Less than 100 years ago, horses pulled plows through the fields of America’s heartland and were the primary source of power used in the production of agricultural goods. Thanks to remarkable advances in farming technology throughout the 20th century, agriculture is today a far more productive and valuable industry. However, it has also become a very energy‐intensive industry. In fact, for the average American farm today, energy expenditures can account for over 30 percent of total production costs.
Unfortunately, this fact has become problematic in recent years as the price of energy has become increasingly unstable, while factors such as high production and bumper crops have driven down the price of agricultural commodities and, in turn, farm incomes as well.
In light of these developments, my colleague Dr. Gary Wolfram and I set out to learn whether natural gas can play an important role in the sustaining the success of agriculture in Ohio and the Midwest. Our investigation revealed four key insights:
1. Energy expenditures are a growing component of farm productivity costs.
2. Decreasing the cost of crop production is essential to farms remaining profitable.
3. Increasing the use of natural gas on farms carries the most potential for decreasing expenses.
4. The decline of our nation’s pipeline infrastructure and the general lack of existing pipeline capacity are the main barriers to getting this vital commodity to market.
Agricultural operations use a great deal of energy, both directly through power generation and indirectly through sources like fertilizer and pesticides. In the past 40 years, natural gas has provided between one third and one half of the direct fossil fuel energy used by U.S. farms. It also represents nearly 70 percent of the cost in manufacturing fertilizer, which itself accounted for over half of all indirect energy consumption on U.S. farms in 2011.
It is abundantly clear that increased access to natural gas carries great economic benefits for American farms and ranches by reducing the costs associated with obtaining this important commodity.
However, increased access can only be achieved if proposed infrastructure projects like the Rover pipeline is approved and allowed to move forward. This midstream infrastructure would allow businesses, manufacturers, and consumers to benefit greatly from the Marcellus shale formation, a natural resource in their very backyard. This is especially true for states like Ohio where ag production is heavily dominated by corn and soybeans, both fertilizer‐intensive crops that also require a great deal of energy to plant, cultivate, and harvest.
On properties that will be affected by construction, Rover has demonstrated a commitment to restoring those lands. The company has already contracted Land Stewards, Inc., an independent consultant, to assist in identifying site-specific conditions and in developing restoration plans for those properties.
Not only will an improved and expanded pipeline infrastructure lower the cost of natural gas, but transporting energy with buried pipelines such as Rover has also proven time and again to be substantially safer than transporting resources via truck or rail, according to experts at the National Transportation Safety Board and the Pipeline and Hazardous Materials safety Administration, the two federal agencies that oversee pipeline safety. Also, although pipeline leaks are very rare, potential leaks from natural gas pipelines are far less likely to contaminate the surrounding soil and water supplies, than leaks from, say, oil pipelines. This is because natural gas quickly dissipates into the atmosphere, rather than lingering in the soil and water. This is especially important to organic farmers who risk losing their organic certification from an environmental mishap.
Our study has demonstrated that increased natural gas supplies are the key to alleviating rising energy expenditures on America’s farms and ranches. Efficient and affordable access to natural gas will lower the price of electricity, fossil fuels, fertilizer, pesticides and other necessary farm inputs. However, without increased investment in our nation’s pipeline infrastructure, these possibilities will never be realized and agricultural producers will continue to see their expenses rise and their incomes fall. We must concentrate our efforts on improving and expanding this infrastructure to ensure that ag producers have access to the energy they require to power on into the future.
Dr. Charles N. Steele is an Associate Professor of Economics at Hillsdale College and holds the Herman and Suzanne Dettwiler Chair in Economics. He also works as an Economist for the Hillsdale Policy Group. Steele served as a consultant on design and performance reviews for USDA crop insurance programs and received his Ph.D in Economics from New York University.
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