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Wednesday, September 26, 2012


Who is "touching the force" in the Natural Gas Industry?


I have been hearing about natural gas drilling and hydraulic fracturing, or "fracking", from my later years of high school to now, with increasing discussions about it over time. My first exposure to the 'problem' was through a movie called Gasland, which I'm sure many university students have seen, about two years ago. The movie presented the natural gas industry in a very negative light, and pushed, explicitly and inexplicitly, for government intervention to correct the problem, which was characterized by flammable water taps and hazardous gas causing sickness near the drill sites. Since the release of Gasland, most people I talk to often reference it in their arguments against natural gas as a feasible energy source, and many people I come across believe fracking is a bad thing.

However, according to this article (which has seemingly credible sources), government may actually be the source of the rapid expansion of the natural gas industry. According to the article, over three decades, the federal government has contributed "more than $100 million in research to develop fracking, and billions more in tax breaks." Alex Trembath, a researcher at the Breakthrough Group, a California nonprofit that supports "new ways of thinking about energy and the environment", states that "[T]he Department of Energy invested about $137 million in gas research over three decades, and that the federal tax credit for drillers amounted to $10 billion between 1980 and 2002." Many of the people referenced in the article seem to believe that government is largely responsible for the size of the natural gas industry today, and rightfully so given these statistics.

Although the article seems to be presenting this in an unbiased manner, the facts that were given reveal some irony within the arguments against natural gas. As I stated earlier, many anti-natural gas advocates look to government to correct the negative externalities caused by the industry, whether it be through tax deterrents or direct intervention. However, by stating that government is responsible for the size of the natural gas industry, it implies that, without government subsidies, the natural gas industry would be much smaller than it is today. Because of the subsidies, I suspect that more and more firms will begin to enter the market, resulting in more drilling. I also suspect that petroleum and natural gas companies had some kind of lobbying interest in the tax breaks and subsidies, but the fact of the matter is that government is both responsible for and expected to fix a large market with negative externalities, quite ironic!

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