US Rust Belt Manufacturing Rebounds Via Fracking Boom

schnell writes: A NY Times article reports that Midwestern "Rust Belt" towns and their manufacturing economies in particular have rebounded greatly due to the U.S. resurgence in fossil fuel production. This resurgence is driven by production of shale gas and natural gas from "fracking" and other new technologies that recover previously unavailable fuel but are more invasive than traditional techniques. "Both Youngstown and Canton are places which experienced nothing but disinvestment for 40 years." "They're not ghost towns anymore," according to the article. But while many have decried the loss of traditional U.S. manufacturing jobs in a globalized world and the associated loss of high-wage, blue collar jobs, do the associated environmental risks of new "tight oil" extraction techniques outweigh the benefits to these depressed economic regions?

Comments

Transition fuel

[mdsolar]

Fracking for natural gas seems to be happy with a price of $4/MMBTU so long as we treat it as a strategic fuel and don't link it up with the $10/MMBTU international market. So, it can support onshoring of manufacturing for a while. But, Midwest wind is selling power purchase agreements at essentially the fuel cost for natural gas generation using combined cycle power plants. The cost of wind is likely to fall further. So, natural gas may end up being just a foretaste of low cost energy boosting onshored manufacturing as renewable energy displaces it.

Re:Transition fuel

[Mr D from 63]

There will be no low cost energy, there will be no reserves. It's just a quick cash grab.

Not quite true. There is a huge supply that will last much longer than 4 years. But there will continue to be a cash grab.

Gas fracking is the big dog in the energy market right now, and driving down pricing in the electrical market. But below about $3.5/Mbtu, profitability drops below the point where it makes sense to add new extractions, so new development slows to a crawl. At the same time, gas fired generation steadily increases due to the low cost, thus the overall energy market dependance on nat gas increases. Once this dependency reaches a tipping point, the gas companies can raise prices significantly. This price spike will be temporary, as it will invite more extractions, and thus increase supply. So you will see a cyclic price pattern combined with some extreme spikes during periods of excessive demand (primarily very cold weather). The greater the dependency becomes, the bigger the cycles and spikes will become, with added uncertainly a periods of huge price spikes.

Re:Transition fuel

[afidel]

Natural gas basically just subsidizes the cost of drilling, the profit comes from the liquid petroleum fraction, that's why BP recently pulled out of their holdings in SE Ohio, their test wells were all much drier than expected resulting in wells that had ROIs well below other global areas so they shifted their capital elsewhere. So as long as they can find large pockets of wet gas there will be as much supply as the transportation network can handle, and if they're finding enough wet gas then liquification will become economical and we'll start shipping natural gas to Europe, which will have interesting geopolitical impacts as it will neuter Putin.

Excellent Question

[Bob9113]

do the associated environmental risks of new "tight oil" extraction techniques outweigh the benefits to these depressed economic regions?

That is an excellent question. What we need is an excellent answer. Unfortunately, right now, we only have some rather crude guesses, mostly made by people with entrenched preconceptions (on both sides of the issue). We don't know what the probable environmental cost of an additional $100m of fracking production is.

There are two reasons to continue fracking, while going easy on the rate of production; 1) the oil will still be there, it will probably continue to climb in value, and we are learning -- by doing -- more cost effective and safer approaches to extraction, and 2) because we need more data to improve the risk assessment model.

Not doing fracking won't get us the data we need, and would prevent us from developing the technology to get this stuff out cheaper and safer. Doing fracking as fast as we can will waste money and create additional damage by using current early-stage extraction processes, and it exposes us to poorly quantified risk.

The biggest problem right now is that the oil companies, in fear of regulation-to-come, are extracting as fast as they can to try to get the money out of the ground before the axe falls. That is pretty much the worst possible answer: It minimizes the profit margin on a finite resource while maximizing the risk. It is a textbook example of short-term orientation market failure.

Re:Excellent Question

[oh_my_080980980]

No environmental disasters...really? So earthquakes and poor water quality do not count as environmental disasters...nice...

Re:Excellent Question

[Bob9113]

But what if doing the fracking causes irreversible damage? Maybe we need to make the mistake to realize it's one, but then it might be too late. Some countries apply the "Principle of precaution", that is, "if you're not sure of the effects of what you're doing, don't fucking do it."

Well played. :)

Here, let me do the iconic example of the other side:

'We can't have government jumping in and killing off entire industries just because the sky might be falling. There have been no major catastrophes as a direct result of fracking, and even the few relatively minor events that have been recorded turned out not to be caused by fracking, but by improper deep-well injection of effluent.'

Re:Excellent Question

[Bob9113]

You'll notice that your "market failure" argument is completely based on a non-market "government chill-factor" driver?

No, I will not. The same short-term-orientation market failure would occur in a pure laissez-faire system. In that case, the failure to account for long-term risk combined with limited liability, bankruptcy, and shell corporations would result in the same public risk / private profit that is the primary economic failure with fracking now.

I will grant that it is exacerbated by the current government stance of "no regulation now, unknown-and-probably-stricter regulation in the future." Solving that hastening of the public risk, however, only requires that regulation remain approximately the same or become less strict over time. Combined with the fact that some level of regulation to offset public risk exposure (negative externality) is the GDP maximizing solution, starting with zero regulation is necessarily incorrect.

Fracking takes water out of action

[whereiswaldo]

This article tries to compare fracking water use to other uses (eg. golf courses) but fails to account for fracking water being taken out of the system - it's not recycled, it's disposed of. With lakes drying up or disappearing in California and other countries fighting over fresh water, how can the fracking industry be so wasteful?

Re:Fracking takes water out of action

[NotDrWho]

While fracking water can't be reused as drinking water, there is some evidence that it can be recycled for other purposes, and may not be nearly as contaminated as previously thought.

Re:Fracking takes water out of action

[xdor]

In terms of the universe, you are probably correct.

However, I notice that pure combustion of methane gas yields carbon dioxide and water vapor (incomplete combustion yielding some nasty things like carbon monoxide). So all of this pulling of methane from underground and subsequent combustion: yields water vapor and a gas plants use to grow and thereby convert to CO2 to oxygen, which bound to hydrogen yields water.

So eventually, we will get the water back. And I'm not sure if the numbers work out (gallons of water polluted vs. amount of water vapor produced from millions of cubic feet of methane), but it seems there's a possibility, over time, we will actually have *more* water in circulation as a result.

Re:Fracking takes water out of action

[will_die]

That you cannot get the recipes is a big lie propagated by the gasland film.

You can do a google search and find the generic recipes. The problem is those recipes are generic and depending on the soil the proportions of different chemicals change. The big problem and why various companies have been fighting the various anti-frackers is that as you use the water it picks up chemicals from the ground, the various anti-fracker groups want companies to do a constant scan for those picked up chemicals and track all of them and report all of them.

Re:Cure is worse than the disease.

[Cardoor]

if by 'small risk of environmental damage' you mean 'enormous active environmental damage', then yes - i agree.

Does natural gas fracking work the same way as oil

[rolfwind]

?

I know the extraction bellcurves of conventional oil wells/fields are generally decades long things, while fracking lasts only a few years, so a fracking area tends to get dotted with many, many wells before they have to move on due to depletion.

Does the same short-livedness hold true for natural gas?

Re:Yeah, once Canada invades

[Anonymous Coward]

I'm pretty sure we would have to invade Canada to force them to take Detroit.

Someone should look-up the term "Rebound"

[ComputerGeek01]

From what the article says, this is a bump in manufacturing from short term contracts, this is hardly a sustainable client base. My guess is that at the very most this will be a benefit for one generation, maybe two at the very most. A few thousand jobs is nothing to shrug off but I hope that these towns are prepared for what is going to happen within the next 20 to 40 years. The cheap housing and sharp increase in demand will attract real-estate prospectors; and just like these sociopathic leeches always do, they will start building up their little housing price bubbles and once again the idea that maybe "infinite growth" can be a real thing is going to settle in the backs of peoples minds. I'm not saying that we should stop this kind of thing mind you. The money generated in this way is very real, even if the actual wealth is not. But we should be better prepared for the fallout this time.

Re:Someone should look-up the term "Rebound"

[frinkster]

From what the article says, this is a bump in manufacturing from short term contracts, this is hardly a sustainable client base. My guess is that at the very most this will be a benefit for one generation, maybe two at the very most. A few thousand jobs is nothing to shrug off but I hope that these towns are prepared for what is going to happen within the next 20 to 40 years. The cheap housing and sharp increase in demand will attract real-estate prospectors; and just like these sociopathic leeches always do, they will start building up their little housing price bubbles and once again the idea that maybe "infinite growth" can be a real thing is going to settle in the backs of peoples minds. I'm not saying that we should stop this kind of thing mind you. The money generated in this way is very real, even if the actual wealth is not. But we should be better prepared for the fallout this time.

Many of these rust-belt cities have struggled for so long that suburban sprawl has been quite limited. Many of them have intact urban downtowns that are run-down and many of these towns and cities have been focusing on smart urban renewal of these downtown areas. They won't be making the same mistakes again. And they don't need a whole generation of investment to make them great little places to live.

drilling & mining is NOT manufacturing

[Cardoor]

it's properly (and technically) called 'exploitation of natural resources'. It isn't sustainable - in terms of environmental impact, massive front-ended depletion rates rates, or the ultimate demand-destruction the high cost of extraction begets. Political and environmental chicanery have obfuscated the first two, with massive monetary stimulus banking on the dollar's reserve status having propped up the latter (among other things of course).

If the ultimate cost of extraction were markedly lower (as it has in decades past) the net energy gains might still be enough to justify. But those days are long gone.

Re:Cure is worse than the disease.

[oh_my_080980980]

Like the earthquakes and poor air and drinking water quality. Quite schilling for the oil industry....

Re:Cure is worse than the disease.

[Cardoor]

Please don't beat your wife.

Ok, I'll beat my daughter instead.

No, please don't beat your daughter either.

Ok, I'll beat my wife.

huh??

fracking is NOT new

[kick6]

Just because the idiots in the media just discovered the existence of the procedure a few years ago doesn't mean anything. The first well was frack'ed in 1947. If fracking is new, so are jet engines, nuclear bombs, and a whole host of now-outdated shit. Journalistic integrity is a lost art.

Re:Cure is worse than the disease.

[mnooning]

The "fracking is bad" ideas are in the movies because they need bad guys in movies to create excitement. There are in reality only very small risks. No, I am not a shill. I am a retired person who took the time to look into it.

would you prefer geothermal power?

[raymorris]

Simple question - would you prefer geothermal energy rather than energy obtained by fracturing?

Re:would you prefer geothermal power?

[Oakey]

It was a trick question, geothermal requires fracking

There's no stopping this.

[Charliemopps]

There's a lot of nonsense posts in this thread about how it doesn't benefit anyone... I live right in the middle of this so let me provide some anecdotal evidence...

My Uncle is a farmer (cranberries) and has a 160 acre farm. His son worked in factories. Those factories pretty much left the state for China and my cousin, who admittedly is an idiot and therefor can't get a decent job that involves thinking, has been bouncing from fast food job to fast food job for about a decade. The cranberry market crashed a while back as the 'cranberry fad' died. Berries went from $80/barrel to around $12/barrel. My uncles farm was floundering, he was about $200k in debt and pulling in $40k/year after expenses.

Then came fracking.

My cousin got a job hauling pipes... he went from working at McDonalds to making $55k/yr over night. That may not seem like a lot to most slashdotters but in the Northern/Midwest area thats a very good salary. He's got land, a house, he's very happy though the commute is terrible. (up to 4hrs to work and back depending on the site hes working on)

Cranberries grow in sand... Sand is used in fracking. My Uncle just closed a deal to sell his farm to a Sand Mining operation for $2 million. In fact, nearly every Cranberry farmer he knows is selling as well. The sand mining companies are offering 400% the going rate for the land and are buying everything... everywhere... Some people are getting as high as $20k/acre depending on the Sand quality and how close they are to the railroad.

Now... as far as environmental impacts... The farm he spent his entire life building is going to literally be turned into an open pit 150ft deep. He hates the idea, but he can either retire a millionaire or leave his children so much debt they'll be forced to sell to the mine as well. The farmers that aren't selling are happy about it to because with fewer farmers around, the price of cranberries will go up. He plans to use his new found wealth to buy some land that has a trout stream running through it up the road and spend the rest of his days fishing.

So yes, the environmental impacts are huge. But to say it's not a boom for local people and the poor, that's just disingenuous. If you live anywhere near this stuff you're economic situation is going to improve. My uncles retaining ponds will, however, no longer be the best fishing spot in the county.

Re:Now comes the Time of the Envirowackos

[ColdWetDog]

You've just read the label on your Pop-Tart.

Put your glasses on, drink some more coffee and try again.

Re:Now comes the Time of the Envirowackos

[kwbauer]

Nice bit of scare tactics there. Repeat items in the list to get a 37% longer list; Probably another third of the list are common FDA approved ingredients for food and soaps.

Seriously, you want to complain that up to half of one-percent of what they pump in could be table salt or pure grain alcohol? Or that they are using very soft water?

You are the reason why the only people who take environmentalists seriously anymore are the environmentalists who are to stupid to realize that the other environmentalists are just making shit up.

I work in fracking industry

[munclesonkey]

95% of what is said her regarding fracking is incorrect. Go work for a fracking company for a few months and see how it is done, you will see exactly what is in the "contaminated" water. Many companies R &D departments are working on ways to re-use "contaminated" water to frac with multiple times so only a very small percentage of "new" water would be needed per frac. The water table where I frac isn't very deep, the place where the fracking is being done is about 2 miles past the water table and near the top of the wellbore there are 7-8 layers of casing (depends on company), cement and steel between the wellpipe and the ground around it, for the "contaminated" water to impact the water table it would have to bypass all those layers and that isn't going to happen. The oil and gas companies also subsidize the county and city to provide for more water testing just to ensure the public trust, not to mention we do our own testing. We live here and drink the water here, do you really think all the lab and engineering employees would use the local water supply if it were contaminated? Learn about fracking on your own and stop letting Matt Damon think for you.