Many Coloradans breathed a sigh of relief this summer when political and business leaders reached a compromise to head off a ballot showdown on fracking. The state’s $30 billion oil and natural gas industry has been described as “ground zero” in the national fight by environmentalists to curb or outright ban the key drilling technology that has spurred a bona fide energy revolution in America.
Coloradans should be grateful that cooler heads prevailed in this fight. Our newest research from the Small Business & Entrepreneurship Council shows that Colorado’s natural gas production, which expanded by 139 percent from 2005 to 2012, has turbocharged job creation and economic growth unlike any other sector in this state in a long, long time.
While overall employment grew between 2005 and 2012 in Colorado — compared to a decline in the United States overall — jobs grew even faster in the state’s energy sector, where more than 12,000 jobs have been created. Sectors such as oil and gas extraction, drilling, business support and pipeline construction all showed hefty double digit increases in employment during this period.
While much of the attention from environmentalists has been focused on what they describe as “Big Oil,” the truth about domestic energy development is that our nation’s historical surge from energy dependence to energy abundance has largely been driven by small and midsize businesses. That is certainly true in Colorado, where the vast majority of energy businesses employ fewer than 500 people. In the state’s drilling sector, for example, the total number of businesses grew by more than 19 percent during 2005-12, with 68 percent of employers in the sector employing fewer than 20 workers.
Colorado’s energy revolution has come about through private-sector investment and technological innovation, which has opened up access to shale gas that was previously uneconomical to produce. The result is a transformed domestic natural gas market. For example, the annual average price of natural gas in the United States declined by 57 percent from 2005 to 2013. While other market factors have played a role, lower prices have nonetheless resulted directly from expanded U.S. natural gas production — a 35 percent increase from 2005 to 2013.
For Colorado, the paradigm shift in domestic energy from one of scarcity to one of abundance and affordability is benefiting the state economy in myriad ways. State leaders are now talking about an “industrial renaissance” in places like Boulder County, capitalizing on existing strengths in computers and electronics, chemicals, and specifically biotech. This is all turbocharged by lower energy costs.
Now, Colorado and other energy states are poised to take it to the next level with exports of U.S. natural gas to global markets hungry for affordable LNG (liquefied natural gas). The abundance of U.S. natural gas output is expected to continue, and may even reach new heights with further technological innovations. The federal government’s Energy Information Agency (EIA), Washington’s official statistics agency for energy, predicted that the United States would become a net exporter of natural gas before 2020.
While some have argued that LNG exports would drive up prices at home and hurt U.S., businesses that use natural gas as an industrial input, we shouldn’t be alarmed. Inevitably, expanded worldwide demand for U.S. natural gas will spur greater domestic production, increased investment, enhanced economic growth, rising incomes, and more jobs – just as is the case when we increase exports for agricultural commodities, manufactured goods, or raw materials. Recent EIA analysis confirmed just that, finding that LNG exports would “spur production and investment, which more than offsets the adverse impact of somewhat higher energy prices.”
A growing LNG export industry would be another boon to American small and midsize businesses, key drivers of job creation.
It’s important to consider the benefits that accrue to workers, small businesses, individual states, and the overall U.S. economy when domestic energy production expands. For Colorado, it’s important that energy policies, environmental protection and economic growth are managed in a healthy balance.
Raymond Keating is chief economist with the Small Business and Entrepreneurship Council in Vienna, Va. His new research paper, “Benefits of Natural Gas Production and Exports for U.S. Small Businesses: Nationally and Key States,” was published Nov. 13.
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