February 2012, Vol. 239 No. 2

From the Burner Tip

Oil & Gas Activities Pay Double Dividend In Manpower Growth And Local Economics

Carol Freedenthal, Midstream Editor

U.S. oil and gas exploration and production have a primary goal of increased fuel supplies. But they have an additional benefit almost as good as the first – job creation and increased economic growth in the area. The new and increased liquids and gas production coming from the development of shale reservoirs have not only been a boon in energy resources but have immensely helped the economy in job growth and economic benefits to regions, including business and government.

The development of shale reservoirs began in the early 1990s with the Barnett Field in the Fort Worth, TX area. The new technologies helping the development of shale reservoirs were horizontal drilling and better methods to “frack” or loosening the fuel from the reservoir. These two major developments have led to many other shale-based reservoirs developments in the U.S. and other countries. The ability to recover liquids and gaseous fuels from these reservoirs has opened a new era in U.S. fuel development.

The changes in fuel availability because of these developments are awesome. Production has been prolific and has dramatically revised the reserve outlook for liquids and gas. Natural gas reserves have increased more than ten-fold. At the turn of the century, planners were looking to build receiving facilities for liquefied natural gas (LNG) from foreign countries; now they’re looking at converting some of those to export facilities because of the large volumes of natural gas available in the U.S.

Liquids production as either crude oil or natural gas liquids has also risen, perhaps not as spectacularly but still significantly. Between the new shale- producing areas and others like offshore and increased supplies from Canada, energy independence for the U.S. is taking on a new color.

Adding to the Barnett development are such fields as Eagle Ford in West Texas, Bakken in the Dakotas and Montana, Marcellus in Pennsylvania, Ohio, West Virginia and New York, Haynesville in Louisiana, Fayetteville in Arkansas, and a few others just now developing such as Utica in Ohio.

Some fields are in states that already have sizable oil and gas operations; others are in new areas and require considerable infrastructure. Even several of those existing plays are already in need more infrastructure. As a result, more and more people are needed and the economics is no longer confined to oil and gas production.

Various trade groups, government agencies, and others with an interest in the industry in recent months have particularly reviewed the growth from the shale-based developments. Some comments on these, based on the various reservoir areas, offer a good perspective of the importance of energy development.

Starting with the original development – the Barnett – some of the comments made by various sources include: “When all major categories of stimulus from Barnett Shale activity are summed, the result includes $5.2 billion in annual output and some 55,385 permanent jobs.” (Berry Group Study, 5/07).

From the Independent Producers’ Association of America (IPAA) report in November 2011: “The overall effects of the activity in the Barnett Shale are likely to be responsible for an average of more than 108,000 jobs and $10.4 billion in output per year through 2015.”

About Eagle Ford, a report in February 2011 by the University of Texas at San Antonio’s Center for Community & Business Research stated: “Eagle Ford’s calling card: help wanted: Last year, the Eagle Ford Shale generated 6,800 full-time jobs and paid $311 million in salaries and benefits.”

Further, “When spinoff jobs are included – from wholesalers to waiters – the study found the development in the shale play supported 12,600 jobs and paid $512 million in salaries.” Because the development is just beginning, the UTSA study estimates that “by 2020, 5,000 new wells will be drilled and the Eagle Ford will support almost 68,000 full-time jobs, account for almost $21.5 billion in total annual economic output, and add almost $1.2 billion to Texas revenues.”

In an area not so well known for oil and gas production, the Bakken has added 61,000 jobs in the past decade, according to an Associated Press article in July 2011. It stated: “North Dakota ended the decade with more than 430,000 workers, up more than 61,000 since 2000 and an increase equal to the population of Bismarck, the state’s second-largest city. Thousands of jobs remain unfilled in a state that’s enjoying a robust economy thanks to the booming oil patch and healthy agriculture markets.”

Another area new to increased oil and gas production is the Marcellus. “During 2010, the Pennsylvania Marcellus Shale natural gas industry triggered $11.2 billion in economic activity, generated $1.1 billion in state and local taxes, and supported nearly 140,000 jobs,” according to another IPAA report. It added: “The Pennsylvania Marcellus industry is projected to generate more than $12.8 billion in economic activity in 2011, leading to more than $1.2 billion in state and local taxes and supporting more than 156,000 jobs.”

The same article noted: “Some 15,000 to 18,000 jobs could be created in the Southern Tier and Western New York, regions which lost a combined 48,000 payroll jobs between 2000 and 2010.” The Manhattan Institute in June 2011 estimated that “75,000 to 80,000 jobs could be created if the area of exploration and drilling (in the Marcellus area) were expanded to include the Utica Shale and southeastern New York.”

The Haynesville play in Louisiana is an example of how the new-found shale can affect a state that already has an extensive oil and gas operation presence. As the Shreveport Times in July 2011 stated: “The natural gas play has transformed the region’s economy by spurring new businesses and creating additional job opportunities… How many additional that could generate for the area is unknown at this time. But, LSU economist Loren Scott previously projected Haynesville and Bossier Shale employment will average more than 67,000 jobs per year from 2011-2014.”

The last current shale play is the Fayetteville in Arkansas. In a fact sheet published by the Arkansas Independent Producers & Royalty Owners, a 121.7% increase in oil and gas industry employment was seen in the 2004-2008 period while total employment in the state rose just 3.8% in the same period.

While all of this is history, projections for continued growth remain promising. Liquid hydrocarbons, either as crude oil or natural gas liquids, are in strong demand. Though natural gas supplies are ample, demand is good. Beyond the benefits of meeting demand that are already evolving from these activities, other projects like the proposed Keystone XL Pipeline, which would bring Canadian crude to Gulf Coast refineries, could add thousands more jobs. Increased drilling in the Gulf of Mexico is another potential source of economic activity for the country and local regions.

Oil and gas development and production provides much more than fuel and security to the U.S. It is a vital source of employment and economic activity. These “also” aspects cannot afford to be overlooked as government and industry move forward with the nation’s energy program.

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