Natural Gas:

ACC's Dooley discusses impact of shale revolution on chemical industry profits, growth

How is the unconventional oil and gas revolution impacting the U.S. chemical industry and its ability to compete internationally? During today's OnPoint, Cal Dooley, president of the American Chemistry Council, discusses a new report that highlights the economic benefits of expanded shale gas production. He also explains how the boom in shale development shifts the focus of the liquefied natural gas exports debate.


Monica Trauzzi: Hello, and welcome to OnPoint, I'm Monica Trauzzi. Joining me today is Cal Dooley, president of the American Chemistry Council. Cal, nice to have you back on the show.

Cal Dooley: I'm delighted to be here.

Monica Trauzzi: Cal, a big headline coming out of Daniel Yergin's group, IHS, last week on the impact of the unconventional oil and gas revolution on the U.S. economy. And the report talks about the overall benefits to the chemical industry. What is the net economic impact of shale gas on the chemical industry? What are the numbers that you're looking at?

Cal Dooley: Well, it's such a huge opportunity for the U.S. chemical industry. We have have been doing a running tally of the new investments in chemical manufacturing in the United States just over the last three years. About three years ago I was on this program, we were talking about projections of $16 billion in new capital investment. In May of this year we released a study where we were talking about $74 billion in new investment, and today we're up to $86 billion in new capital investment in chemical manufacturing in the United States. And the IHS report further substantiates that we're going to have a sustained competitive advantage in the United States in chemical manufacturing for probably the next 20 or 30 years. We're going to see U.S. chemical and plastics production, which are going to increase almost 200 percent by 2020, while one of our primary competitors, those manufacturers in the European Union, are going to see their production decline by one-third.

Monica Trauzzi: What role did ACC play in making this report happen?

Cal Dooley: Well, we were one of the funders of the report, and we had been working closely to provide the information in terms of the decisions that corporate leaders in the chemical industry in the United States and globally. We're seeing investments not only by U.S.-based companies coming into the United States, but European-based, Indian-based, Brazilian-based companies, Japanese companies, are all flooding this market. Because they know that we have a 30-year supply of natural gas and natural gas liquids that are available at $4 MMBtu.

Monica Trauzzi: So you mentioned that this makes the U.S. chemical industry more competitive. Would you consider this a game changer for you guys?

Cal Dooley: Absolutely. This really is a once in a lifetime opportunity we have, and it's a game-changer for our industry, but it's a game-changer for the broader manufacturing sector in the United States, and it's a game-changer for our citizens. Who would've thought ten years ago that the United States and North America could become energy independent? Who would've thought in the United States, which the IHS report just also disclosed, that the average per capita benefit of the increased production of natural gas is generating almost $1,200.00 in savings in 2012 to the average family, which is going to go up, by their projections, up to $3,500.00 per family by the year 2025 solely because of natural gas increased production.

Monica Trauzzi: The sticking point here, though, is what the future of regulation looks like. And the suggestion with this report is that regulations could stymie growth within the industry. What does ACC consider to be restrictive regulations?

Cal Dooley: Well, I think clearly we have to have a comprehensive approach to ensure we have a regulatory environment that allows us to maximize the production of natural gas and other fossil-based fuels in the United States. We need to fully commit ourselves to developing our natural gas and fossil fuel resources on public as well as private lands. We need to ensure that we're sending the right appropriate signals on tax policies, such as accelerated depreciation that will ensure that we're making those investments in a timely fashion to capitalize on this tremendous opportunity.

Monica Trauzzi: And is the Obama administration headed in the right direction on that?

Cal Dooley: Well, they are generally headed in the right direction. We wish they would be a little more focused on trying to ensure that we have the regulations that deal with the public lands that would be more clearly defined. Because most all the increase in production of natural gas to date has occurred on private lands. And we have tremendous reserves on public lands that have to be part of this mix if we're fully going to capitalize on this opportunity.

Monica Trauzzi: Greater natural gas development builds a stronger case in some ways for LNG exports, does it not?

Cal Dooley: Well, I think that what this report will demonstrate is that we probably have the reserves in the United States, if we fully capitalize on developing those reserves to meet the domestic needs, which will allow the chemical industry to maintain our global competitive advantage while still having natural gas that would be available for exports to a limited degree.

Monica Trauzzi: So this sort of helps to quell some of those concerns that we had heard from some members of the chemical industry over the last couple of years, that jobs may be shipped overseas if the price of natural gas goes too high as a result of LNG exports?

Cal Dooley: I think what it clearly demonstrates, if we get the regulatory policies right that really allow us to fully develop our domestic reserves of natural gas, that we will have an adequate amount here in the United States that will allow us to meet our domestic manufacturing needs, our energy needs, as well as to have an amount of gas that would be available to meet the market conditions that would allow for some exports.

Monica Trauzzi: So what should your member companies be doing right now to harness the potential that natural gas poses for the U.S. economy?

Cal Dooley: Well, our members are doing it right now. This $84 billion in new investment is going to, once it gets all in place by the year 2020, again, we think it's going to result in an annual additional contribution to our country's GDP of almost $60 billion a year. And when you translate that down in terms of just what that means to job creation, could be as many as 320,000 additional jobs. It could mean over $7 billion in federal tax revenues, and about another $7 billion in state tax revenues.

Monica Trauzzi: Well, this is just one report of many. We'll see how it influences the political discussion in Washington. Thank you for coming on the show.

Cal Dooley: Thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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