The Small Business & Entrepreneurial Council’s new study is telling about the potential future for job growth. Entitled, The Benefits of Natural Gas Production and Exports for U.S. Small Businesses, this study makes clear that natural gas has led to the expansion of small business in the US and to the creation of 146,000 jobs between 2005 and 2010 as total US jobs fell by 4.3 million over the same period. As we approach more forums by the Senate Energy and Natural Resources Committee relative to liquid natural gas (LNG) exports, it is worth noting the jobs-related potential that can come from allowing new permits for LNG export.
The Council’s report not only identified the specifics of job growth, it attributed some of the job growth to small businesses. While total employers fell over the five-year period between 2005 and 2010 by 4.2% in the US, small businesses with less than 500 employees in sectors like oil and gas extraction grew by 3%. In some other related sectors, growth percentages were higher in the face of a declining overall US economy.
The forums by the Senate Energy and Natural Resources Committee could make a difference in the potential for future job growth. The US continues to have an enormous potential for the production of natural gas. This huge reserve has meant that the US has very favorable prices for natural gas when compared with the rest of the world. The Council’s study reports recent prices for natural gas in the US of $3 per million metric British thermal units of energy, compared with a price of $11 – 13 in Europe and $18 in Southeast Asia. The price differential explains the potential for exports from the US to the rest of the world – and the potential for additional job growth from large and small US businesses.
Some business representatives, especially in the chemical industry, have argued against permitting additional LNG exports. Their argument for industry protection is associated with their own interest in protection and in producing chemicals at relatively lower prices with cheap US natural gas. This kind of argument for isolating an industry or a country from world markets is one we have seen for centuries. Isolationism and industry protection have not generally proved good for a country’s economy. Some historians have catalogued the decline of the Spanish economy centuries ago to its decision to isolate domestic markets. More recent examples of attempts at isolation are evident in agriculture from both the US and the European Union.
Generally speaking, the economy is a global one, and attempts at isolation are suboptimal. Isolation tends to raise prices for a country’s citizens and limit economic growth. The consequences are slower growth or decline in new businesses and limitations on growth or declines in new jobs. As the US economy remains fragile in its recovery from the recent recession, this is no time for the US Government to take actions, which will be harmful to US job growth. And the argument is easily made that this is especially no time to stifle the potential in an industry like natural gas that has been nearly singular in its job growth in the face of overall decline in most other US industry sectors.
The annual EPA report on greenhouse gases – Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2011 – published this past month, is striking for its findings on both carbon and methane and the impact of natural gas on the environment. Its findings include evidence that is favorable to natural gas relative to two very important greenhouse gases: carbon and methane. The findings associated with methane are especially important because they will be surprising in light of recent media reports. The EPA report shows a decline in methane, raising serious questions about the methodology and findings of recent studies of ambient methane release associated with natural gas extraction.
Natural gas is increasingly becoming the fuel of choice for electric power generation. There are many reasons for this, but an important one has been the relatively lower production of atmospheric carbon from natural gas. However, the rationale for the transition to natural gas in the power industry goes well beyond its comparative advantage in friendliness to the environment from lower release of carbon. Since 2009, the price of natural gas has declined while that of coal has risen. Contributing substantially to the increase in supply of natural gas and its lower price has been the extraction method known as fracking. Hydraulic fracturing of shale – or fracking – involves fracturing layers of underground shale using high-pressure injection of liquids. The newness of the process has raised a variety of environmental questions.
When examining the impact of natural gas on the environment, it is important to understand why it is considered a cleaner fuel source. Natural gas is a lower carbon intense fuel. It produces the same unit of heat or electricity with a 55% lower carbon content than some other fuels such as coal. US greenhouse gas emissions declined from 2007 to 2011 as a result of “a decrease in coal consumption, with increased natural gas consumption and a significant increase in hydropower used.”
Nevertheless, the increasing use of the fracking process for extraction of natural gas from shale has been questioned for its environmental friendliness, particularly from the potential for increased methane production. Among the questions has been a set dealing with the potential that the process has for producing unintended emissions of greenhouse gases that offset the advantage of the lower carbon intensity of natural gas. Of particular attention has been the production of methane in what has been referred to as fugitive methane emissions. Methane has more than 20 times the capacity of carbon for trapping heat in the atmosphere. The Intergovernmental Panel on Climate Change reported that atmospheric methane has increased by 158% over the last 250 years.
The annual EPA report adds very important information about natural gas and fugitive methane emissions. While natural gas remains a large potential source of methane, emissions of methane have decreased since 1990. This decrease occurred at the same time that the supply of natural gas has increased substantially, at the same time that the fracking process was introduced for extraction of natural gas, and, most importantly, at the same time use of natural gas has increased. In examining specifically the issue of methane production from fracking, the EPA report compared current findings of its Inventory with its Greenhouse Gas Reporting Program (GHGRP). There are unreconciled differences between these two reports. Moreover, the GHRP data “show lower overall methane emissions from well completions with hydraulic fracturing and workovers with hydraulic fracturing (refracturing) than calculated in this inventory.”
Clearly more studies will examine the issues of methane production from the fracking process. The EPA will also work to reconcile data from different methodologies for measuring greenhouse gases. But overall data from this Inventory are simply inconsistent with what has been reported from some studies about the impact of fracking on methane production.
The Arizona Education Innovation Summit presented numerous challenges for attendees, including the one I wrote about last week – the challenge of accepting Education Innovation. Another challenge that attendees confronted was accepting that for-profit does not equal unethical or irresponsible in an education provider.
There are many reasons for the difficulty that many people have in seeing the positive in for-profit education. The first, of course, is that traditional American education has been principally public or private, nonprofit. We are unfamiliar with the alternative. That has been true in primary, secondary and higher education. The second reason has been the bad press received by many for-profit providers of higher education of late. Certainly some of that bad press is warranted.
However, my decades of experience in public, higher education leaves me willing to state unequivocally that public education does not equal high quality education. There are excellent public colleges and universities as there are excellent private nonprofit colleges and universities. But a nonprofit designation does not mean that graduation rates are necessarily high nor that graduates of nonprofits find jobs because of the corporate status of the school.
Elizabeth Purvis, CEO of Chicago International Charter Schools stated it most clearly when she charged that that making a distinction between for-profit and nonprofit schools was “actually a ridiculous argument.” “It’s about outcomes,” she went on to state at the Education Innovation Summit. Jonathan Hage, CEO of Charter Schools USA, went further. In describing the rapid growth of Charter Schools USA, Mr. Hage made the case that the schools of Charter Schools USA could not have succeeded so well if they had been nonprofit rather than for-profit. A nonprofit would have had to invest its resources in raising money, for example. Instead the for-profit corporate status made it possible to bring together business acumen and academic excellence.
Already we are seeing change in the collaboration and intertwining of for-profits and nonprofits. Traditional nonprofit colleges and universities are turning to for-profits for partnerships. Universities like Arizona State and the University of Maryland are finding that Pearson is a good partner for online education. Others are finding that AfterCollege is a good partner for job opportunities for graduates or that Insidetrack is a good partner for raising persistence rates. And K-12 has long turned to for-profits for texts; now they are turning to companies like Adaptive Curriculum for online support for students’ classroom learning experiences and as substitutes for texts.
The Education Innovation Summit is a celebration of the possible and a window on the future of education. I have frequently said that we will see a day when one will not ask whether the school or college is for-profit or nonprofit but whether it delivers on promised outcomes – of expected knowledge and skills from K-12 and post-graduate opportunities from higher education, e.g., jobs or advanced degrees for college graduates. It has become uncommon to ask whether a hospital is for-profit or nonprofit. We take the advice of our physician or we search out the increasing number of evaluations of hospital. I anticipate that, despite challenges to for-profit K-12 and for-profit higher education, we will see the question about corporate status no longer asked – and soon.
The challenges – and the opportunities – ahead for education are the subject of the Education Innovation Summit this week in Arizona. Along with President Michael Crow of Arizona State University, the conference began with comments from Michael Feinberg, co-founder of KIPP (knowledge is Power Program). This Summit is the same one about which I have written in the past (see Penley on Education and Innovation).
Mr. Feinberg amused the crowd with his comments about the letter, Yuzz, from the Dr. Seuss book, On Beyond Zebra. This less well-known Dr. Seuss book is about the letters of the alphabet beyond Z that most of us ignore. The message of the book is straightforward; it is those things that most people ignore that excite us and lead to innovation. And that was the message of Mr. Feinberg about education; the potential for innovation in education is considerable and exciting. We have only to open ourselves to the excitement and potential of what is out there. We have only to permit innovation rather than restrict ourselves to traditional models of education from which we learned.
The message is one that encourages us to welcome innovation in education. It is one that asks that we be open ourselves to possibility and that we not constrain ourselves by what has been done in the past. Education has been a very stable industry. Much more is demanded of it today in building students’ problem-solving and critical thinking capabilities, in making our society more competitive, and in raising economic prosperity for all. If we accept and welcome innovation, education offers us much that we yet don’t recognize, like those letters beyond Z. But it requires that we are willing to change.
That willingness to change is essential if we are to take advantage of the way people learn – not at a time and place defined by schools – but based on actively and individualized defined needs. That willingness to change offers opportunity if we encourage new forms of education: new charter schools in K-12, competency-based assessment in higher education, new structures and models for schools and colleges, and the integration of eLearning into a maturing understanding of the role of teachers with integrated digital learning resources.
The Education Innovation Summit is a great learning experience but also a celebration of the possible. The question that all of us must confront is whether we are willing to change and whether we are willing to open ourselves to policies that encourage change. Indeed, it is a question about whether we are capable of looking beyond Z.
This past week, U.S. District Judge Rudolph Contreras ruled against the Department of Education and its Secretary in a request that was filed asking the Court to amend the June 2012 judgment that set aside new rules associated with what is called Gainful Employment. The Gainful Employment Rule from the Department was designed to motivate for-profit colleges and universities to reduce loan default rates among graduates by insisting on higher levels of post-graduation, successful employment.
The Court’s ruling may well have unintended, but positive consequences if it provides an avenue to improve college graduation rates. This surprising potential outcome of the ruling comes from the possibility that Congress could use the ruling as a rationale to alter the Higher Education Act’s restrictions on data collection, the basis for the Court’s ruling against the Department of Education. Those restrictions now limit the collection of student data that could be used to mitigate low graduation rates in our public institutions as well as for-profit ones.
A little background is essential. The U.S. continues to lag many countries in the percentage of its population that receives a college degree, and low graduation rates impede our economic development. With the best colleges and universities in the world in the U.S., this sad state of affairs seems inexplicable. Confounding the problem of understanding and mitigating our low college graduation rates is the increasingly complex attendance patterns of college students. Those patterns are marked by lower than desired persistence of freshmen students from their first year to second year of college, relatively high transfer rates between community colleges and four-year institutions, dual enrollments in community college and a university, and the inability to track students across those enrollment patterns.
In the middle of the past decade many of us had hoped for the data necessary to track those complex enrollment patterns so that we could analyze them and address the problem. The assumption is that collecting data and analyzing them are essential to an understanding of the problem and the creation of interventions to mitigate the problem and improve college graduation rates. Many of us had thought that a universal student unit record was the foundation for intervention that might address the problem. This form of data could have come from requiring colleges and universities to report student data that would allow us to follow a student through the complex enrollment behavior that has become characteristic in the U.S..
The problem, however, with this solution was one that Americans understand in our commitment to protecting our privacy. Universal practices of collection of student data represented a threat to the privacy of students. Therefore, Congress imposed restrictions on the collection of student data that led to the end of hope for a universal student unit record and to the ruling of the Court against the Department of Education’s Gainful Employment Rule. The basis of the Court’s ruling is embedded in the Higher Education Act which prohibits:
the development, implementation, or maintenance of a Federal database of personally identifiable information on individuals receiving assistance under this chapter’ unless that information ‘is necessary for the operation of programs authorized by’ Title IV.
What is needed now is a careful rewriting of the restriction quoted above and along with its being embedded in the Higher Education Act. That rewriting should protect students’ privacy but it could also permit tracking of student enrollment patterns for purposes of improving graduation rates. Whether we should use data to apply rules like the Department’s Gainful Employment Rule is quite another question that this blog has already addressed.
The Center for Sustainable Shale Development announced 15 new standards for environmentally sound development of natural gas from shale. The collaboration among energy companies and environmental groups makes this announcement noteworthy – and promising from both the perspective of the environment and our economic prosperity.
US energy companies have led the way in producing new technologies that have made it possible to extract natural gas from shale in a process that is often referred to as “fracking.” Natural gas is a much cleaner burning fuel than coal when used to produce electricity at a power plant. Natural gas has been made much cheaper and more abundant via fracking, leading to its potential to transform the utility industry. The industry’s power generating plants now depend heavily upon coal, a source of considerably higher atmospheric carbon with its associated global heat containment properties, which have been linked to climate change.
Despite the many benefits of increased use of natural gas, there has been considerable concern with the environmental issues associated with fracking. The voluntary standards just issued last week are a major step forward in addressing environmental concerns despite criticism of them as just that – voluntary.
The standards address areas of concern, including disposal of wastewater used in the fracking process; that the new standard is zero discharge of waste water will make the fracking process much more friendly to the environment, protecting groundwater and the flora and fauna of nearby streams. Adding to the positive environmental impact of zero tolerance of wastewater are requirements for well casings and well pads. Improperly installed well casings can create environmental hazards that may be attributed to the fracking process. Such improper installation, for example, has the potential to contaminate groundwater because of the failure to isolate the well from groundwater.
The new standards also address a frequent criticism of fracking associated with the chemicals used in the fracking fluid. The standards require disclosure of the chemicals, and they prohibit certain fluids like diesel fuel.
Issues of air pollution have also been a source of criticism of fracking. The voluntary standards address important sources of air pollution, including requiring vehicles and engines that meet more recent and higher EPA regulations. While they do not address methane release into the atmosphere, there is still more research that is necessary as a preliminary step to the establishment of the impact of fracking on production of methane. Methane is a known pollutant that has a far more significant impact on atmospheric heat containment with its than does carbon. Despite the widely reported findings of one study out of Colorado, other scientists, using alternative methodologies and alternative locations for their research, have not duplicated the Colorado finding discussed in a 2012 Nature article.
There are many reasons to applaud rather than criticize the establishment of voluntary standards by the Center for Sustainable Shale Development. They include the impact of the standards themselves, but they also include the impact of a set of common standards that address variances across states. That the standards represent the work of industry and environmental groups’ collaborating is a testimony to their role and importance. While they remain voluntary, it seems very likely that they will be seen by states as the foundation for the establishment of consistent legislation that provides environmental safeguards along with assuring access to a very important, cleaner fuel – natural gas from shale.
There is growing evidence of ever more rapid change in how we learn and in the choices we are making about higher education. Those changes are making it more likely that a certification process will spread to non-technical areas. It is now more likely that certification will begin to replace traditional higher education with its graduation and diplomas; instead, a system of testing for what has been learned along with certifying that learning is becoming more likely – and sooner.
Higher education in the US has remained committed to a form of education that is very traditional. For the most part, classes are still face-to-face. Learning is evaluated by means of multiple-choice exams (with some written samples in smaller non-state schools). Letter grades are the norm at the close of the still-traditional 16-week semester. And students still receive diplomas at graduation as a sign of their knowledge and skills.
The process from entry to baccalaureate completion is measured as a six-year one, and the success rate for students at graduation, even after six years, is still bemoaned by many as too low – especially for males and minorities. Periodically national tests of knowledge of some subject like U.S. history or political science raises the question of what, if anything is learned over those six years. Routinely employers find themselves having to reject applicants with college diplomas or retrain them because they can’t write standard English nor can they complete simple maths.
This description alone cries out for change to higher education in America. Fortunately, there is growing evidence that change may be on the horizon coming from several directions. One is the declining attraction of some degree programs like the Master’s in Business Administration (MBA). Students have been voting against traditional two-year MBA programs by not enrolling. These 2-year MBA programs represent high opportunity costs for students in time and tuition. Stagnation in the salaries offered at graduation has not helped. Instead many students are opting for one-year MBAs, most of which still remain outside the U.S. from highly ranked schools like INSEAD, HEC, IE, etc. or for one-year Master of Science (MS) degrees from the growing number of traditional providers, like the Thunderbird School of Global Management, where I serve as president.
Evidence for change in higher education also comes from a recent report from the Sloan Consortium, Changing Course: Ten Years of Tracking Online Education in the United States. What is remarkable about the report is not that it provides any direct evidence for certification. What it does is tell the story of how the market is changing in ways that set the stage for certification, rather than the traditional six-year path to a college degree.
Changing Course reports that the proportion of students taking at least one online course is now at 32%, which is a new high. For every year that the report has been done, the rate of enrollment in an online course has surpassed the growth in enrollment in higher education overall. What is relatively new in the report is the focus on Massive Open Online Courses (MOOCs) and the reaction to them. While there is still limited interest by academic leaders in expanding MOOCs, there is an interesting perception of their acceptance in the workplace. While only 19% do not believe they will be accepted in the workplace, the remainder either agrees that they will be accepted or are neutral. MOOCs provide the foundation for easily accessible learning opportunities, and they do what traditional diplomas should do – certify that a body of knowledge and skills has been acquired.
Between the move away from high-priced and lengthy degree programs and the increase in access to online learning, the stage is set for a certification process. Adding to that pressure is the way we learn. We have long had the option of doing what Abraham Lincoln did and search out books to read in order to learn on our own without schools. Now, the Internet places information far more readily at our fingertips. When we have a question about something we have observed or heard, we only have to turn to the smart phone in our purse or pocket or the tablet lying on the table at our side.
We have long understood the potential role of certification. It involves setting standards for what should be learned about a given subject and requiring that success be learning to standard. Certification is about demonstration of knowledge and skills for “certification” rather than spending time in class over many semesters. And it is about certifying what you know whether you learned it in a 16-week class or you read it on your own or learned how to do it by virtue of job or just sheer determination. The stage is set for the Department of Education to allow certification in addition to the traditional diploma-related process for new, traditional areas of education.
The global market remains the great opportunity for U.S. natural gas producers . More reason for moving swiftly to allow increased exports of liquid natural gas (LNG) came from Japan’s new Prime Minister.
Very recently Prime Minister Abe of Japan visited Washington and spoke with President Obama. The Financial Times reported the Japanese Prime Minister’s request that the US permit increased LNG exports to Japan. Prime Minister Abe also announced US $10.9B in credit guarantees to fund investments by Japanese companies in shale gas projects.
The Prime Minister’s request for the U.S. to permit additional exports of LNG and his commitment to credit guarantees reinforces the potential for the U.S. to benefit from its natural gas supply. That potential includes the positive environmental impact of natural gas. It is evident that global demand for natural gas is expanding, especially in the face of the advantages of natural gas for power generation. This relatively cleaner fuel reduces atmospheric carbon, and it addresses the risks that many countries like Japan and Germany feel from nuclear-fueled energy production.
Studies show that LNG exports will also greatly benefit the U.S. economy. The increased demand for U.S. natural gas will spur very considerable job growth It also does so from the potential improvement in our total exports and our net balance of trade. But that positive impact of U.S. natural gas depends upon the government’s approval of applications from companies working to export natural gas via specially designed terminals that use LNG.
It is necessary for the Department of Energy (DoE) to approve LNG export permits so that we can take advantage of the demand. Penley on Education and Energy recently reported on Senate hearings related to LNG and natural gas. Those hearings raised the spectre of possible limitations to applications for export and seemingly futile attempts to “protect” the U.S. from the impact of the global economy on domestic energy prices.
What is needed now is for the DoE to move swiftly to allow Japan and other countries to buy American natural gas via increased LNG exports. As this blog has observed in the past, the energy industry is global. Natural gas is available from other countries and regions of the world other than North America, and if we don’t act now, we will miss an opportunity to further improve our economy. We should do so.
Last week, Penley on Education and Energy joined others in praising President Obama for the Department of Education’s (DoE) new College Scorecard. Following the State of the Union address, the DoE made available a new information site about college costs, including tuition and student debt. It plans to offer more information such as employment outcomes later.
Making American higher education more accessible and successful has been a common topic for this blog. The concern for access with success comes from a concern about students’ readiness for higher education along with affordability of colleges and universities and the extent to which the resulting education lives up to its promise of knowledge and skills needed by the American labor force. Already the scorecard addresses affordability, and plans include information on the extent to which colleges and universities deliver on employment.
A focus on employment is not inconsistent with valuing a liberal arts education at the undergraduate level. Those of us who received our baccalaureate education from a liberal arts college appreciate what we found in the opportunity to hone analytic and cognitive skills. We also hope that we are better citizens as a consequence of that education. But many of us went onto to pursue professional education in areas like business, law, and medicine.
The US needs a well-educated workforce – with the analytical skills promised by a liberal education – and the knowledge and skills needed by employers. Our economic prosperity depends upon it, and this is clear from economic growth theory that makes the quality of labor and technological advances central to improvements in economic prosperity. The DoE’s College Scorecard offers hope that higher education will focus more directly upon cost, speed to degree, and employability. Time to degree matters; shorter degree programs like three-year undergraduate degrees and one-year MBAs lower debt.
With the addition of information from the College Scorecard on employment, there will also be more motivation for colleges and universities to become far more market-driven rather than faculty-driven. This information, when it is available, will lead colleges and universities to design their degree programs based on the knowledge and skills that matter upon graduation. That employer-driven focus on the market will have a positive impact on the quality of our labor force.
A recent Wall Street Journal article on student debt is evidence that the Scorecard will have an impact. Quoting one parent, the Journal reported her saying, “ . . . it would have been ‘absolutely wonderful’ to have such information when her family was picking colleges.” In other words, the Scorecard will drive parents and students toward some schools and away from others. That will, indeed, drive change toward increased access – lower tuition and faster time to degree – and greater success – the knowledge and skills needed for employment. This is good news.
Last week the U.S. Senate Committee on Energy & Natural Resources held a hearing on natural gas and Liquid Natural Gas (LNG) exports. On the whole, the discussion was a good one, covering issues of natural gas availability, safety of fracking fluids, domestic uses of natural gas, and jobs created in the natural gas industry and related chemical manufacturing industry. But there were some elements of the discussion that should leave Senators and the public somewhat puzzled.
Perhaps most puzzling were statements associated with the desirability and viability of potential government control of natural gas prices and markets. The idea is seemingly simple; keep domestic natural gas prices low. Doing so will, of course, benefit domestic consumers of natural gas. Those consumers include the public and large manufacturers like Dow Chemical, which is a heavy user of natural gas and whose CEO, Andrew N. Liveris, testified at the Senate hearing.
This blog has already pointed to the conundrum that the US faces with oil and gas prices. We are not an island that is insulated from global energy prices. Yet, a puzzling premise of the hearing appears to be that our domestic abundance of natural gas allows us to behave as if we were an island. And that is the second puzzling aspect of the Senate Committee’s hearing.
Since the US has the potential to become a net exporter of natural gas because of its domestic abundance, the government can stand in the way of exports by limiting permits for exports of LNG. Of course, damping the supply of domestic natural gas has several unintended, potential consequences. Those include stifling job growth in the energy industry, stifling domestic production of natural gas, causing prices to rise for domestic consumers and increasing the balance of payments by restricting exports.
The third and final puzzling aspect of the Senate hearing is why the Senate or the federal government should try to pick winners and losers among potential job creators. Keeping the domestic natural gas price low perhaps will positively impact the US chemical industry and the number of jobs it creates with increased production. At the same time, keeping natural gas prices low and restricting exports of natural gas have the potential to stifle job growth in the domestic energy industry. It will do so by restricting supply for US natural gas with prices held artificially below global levels.
More hearings from the Senate Committee on Energy & Natural Resources are likely. We should watch closely for testimony and Senate recommendations that may tend to distort US markets and negatively impact economic growth with restrictions on job growth in any industry, including the natural gas industry.