Fracking debate: What’s in it for families?

(Sponsored Energy Section)

Colorado is one of the top six natural-gas producing states in the country, and residents paying utility bills every month are among those who benefit directly from that production.

Average household energy costs in Colorado – $1,551 per year – are 23 percent less than the national average, primarily due to historically lower natural gas prices in the state, according to U.S. Energy Information Administration’s Residential Energy Consumption Survey from July 2012.

“The report certainly supports many of the assumptions and attributes of the energy and utility industries in Colorado, and for that matter, consumer use patterns,” said Xcel Energy spokesman Mark Stutz. “Certainly as a state, we have access to abundant supplies of coal and natural gas, not just from Colorado but from throughout the Rocky Mountain region.

“The largest single advantage we enjoy as Coloradans is that we are in relatively close proximity to large reserves of generation and home heating fuels that are desired nationwide, specifically low-sulfur coal and natural gas. This proximity significantly cuts down on the transport and transportation costs, which in turn are typically passed on to consumers. As a side note, we’re also in a very favorable area for renewable generation, wind and solar.”

Indeed, Colorado’s Renewable Energy Standard requires investor-owned electric utilities to provide 30 percent of their generation from renewable energy resources by 2020, a target Xcel expects to reach several years in advance. That mandate places even more importance on natural gas, as the intermittent nature of wind and solar requires those renewables to be paired with a reliable alternate energy source for use when clouds cover the sun or the wind dies down. Natural gas is best suited for that role.

“When you bring in renewable energy, you’re going to have to be able to turn up and down your generation plants,” said Xcel spokesperson Gabriel Romero. “That only works with gas. That doesn’t work with coal.”

A major obstacle to meeting any ambitious renewable-energy mandate would be a statewide ban on hydraulic fracturing, a technique now routinely used in natural gas development.

Michael Shellenberger, co-founder and president of The Breakthrough Institute, an Oakland, Calif.-based environmental think tank, stands out among environmentalists as a supporter of hydraulically fracked natural gas. He sees the long evolution of energy development around the world – from animal dung, to wood, to coal, to natural gas – as a series of incremental steps in the direction of more efficient and generally less environmentally disruptive energy development.

“Our broad view is that you want to go from dirty to cleaner-air sources,” says Shellenberger, who grew up in Greeley.

“It’s complex,” he says of the polarized pro-fracking and anti-fracking camps.  “If you go back to the ’90s, the Clinton administration, guys like (former Colorado U.S. Senator) Tim Wirth and the kind of moderate environmentalists were really pro-gas. They saw gas as a big improvement. And because they liked renewables so much, it created a demand for gas because it’s easier to ramp it up or down than it is to do with other backup fuels.”

In recent years, some environmental activists have tried to start a “backlash away from gas” by trying to ban fracking, Shellenberger says. But other environmentalists , including some of President Obama’s top advisers, continue to stand behind natural gas as a clean and safe energy source. For example, in Boulder last year, U.S. Environmental Protection Agency Administrator Gina McCarthy said natural gas helps “curb climate change and support a robust clean energy market.” Meanwhile, McCarthy’s colleague in Obama’s Cabinet, Interior Secretary Sally Jewell, says “fracking has been done safely for decades” and any effort to ban this technology “ignores the reality” that it will be needed “for decades to come.”

Shellenberger himself took part in a debate on fracking late last year hosted by the Nathan Cummings Foundation, and in that discussion he suggested that too little attention is being paid by environmental groups to the overwhelming benefits of natural-gas development.

“I think you’ve got to pay attention to both winners and losers,” he said. “We’re in the midst of a transition that’s basically positive that we should not be putting the brakes on. It has been good for the environment, it’s been good for workers. And it’s been good for the whole country, the economy. It’s produced $100 billion a year (in revenue).” Additional benefits are evident in Colorado, as average household energy costs for Coloradans are lower than the national average despite the fact that residents use 15 percent more energy than the national average, according to the EIA. Xcel’s Stutz says this isn’t surprising.

 “We are one of several states that experience both extremely hot and cold weather during the year, and everything in between,” he says. “In Denver, for example, we can be well over 100 degrees in temperature for many days or weeks in the summer, and be minus 15 degrees or more for extended periods in the winter. This means Colorado consumers need significant amounts of electricity in the summer, and significant amounts of both electricity and natural gas in the winter. Xcel Energy’s electricity use per residential customer is about 7,500 kilowatt-hours a year and generally peaks in the mid-summer. Consumers tend to use most of their annual approximately 800 therms a year during the November to February time frame.”

Colorado’s residential sector is the largest consumer of natural gas, with nearly three-fourths of households in the state using natural gas as their primary home heating source.

IHS, the global information company, issued a report late last year that quantified the economic impact of natural gas development nationally and in states such as Colorado.

“It’s really around unconventionals, so it’s directly related to hydraulic fracturing,” said Chris Hansen, IHS director, Energy Insight, who specializes in energy sector economics, electricity market reform, and international electric power policy. “One of the things that surprised me when I first read the report is both the jobs impact and the household-income impact. Our estimation is there have been about 2 million jobs created as of 2012 because of unconventional natural gas development, and we see that basically doubling by 2025. So it has a huge impact. Household income, we think right now it’s contributing about $1,200 to household disposable income, and we see that headed to about $3,500 per household by 2025 in real terms.”

The IHS study of Colorado estimated unconventional gas development contributes about 78,000 jobs in the state today and projected that figure would climb to 175,000 jobs and add $7 billion in tax revenue for the state by 2035.

“We rank the states by employment impact, and Colorado is fifth,” Hansen said. “We’re definitely in the epicenter of this activity.”

 Hansen said IHS undertook the study with underwriting from America’s Natural Gas Alliance (ANGA) to quantify the economic value of natural gas development nationally and in states where it is produced.

 “The one reason ANGA supported the work is they wanted a clear statement for policymakers and in the public sphere that would help them communicate to the public, ‘Hey, this is really important from a jobs perspective, from a tax-revenue perspective, from a household-income perspective – all the ways we quantified it,” Hansen said. “We want (the public) to be very clear-eyed about the impact if we decide to go toward bans of fracking or inhibiting natural gas development in Colorado.”