Sorry for all the videos lately (even though I only post ones I think will be interesting), I have been under tremendous time constraints. However, I have an amazing investment that I hope to post today or tomorrow. It will be short and not very complicated, but the risk reward ratio is absurd.
I wanted to write a few articles about NY over the coming week. I live in NY so one may think these issues are local, but these thoughts and ssues apply nationwide.
At this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More
Timothy J. Considine, director of the Center for Energy Economics and Public Policy at the University of Wyoming, recently published a compilation titled “The Economic Opportunities of Shale Energy Development” which highlights the economic benefits New York would enjoy as a result of unlocking Marcellus reserves through the process of hydraulic fracturing.
Just to get a sense of the location of Marcellus take a look at this map:
According to the Department of Environmental Conservation of NY, the entire Marcellus Shale formation contains between 168 trillion to 516 trillion cubic feet of natural gas. To put it in perspective, NY currently uses 1.1 trillion cubic feet of natural gas a year. Therefore, NY could easily provide its own natural gas needs and be an exporter to other states in the New England area, and ship it all over the country and the world.
Hydraulic fracturing is a process which has long been adopted for drilling wells to extract Marcellus natural gas from under the ground. It is not the cost associated with the process, which is approximately 3 to 5 million per well, but the environmental concern that is serving as a hindrance towards reaping profits from this natural gas. In 2008, the ban on hydraulic fracturing was made effective considering the possibility of underground contamination of water.
This moratorium, which was an upgrade to drilling regulations, I believe is a mistake as the same process is being adopted to unlock Marcellus reserves in areas such as West Virginia and Pennsylvania. The fracking there is having an enviromental impact on New York’s water supply according to critics, so it makes no sense why NY would not take advantage of the shale gas, if the state is anyway being impacted. New York Attorney General Eric T. Schneiderman filed a suit in U.S. District Court recently alleging that Pennsylvania’s drilling has caused ““hundreds of violations of water pollution laws and the pollution of drinking water supplies relied on by hundreds of thousands of people” as a result of hydrofracking.” No regulation is perfect, but there is no reason that NY cannot also drill and have regulators that overseas safety issues.
On a side note, I see natural gas as the least of the worst alternatives. Nuclear energy is unsafe and no one wants it in their backyard. Coal, which supplys about 50% of America’s energy needs, is awful for health reasons both for the miners and anyone who lives within 30 miles of the plant (coal is also a leading cause of carbon dioxide, which causes global warming, a political topic I dare not venture in to :) ), green energy is very cost inefficient, and is currently such a small percentage of US energy production, that it would take decades to make a dent in total energy use. Oil has similar problems to coal, and the BP spill demonstrates the political risk that oil drilling companies could face. Natural gas is abundant (to say the least), cheap, and can be used in cars if T. Boone Pickens’ http://push.pickensplan.com/index.php is adapted. I think natural gas should be championed by most environmental groups.
Most argue, with evidence, that the environmental cost of hydraulic fracturing is a very little price to pay keeping in perspective the profitability of the natural gas development. New York has been steadily witnessing a drastic decrease in their state population. The reason is not the unattractiveness of the state but the high cost of living due to so many taxes, which is mostly unaffordable except for the super wealthy ,or super poor who qualify for Government programs (I plan to post shortly an article titled “Why People Live in NY”). Anyone in the middle class ranging from lower middle class to upper middle class get really squeezed in New York.
On a broader level, America has over the years experienced high levels of dependency on other countries for natural resources. If the moratorium is lifted, it is believed the opportunity will not only reap high economic benefits, for New York as well as America as a whole, but also serve as a way of decreasing unemployment through job creation.
According to the before mentioned research compilation regarding the economic advantages associated with Marcellus Shale, if the ban on hydraulic fracturing is lifted, the resource development project will give rise to an aggregate of $11.4 billion economic output. New York has the opportunity to collect $1.4 billion in tax revenues and 15,000 and 18,000 jobs will be created in Southern Tier and western New York. Moreover, 75,000 to 90,000 more employment opportunities can be created if this natural resource development project is extended to regions of southeastern New York and Utica Shale. The economic benefits generated just from a typical Marcellus Shale gas well is approximately $4 million. Comparing the mentioned economic gains to the $14,000 cost of the environmental impacts of a typical shale gas well, it is evident that the benefits outweigh the environmental costs.
The estimated cost associated with the environmental impacts is derived through careful study of the records of environmental violations reported by Pennsylvania DEP during the years of 2008 till 2010, when the extensive hydraulic fracturing processes were on-going in Pennsylvania for the development of the Marcellus Shale gas well were taking place. The cost is low mainly because the impact is very little and gradual. Errors and flaws in the drilling process were the main reasons for the reported violations which cause environmental concerns. With proper drilling and well-casting techniques along with supervision of the Department of Environmental Protection, environmental impacts can be further minimized.
According to congressman Tom Reed (R-29 NY), Pennsylvania was able to generate an economic output of more than $3.8 billion and $400 million state and local tax revenues due to the production of Marcellus Shale. Furthermore, employment rate went up as 48,000 new jobs were created for the citizens along with the Marcellus Shale gas well development. These numbers provide us with enough evidence of the fact that the lifting of the moratorium would benefit New York State with economic gains along with employment generation and increased tax revenues.
New York has been faced with huge budget deficits. If the state just opened the Marcellus shale to companies, the state could earn billions of dollars of “easy money”.