Natural gas: game changer for American manufacturing

Domestic natural gas holds the potential to yield revolutionary economic and energy benefits for the United States.  Fully developing our natural gas resources from the shale formations across the country will provide low-cost and reliable sources of energy that will boost our competitiveness, and spur an American manufacturing renaissance which the steel industry, with its ripple effect throughout the supply chain, is helping to lead.  

According to a recent report released by Professor Timothy Considine, an energy economist at the University of Wyoming, the U.S. steel industry supports more than one million jobs in the U.S. economy.  For every job formed in the steel industry, seven additional jobs are created in other economic sectors.  For that reason, the steel sector has played an outsized role in driving manufacturing’s post-recession resurgence.  

{mosads}Despite this encouraging analysis, the U.S. manufacturing sector still faces significant challenges including energy cost uncertainty.  As an energy-intensive industry, the domestic steel industry’s international competitiveness depends on our ability to capitalize on the discovery and development of North America’s shale resources.  Our industry consumes large amounts of natural gas, and will benefit from the increased supply resulting from shale production, which keeps gas both reliable and available at a low cost.  

A second positive dimension of shale resource development for our industry is that steel pipe and tube products that U.S. steelmakers produce are integral to the exploration, production and transmission of natural gas and oil. Producing more natural gas will help maximize industry market opportunities due to the increased demand for steel.  In addition, these developments will create high-value jobs, stimulate economic activity in North America and help provide energy security and independence for our nation.  

The facts are crystal clear.  A recent independent study found that the Marcellus Shale accounted for the creation of more than 60,000 jobs in Pennsylvania in 2009, with more than 200,000 new jobs anticipated by 2015.   In addition, a study by the Ohio Oil & Gas Energy Education Program notes that development of Ohio’s Utica Shale could support more than 204,000 jobs in just four years (IHS Global Insight).

In the steel industry, which supports over 115,000 jobs in Ohio, companies are already making substantial new capital investments and creating high-value jobs in the state as a result of shale natural gas production.  And developing our natural shale resources is not just creating jobs within the steel industry.   Because of our industry’s jobs multiplier effect, it is creating thousands of jobs in the manufacturing sector.  

Because of its massive potential for job creation and capability to provide a reliable, affordable source of energy, it is essential that public policies on natural gas production be developed and implemented carefully, so as to balance economic, energy, and environmental goals. Most of the states in which shale production is taking place have already had robust regulatory programs in place for decades; others are currently in the process of updating regulations.  This is working, and regulations on shale gas drilling are best developed and put in place at the state rather than the federal level.  A one-size-fits-all approach from the federal government will almost certainly hinder the economic and energy benefits that we are already seeing from shale gas production, and could also limit the potential for an American manufacturing renaissance.   

By embracing our shale reserves as the tremendous domestic resource that they are, while developing them in a careful manner, our nation can lessen its dependency on foreign energy supplies, create thousands of jobs and spur economic growth for years to come.

Gibson is president and CEO of the American Iron and Steel Institute (AISI).  AISI member companies produce more than three quarters of the steel made in America.