The story begins as early as 1973, the year of the Yom Kippur War. On Oct. 17, several Arab states decided to stop exporting oil to the United States and certain European nations that supplied the Israeli military. In roughly two weeks, the
Organization of Petroleum Exporting Countries slashed its production by one-fourth. Though the war lasted less than three weeks, the embargo persisted for five months. The 1973 oil embargo immediately decreased the amount of crude oil and petroleum products available to U.S. businesses, exposing America’s reliance on foreign-sourced energy.
The next chapter in the story arguably takes place in 1979. On March 28, the worst nuclear disaster in U.S. history took place at Metropolitan Edison’s Three Mile Island Unit 2 outside Harrisburg, Pa. That event, combined with rising costs and legal liabilities, conspired to bring the construction of nuclear plants in America to a grinding halt. The nation’s last new nuclear power plant, the Watts Bar Nuclear Plant in Spring City, Tenn., was approved in 1977 and completed in 1996.
At least two other salient events transpired during 1979: the fall of the shah of Iran and the Soviet invasion of Afghanistan. The combination of political instability in oil-rich portions of the world and a lack of nuclear power plant construction in the United States led to a surge in energy prices.
When oil prices jumped to $147/barrel in mid-2008 due to a weakening U.S. dollar, as well as supply disruptions in Brazil and Nigeria, conventional wisdom held that America would dramatically increase domestic production of energy. How to do so led to the emergence of several potential candidates, including coal, solar, wind and nuclear. The Japanese earthquake on March 11, combined with the current financing environment, rendered America’s nuclear renaissance a non-starter for now. Though the influence of solar and wind has become more pervasive with the passage of time, these represent relatively expensive sources of energy and a small fraction of the overall energy market.
The resource that appears to be emerging as the current winner in the U.S. energy sweepstakes is natural gas, in part due to its less detrimental environmental implications and in part due to a revolution in technology. In 2011, researchers at
Carnegie Mellon University released a report that determined natural gas wells in the Marcellus Shale region (which encompasses large parts of New York, Pennsylvania and West Virginia, and stretches into Ohio, Maryland and Virginia) emit 20 percent to 50 percent fewer greenhouse gases than coal for the generation of electricity.
The technological revolution pertains to hydraulic fracturing, commonly referred to as fracking. This process creates fissures or fractures in underground formations to allow natural gas and oil to better flow up a wellbore to a pipeline or tank. The technology created vast potential for energy production in America, often in areas most closely associated with low incomes and high rates of unemployment.
Construction Impacts Are Significant
The estimated economic impact of exploring the Marcellus Shale’s largely untapped natural gas reserves has been substantial. Researchers at
West Virginia University’s College of Business and Economics estimated in 2009 that the state’s oil and natural gas industry directly employed nearly 10,000 individuals associated with more than $650 million in wages, with the construction industry accounting for 1,000 direct jobs—placing it third behind only the mining and transportation industries.
A 2010 study by
Pennsylvania State University determined Pennsylvania Marcellus natural gas produced $11.2 billion in value, contributed $1.1 billion in state and local tax revenues, and supported nearly 140,000 jobs (including 24,000 construction jobs). Nearly $3 billion in associated construction spending took place as a result.
Hydraulic fracturing affects many areas of construction, including pipelines, industrial facilities, wastewater plants, housing and hotels. The industry’s potential is vast given the lengthy list of shale gas reserves in the United States. Among the key formations are the Antrim Shale in the northern part of the Michigan basin; Barnett Shale in the Fort Worth basin; Bakken Shale (which produces both oil and natural gas) in North Dakota; and Fayetteville Shale in the Arkoma basin in Arkansas. However, many experts seem to agree the Marcellus Shale is the most exciting in terms of potential revenue to oil and natural gas companies and, by extension, members of the construction industry.