impact on customer bills. The average
residential gas customer saved $178, or 18%, off their gas bill in 2010 compared to what they
would have paid had 2008 prices been the norm. The typical commercial customer saved
$1,106, or 23 percent. Regional savings ranged from 14 percent to 23 percent for the
residential customer. Savings to the commercial customer ranged from 17 percent to 27
percent (Table 1).
Table 1
Cost Savings per Gas Customer in 2010 Due to Price Declines since 2008
Residential Customers Commercial Customers
Cost Savings Percent Saved Cost Savings Percent Saved
UNITED STATES $178 18% $1,106 23%
New England $193 14% $1,199 23%
Middle Atlantic $237 18% $1,154 23%
East North Central $229 20% $1,025 24%
West North Central $181 18% $1,078 23%
South Atlantic $229 22% $1,500 25%
East South Central $224 23% $1,359 27%
West South Central $148 19% $1,253 27%
Mountain $104 14% $721 17%
Pacific $121 19% $932 21%
Source: Calculated from data in AGA’s Gas Facts 2012
In fact, the total amount of savings to all end-use customers during the past three years
has been almost a quarter of a trillion dollars. As might be expected, the largest impacts
occurred in the industrial and electricity generation sectors, due to their significantly larger
consumption of natural gas (Table 2).
Table 2
Total Savings to Natural Gas Customers Comparing Use at 2008 Price Levels
Residential Commercial Industrial Electricity
Generation
2009 $8,363,087,250 $6,767,344,640 $26,643,042,720 $29,758,067,890
2010 $11,968,300,000 $8,560,623,000 $27,112,704,320 $29,474,864,160
2011 $14,626,922,880 $10,657,119,500 $31,342,442,380 $33,372,455,140
Total $34,958,310,130 $25,985,087,140 $85,098,189,420 $92,605,387,190
Source: Calculated from data supplied by the Energy Information Administration
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5. Not only do these savings benefit the gas customer, but there is a ripple effect on the
economy when consumers spend some of these savings. This multiplier effect depends on the
person’s propensity to consume, which has been lower during the recession. When consumer
spending rises, the economy is stimulated leading to job creation.
IV. Employment Impacts Associated with Shale Basin Development
The “shale gale” as it is sometimes described has increased employment in the United
States in three ways:
Direct jobs -- associated with the extraction, processing, and delivery of the gas;
Indirect jobs – those that provide goods and services to the energy industry; and,
Induced jobs -- Employment opportunities created by the multiplier effect from the
income generated by the new jobs listed above.
Job creation directly tied to energy extraction and delivery accounted for about 150,000
new jobs in 2011, or about nine percent of all new U.S. jobs that year,1 In 2010, it was
estimated that shale gas alone had almost 150,000 people directly employed in the shale gas
extraction activity. By 2015 the number of these jobs is expected to grow to about 200,000.2
Jobs that provide goods and services to the shale industry totaled 194,000 in 2011, with
expectations to grow to 283,000 by 2015. Jobs induced by the multiplier effect numbered about
260,000, and may reach 870,000 by 2015.3
A number of states have estimated the impact of shale gas their economy.
Pennsylvania – shale gas development created 46,000 jobs, $11 billion in economic
value, and $1 billion in local and state taxes.4
New York – prohibiting shale gas development cost the state up to 90,000 jobs,
$11.4 billion in economic output, and $1.4 billion in state and local taxes.5
North Texas – the Barnett Shale has had a cumulative impact of $65.4 billion since
2001 and supports 10,268 jobs.6
1
Energy for Economic Growth, Energy Vision Update 2012 World Economic Forum and HIS CERA
http://www3.weforum.org/docs/WEF_EN_EnergyEconomicGrowth_IndustryAgenda_2012.pdf
2
The Economic and Employment Contributions of Shale Gas in the United States prepared for America’s
Natural Gas Alliance by IHS Global Insight (USA) Inc., December 2011
http://anga.us/media/235626/shale-gas-economic-impact-dec-2011.pdf
3
The Economic and Employment Contributions…
4
"The Pennsylvania Marcellus Natural Gas Industry: Status, Economic Interests and Future
Potential” Penn State University, College of Earth and Mineral Sciences, Department of Energy and
Mineral Engineering
5
The Economic Opportunities of Shale Energy Development Manhattan Institute Center for Energy Policy
and the Environment, http://www.manhattan-institute.org/html/eper_09.htm
6
Report: Shale Gas Industry Has Profound Economic Impact in United States Star-Telegram, 12/6/2011
http://www.star-telegram.com/2011/12/06/3576017/report-shale-gas-industry-
has.html#storylink=cpy
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6. V. Economic Impact of Shale Development on Industrial Demand
Lower natural gas prices resulting from the shale boom have attracted industries to the
U.S., have resulted in the expansion of existing domestic plants, and induced the creation of
new plants. A study by PricewaterhouseCoopers7 identified some of these impacts from low-
priced natural gas including:
industries providing supplies to companies that produce, process, and transport
natural gas have already experienced an increase in demand – 17 companies
reported higher demand directly related to shale gas during 2011;
Lower prices have also allowed companies that consume large quantities of
natural gas, whether for process uses or as a feedstock (e.g., fertilizer plants), to
expand operations; and
That expansion could lead to an additional one million manufacturing jobs by
2025.
According to Wood Mackenzie,8 twenty natural gas intensive industrial projects have
been initiated or recently announced. When these projects are combined, domestic natural gas
demand would be one Bcf/day.
Three are restarts, five are expansions, one is new to the U.S. and the rest are
new facilities.
Two produce steel, the rest are chemical companies.
Planned operational dates run from 2011 to 2018.
VI. Conclusions
During the past five years, U.S. natural gas supply increased quickly and dramatically as
shale gas production increased. Expectations of constrained gas supplies were confounded,
and prices reacted accordingly:
wholesale gas prices fell 55 percent in one year; and,
retail prices fell about $4 per MMBtu.
These lower prices were passed directly to natural gas consumers:
2010 gas bills were more than $175 lower for the average residential customer
and more than $1,100 lower for the typical commercial customer compared to
what the bills would have been using 2008 prices; and,
7
Shale Gas: A Renaissance in US Manufacturing? PricewaterhouseCoopers with contribution from
National Association of Manufacturers http://www.pwc.com/us/en/industrial-products/publications/shale-
gas.jhtml
8
Regional Gas and Power Service, Wood Mackenzie, March 2012
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7. When all gas consumers are included, these savings totaled about $250 billion.
Lower natural gas prices have also helped create jobs during one of the worst recessions on
record:
job creation directly tied to energy extraction and delivery accounted for about
150,000 new jobs in 2011; and,
Expansion of natural gas-dependent industries could lead to an additional one
million manufacturing jobs by 2025.
NOTICE
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own risk. Information on the topics covered may be available from other sources, which you may
wish to consult for additional views or information not covered.
Copyright © 2012 American Gas Association. All Rights Reserved.
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