New York and Natural Gas Drilling

New York Governor David Paterson vetoed legislation over the weekend that would have imposed a moratorium on a technique called hydraulic fracturing (or fracking) used in natural gas drilling in upstate New York, but signed an executive order that placed a narrower moratorium into effect for a longer period (until July 2011).

In effect, Governor Paterson punted the issue to New York Governor-elect Andrew Cuomo.

This comes as the ranks of President Obama, the Environmental Defense Fund, and many other organizations and individuals are publicly recognizing the valuable role natural gas can play in our local, state, and national economies.

The stance of the governor-to-be is important, of course, as removing any moratorium would grant access to hundreds of thousands of acres in the shale areas that could be leased for billions of dollars. The promise of better jobs and a brighter energy future would mean a lot in a state with unemployment hovering around eight percent, more than 40 inches of annual snowfall already, and home heating costs expected to be $30 more this winter compared to last year.

Support for the safe and efficient development of the Marcellus Shale and other natural gas resources around the nation is a position that transcends party lines. Given the economic and environmental benefits, it’s easy to see why.

America’s natural gas industry already supports more than 2.5 million U.S. jobs and contributes over $300 billion to our economy annually. Fracking has given us the means to substantially increase the jobs, economic contributions, and tax revenue generated by natural gas. Advanced technologies used in fracking allow engineers to tap into natural gas deposits a mile under the earth’s surface. According to IHS Global Insight, natural gas drilling has contributed directly and indirectly to over thirty-six thousand jobs in New York. More job gains are possible if sensible regulatory policies are put in place.

Studies have warned that 5,000 industry jobs and $1 million in annual state drilling fees would be lost as a result of the moratorium legislation that Paterson vetoed. Tax revenue from natural gas could go a long way in a state facing a $315 million budget deficit.

More important is the issue on everyone’s mind – jobs. It’s clear that New York will need to do everything possible to foster private sector job growth. After all, New York ranks 49th on the just-published Small Business & Entrepreneurship Council’s “Small Business Survival Index 2010: Ranking the Policy Environment for Entrepreneurship Across the Nation,” which ranks the 50 states and District of Columbia according to 38 government-imposed or government-related costs.

Natural gas can be a part of the solution. This resource carries great value for New Yorkers -- especially those in rural communities -- who have been disproportionately hit by the economic downturn.

Shale gas makes up just 20 percent of America’s natural gas supply, and according to IHS Cambridge Energy Research Associates, in the next 25 years, it will account for half of the country’s gas supply. In the coming years, much of our economic growth and energy security will depend on our willingness to tap our clean, domestic energy resources. As the country looks forward, shouldn’t New York be leading the way?

Given these considerable merits, it’s little wonder President Obama recently asked: “We’ve got, I think, broad agreement that we’ve got terrific natural gas resources in this country … are we doing everything we can to develop those?” For New York, will the answer be “yes” or “no”?

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council