When we think of fracking in America, North Carolina is far from the first state that comes to mind. However, after Gov. Pat McCrory signed legislation this year to terminate the state's 2012 moratorium on fracking as well as its decade-old ban on the process, North Carolina is now gearing up to start fracking its first natural gas wells next year. It's a move that could create a whole new sector of employment in the state.
Drilling down into North Carolina's fracking future
Deep underneath North Carolina are the Deep River and Dan River Basins, both of which are thought to contain natural gas and can be seen in the following map.
Of the two, the Deep River Basin is thought to be most promising, as it is estimated to contain 1.7 trillion cubic feet of natural gas. Just for some perspective on how much natural gas we're talking about, here, that's enough natural gas to meet the energy needs of 1.7 million people for 15 years.
While that's potentially a lot of natural gas, this is not a natural gas game-changer for the U.S. by any means. Currently, America's other shale gas plays contain 129.4 trillion cubic feet of proven reserves, so if all of the natural gas in the Deep River Basin does prove to be both technically and economically recoverable, it wouldn't really move the needle that much. However, it does have the potential to be an important source of growth for the state of North Carolina.
Fracking to bring jobs in North Carolina
Initial estimates suggest that fracking in North Carolina could add as much as $80 million to the economy each year, according to analysis from an economist at N.C. State University. It would also create a number of high-paying job opportunities in the oil and gas industry, as the average oil-field worker makes upwards of $40 per hour. However, the bulk of the jobs will be created indirectly, as the economic boost will create jobs to support the industry.
In addition to the jobs created to support fracking, North Carolina is also looking to shale gas that's produced outside of the state to create jobs. A new pipeline project has been proposed that would take shale gas from the Marcellus and Utica shale formations and send it to North Carolina. The nearly $5 billion natural gas pipeline, which would be jointly owned by Duke Energy (NYSE:DUK), AGL Resources (NYSE:GAS), Dominion Resources (NYSE:D), and Piedmont Natural Gas Company (NYSE:PNY), could begin pouring cheap shale gas into the state by 2018. The project is expected to create 738 jobs in the state each year during the construction phase, which will boost the economy by $680 million. It will also create 52 permanent jobs.
The reason for the project is twofold. First, it would help reduce North Carolina's dependence on coal for electricity, as some of the natural gas can be used for new power plants. This would reduce the state's greenhouse gas emissions and potentially lower electricity prices.
On top of that, the pipeline would also provide cheap natural gas to industrial users in the state, which could potentially open up the state to further industrial development. The pipeline would bring natural gas to a part of the state that currently lacks access to natural gas, which puts the region at a disadvantage when it seeks to attract new businesses. However, by bringing inexpensive shale gas to the state, it can then use that as a tool for economic development to create more jobs.
North Carolina is the latest state to turn to fracking to create a new jobs. It's taking a two-pronged approach by both developing its own natural gas resource as well as securing its access to cheap natural gas from shale plays in other states. In doing so, the state is looking to help North Carolina-based businesses lower their costs to improve profit margins, providing them with additional capital to reinvest in new growth opportunities that will create more jobs.
Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources and Piedmont Natural Gas Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.