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Monday, July 8, 2013

What is the value of conservation in the shale gas era?

What is the value of conserving natural resources?  One can answer that question qualitatively - based on value judgments, philosophy, educational background, life experiences, religion, and more.  But that question can also be answered quantitatively – to at least some degree of accuracy – thanks to the emerging and increasingly important field of resource economics.  That discipline attempts to place almighty dollar signs on some specific example of the Almighty’s handiwork, in an attempt to avoid the destruction of the latter in favor of the former. 

An important example of the application of this work can be found close to home, in the Delaware River Basin, which provides drinking water to 5 percent of the U.S. population.  Pennsylvania’s Governor recently called on the Delaware River Basin Commission to lift its 3-year old moratorium on unconventional gas exploration in the basin, citing depressed economic growth in northeastern Pennsylvania and deprivation of landowners’ rights.  DRBC reportedly responded saying that commissioners are trying to strike the “appropriate balance between natural gas development and protection of natural resources and public health.”

The question of balance is even more complicated that DRBC implies, because the value of natural resources is often not taken into account when making decisions.  So, another question for the Governor and the Commission is this: Does the economic value provided by the waters and forests of the Delaware River Basin dwarf the value of any natural gas drilling that could take place in it?

According to a 2011 study by researchers at the University of Delaware, the answer is a rather emphatic "yes."

The report estimates the economic value of water, natural resources, and ecosystems in the Delaware Estuary watershed in Delaware, New Jersey, and Pennsylvania as:
  • over $10 billion in annual economic activity from recreation, water quality and supply, hunting, fishing, boating, ecotourism, forests, agriculture and parks;
  • $12 billion annually in ecosystem goods and services provided by habitat, such as wetlands, forests, farms, and open water.  For example, forests and wetlands filter drinking water naturally; if lost, they would have to be replaced with very expensive drinking water filtration plants;
  • directly and indirectly supporting over 500,000 jobs with over $10 billion in wages annually.
Recently, the study’s principal author said that the upper Delaware River Basin above the Delaware Water Gap – where drilling would occur if the moratorium is lifted - is worth nearly $8 billion annually from renewable resources, including drinking water at $2.8 billion; forests at $4.2 billion; and river recreation at $940 million.

These values should be weighed carefully. And the methodology that produced them should be refined and more widely and consistently applied by regulators and companies - not necessarily to prevent development, but to inform decisionmaking and to drive production innovation and regulation. 

What is the value of conservation? Even in the shale gas era, the answer is – a lot.  If gas - as valuable as it is - cannot be produced responsibly with minimum impacts and risks, and strongly regulated, there may indeed be places where it should not be produced at all.

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