Energy Markets Watch Intently as Texas Fracking Bill Moves Forward
The bill specifically moves the power of regulation of Texas' oil and gas industry into the hands of the Texas Railroad Commission, and is a response to efforts in Denton, Texas, to ban fracking entirely within its communities.
Two other states, New Jersey and New York, have placed moratoriums on fracking while they study the pros and cons of allowing the use of this relatively young technology. The states of Pennsylvania, Colorado, and Ohio have looked to limit the use of fracking technology by implementing the use of popular referendums to disapprove local fracking, or by the use of zoning rules to keep fracking operations away from sensitive areas. The zoning rules vary and disallow fracking from taking place in heavily populated areas, areas near schools, near major water sources, or near major fault lines.
The Denton, Texas bill to halt fracking was seen as a step forward for environmentalists looking to slow the rise of fracking in the US energy industry, while detractors saw it as a threat to one of America's fastest growing energy booms as well as a step in the wrong direction for the country's economic profile. The fracking boom has allowed considerable growth of the American domestic energy industry, lowering the USA's reliance on foreign petroleum imports while creating near massive surpluses of natural gas, a fossil fuel energy source seen as a cleaner alternative to coal.
The energy industry has seen a large, multi year expansion as a result of the fracking boom, with proponents of the methods hailing the extraction method as key to securing the USA's dominance in the international energy scene. Analysts have estimated that the fracking boom could lead to complete energy independence by the 2050s, with America becoming a net petroleum exporter, in addition to becoming a natural gas exporting powerhouse.
Despite the relative abundance of oil and gas now available via fracking, the costs of extraction have remained stubbornly high in relation to extraction costs of foreign competitors. The recent glut on the oil market, caused by both increased production in response to oil price spikes in the late 00s and a reduce in demand from developed economies, has put considerable strain on the fracking industry as it struggles to compete with more cost efficient producers from across the globe. While low gas prices have been a boon for energy intensive industry and consumers as they saw steep decreases on their energy bills, the glutted market has been a point of contention for energy companies as they consider whether to expand, or even continue, their higher cost fracking operations.
The recent move by Texas to endorse fracking by stripping localities of their jurisdiction over drilling operations has been a rare recent bright spot for the fracking industry. An increasingly skeptical public and less than prime energy market could be two important forces that significantly reduce the momentum and longevity of the United States' current energy renaissance.
Published on May 4, 2015By Travis Lindsay
Posted in ...Market Commentary