Laboratories of Democracy Hearing: States That Embrace Fracking Are More Prosperous

The House Energy & Power Subcommittee recently held a hearing on the economic impacts of state energy policies.  One primary conclusion came out that hearing: states with robust energy development, especially those that allow for advanced oil and gas extraction techniques, like fracking, are stronger economically than states that have prohibited such development.

Supporting the main conclusion is testimony from Dr. Bernard L. Weinstein, Associate Director of the Maguire Energy Institute at the Cox School of Business at Southern Methodist University.  According to Weinstein, the unemployment rates in states that pursue energy development are well below the national average.  On a more specific note, he looks at Texas, which has aggressive energy development and the lowest unemployment rate in the nation at 5.1%, compared to California, which has abounding energy regulations, one of the highest unemployment rates in the nation, and a stagnating economy.  He also looks at North Dakota, which has open energy development policies, along with the nation’s lowest unemployment rate and fastest growing economy—compared to New York, which is not open to energy development and has a weakening economy.

Dr. Paul Polzin, Director Emeritus of the Bureau of Business and Economic Research at the University of Montana, also looks at North Dakota’s success.  Polzin specifically looks at the impact that development of the Bakken Shale play has had on Richland County, Montana and Williams County, North Dakota, where both states embrace energy development in this newer play.  The economies in both areas were stagnant for most of the last 30 years, but saw some improvement with the onset of new drilling in 2004, along with a recession-related slowing or even stopping of that growth in 2008-2009.  But growth began accelerating when new technological advances in drilling were employed 2010.  Polzin also discussed a multiplier effect where increased employment in the energy sector leads to increased employment in other sectors.

Interesting testimony was also presented by Fred Siegel, Senior Fellow at the Manhattan Institute.  Like Weinstein, Siegel looks at the languishing economy and restrictions against energy development in New York, but compares them to the similarly-situated Pennsylvania, which has chosen to pursue energy development and has a strong economy.  Siegel, who is a historian and expert on the concept of Laboratories of Democracy, sees New York’s anti-fracking movement as class warfare driven by “Gotham’s liberal gentry,” who are out to protect idyllic summer homes—but at the cost of jobs and economic growth that is needed by the general public.

Supreme Court Justice Louis Brandeis is credited with coining the term “Laboratories of Democracy” to describe a policy phenomenon.  With states having great latitude in many areas of policy development, many take different approaches—leading to experiments that can provide lessons for policy development in other states and the federal government.  This hearing was called to look at the outcomes of various energy policies in the states.

In his opening remarks, Energy and Power Subcommittee Chairman Ed Whitfield (R–KY), discusses some of the successes states have seen and says, “Washington should be learning from these state successes and applying the same pro-energy policies to federally-controlled lands and offshore areas. But unfortunately we are not doing so. In fact, recent reports from the Congressional Research Service and Energy Information Administration show overall declines in energy production from federal lands. North Dakota and others have set a good example for the nation, but that example is being ignored here in Washington. It is time for that to change.”

Testimony was also presented by Tom Tanton, Director of Science and Technology Assessment at the Energy and Environment Legal Institute, who argues against the development of a centralized federal energy policy; Steve Clemmer, Director of Energy Research & Analysis at the Union of Concerned Scientists, who looks compares who compares Renewable Electricity Standards among the states; and Steve Nadel, Executive Director at the American Council for an Energy-Efficient Economy, who focuses on energy efficiency, arguing that it should be “a cornerstone of an “all-of-the-above” energy policy.”

Read the Chairman’s opening remarks and the witness testimonies

Written by Marta Weismann