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Gas-fired generation expansion is fueling job growth -- study

Production of shale gas and other unconventional gas development supported more than 1 million U.S. jobs in 2010, and the number will grow to nearly 1.5 million by 2015 and 2.4 million by 2035, according to a study by IHS Global Insight for America's Natural Gas Alliance, the industry's lobbying organization.

The biggest driver for gas demand is its steadily growing use as a power plant fuel, increasing by 42 percent over the next quarter-century, according to IHS assumptions.

The study, following earlier IHS projections, predicts that unconventional gas production from shale, coalbed methane and tight sands will attract $3.5 trillion in cumulative capital investment through 2035 and produce $1.5 trillion in state and federal revenues in the next quarter-century, IHS said.

"At a time when the U.S. economy is slowly recovering from the Great Recession and struggling to create enough jobs to sharply reduce the unemployment rate, the growth in shale and other unconventional natural gas production is a major contributor to employment prospects and the U.S. economy," said IHS Vice President John Larson, who headed the study.

The employment numbers estimate only the new jobs from unconventional gas development, Larson said. They do not include jobs lost at coal-fired electric power plants or renewable energy projects that are supplanted by gas generation. Nor do they include jobs that may be created in U.S. industries that become more globally competitive because of low U.S. gas prices, Larson added.

The study results also depend on trends whose directions are open to debate, and where major surprises may lie in store, including assumptions about natural gas prices, increases in gas-fired electricity generation and gas exports, and regulation of horizontal drilling.

The study employs computer modeling that estimates the jobs created directly from unconventional gas drilling and production and at firms that supply the industry, including suppliers of pipe, cement, machinery and chemicals, and the construction of an expanded gas delivery and processing infrastructure. It is built, bottom-up, from estimates of well drilling costs in shale regions that range from $3.5 million to $12 million per well, depending on the geology.

Larson said a key assumption built into the study is the future direction of natural gas prices. Current prices below $3 per thousand cubic feet have caused a steep reduction in gas drilling.

The IHS model assumes that the current oversupply of gas comes back into balance by 2015, when prices rise to an annual average of $4.77 per thousand cubic feet, in 2010 dollar values, he said. The gas price input is set at $5.15 in 2035 in the model.

The outlook for gas development also depends significantly on how it is regulated, he said. The study assumes that the current mix of state and federal rules for horizontal drilling will remain in effect over the next 25 years.

"We looked at what was going on in the states," Larson said. If there was not a clear regulatory path to drilling and production in any state, new production from unconventional gas was not included in the state's production totals.

The study also assumes that exports of liquefied natural gas will grow gradually, reaching 1.2 billion cubic feet per day in 2017, he said. It projects 1 billion cubic feet per day of natural gas output to be used by gas-powered truck fleets, but no contribution from natural gas-powered private vehicles.