States with fracing are economically stronger, House panel told

US states that embraced hydraulic fracturing and horizontal drilling staged stronger economic recoveries than those that did not since 2008 when the country plunged into recession, an economist told a House Energy and Commerce subcommittee.

“In those states that have chosen to pursue energy development, output and jobs have grown faster than in most other states, while their unemployment rates are well below the US average of 6.1%,” Bernard L. Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University’s Cox School of Business in Dallas, said to the committee’s Energy and Power Subcommittee on July 24.

Texas, which aggressively developed its tight oil and gas formations, witnessed a 100% increase in its crude production since 2010 and has the lowest unemployment rate, 5.1%, of any large state, Weinstein said in written testimony for the subcommittee’s hearing on state energy policies’ economic impacts.

“By contrast, New York, whose southern tier sits atop one of the ‘sweet spots’ of the Marcellus shale, has imposed a ban on hydraulic fracturing with the result that oil and gas production has plummeted in recent years, while the state’s unemployment rate is currently at 6.7%, with some upstate counties as high as 7.5%,” Weinstein said.

Communities in Montana and North Dakota saw jobs rise dramatically in sectors beyond oil and gas as the Bakken shale was developed, another witness testified. “The streets of Sidney and Williston are crowded with petroleum engineers, drilling managers, environmental specialists, and other natural resource workers,” said Paul Potzin, director emeritus at the University of Montana’s Bureau of Business and Economic Research in Missoula. “But these high-paying specialties are not the only ones to benefit from the boom. Almost all sectors of the local economies are experiencing greater-than-expected growth in employment opportunities and wages.”

Texas vs. California

Texas led the US in job creation during 2013, adding 323,000 workers to payrolls, Weinstein said. “Through June of this year, another 225,000 jobs have been created,” he said. “More incredibly, Texas has accounted for almost 35% of the nation’s job growth since 2000.”

Tremendous oil and gas production growth resulting from the “shale revolution” accounts for much of the state’s superior economic performance, he said. Texas now accounts for more than 25% of the nation’s oil and gas and would rank as the world’s 14th largest producer if it was a separate country, Weinstein said.

“Texas’s economic fortunes can also be attributed to a positive business climate, and sensible, cost-effective regulation of energy and other sectors of the state’s economy,” he said. “Contrary to assertions by some environmental activists, Texas is not a toxic wasteland. We care greatly about the quality of our air, water, and land. But we make sure our regulatory environment is predictable and effective so that the costs of compliance aren’t burdensome to the point of discouraging new investment.”

California’s economy also has recovered somewhat, but its payroll growth since 2008 has been 322,100 jobs—about the same as Texas’s 2013 gains, Weinstein said. “Had the state been more supportive of energy development, especially in the huge Monterey shale, California would likely have posted much faster job gains and its unemployment rate wouldn’t be 7.4%, the highest among the 10 largest states with the exception of Michigan,” he said.

Weinstein said some estimates place reserves in the Monterey shale, which extends from Los Angeles to San Francisco, at 15 billion bbl, or about two thirds of the country’s total tight oil resource. “Unfortunately, hydraulic fracturing has been roundly opposed by the state’s influential environmental community as well as many state and local government officials,” he said.

“If California were to adopt more accommodating energy policies and regulations, the state could realize huge economic benefits,” Weinstein said. A recent study by the University of Southern California and the Communications Institute, a Los Angeles think tank, found Monterey shale development would generate 500,000 direct and indirect jobs within 3 years and 2.8 million direct and indirect jobs within a decade, he said.

North Dakota vs. New York

North Dakota, meanwhile, passed Alaska to become the nation’s No. 2 oil producing state as its production climbed in a few years from 10,000 b/d to more than 1 million b/d, Weinstein said. “Unlike New York, which prohibits fracing, North Dakota offers an accommodating and supportive business and regulatory climate that encourages new investment in oil and gas production,” he said.

Since 2008, jobs there have grown more quickly than in any other state and its current unemployment rate, 2.9%, is the nation’s lowest, he told the subcommittee. New York, meanwhile, has forfeited thousands of new jobs and millions of dollars in new tax revenue because of its fracing ban, Weinstein asserted.

“For example, the New York State Department of Environmental Conservation estimates that at least 25,000 new jobs would be created quickly if the state lifted the ban—and that figure doesn’t include the indirect and induced employment that would follow,” he said. “Another study, prepared by Michael Orlando of the University of Colorado, estimates that drilling and producing activities could support 39,000 new jobs in New York State within 3 years and 69,000 jobs within 10 years.”

Employment and wages grew more quickly in Montana and North Dakota counties where Bakken shale production is centered than in the 2 states overall, Potzin said in his written testimony. During 2003-13, employment increased 3.62% and wages per worker 42.1% in Montana, compared with 109% and 105.9%, respectively, in Richland County, he said. North Dakota’s total employment rose 105% and its average worker’s wage 85%, compared with respective rates of 900.2% and 178.1% in Williams County during the same period, he added.

Construction; accommodations; and professional, scientific, and technical service payrolls showed similarly more dramatic gains over the 10 years in the two counties, Potzin said. “Simply put, the economic impacts of the energy boom are being felt in all sectors of the economy,” he said. “Employment and wage increases have been significant in the energy sectors, of course, but also in industries with workers that have a wide variety of education, skills, and training.”

Rural wages rarely exceed state averages which may be dominated by higher urban wages, he observed. “However, such trends in energy producing areas can have a powerful effect in strengthening rural economies,” Potzin said.

Tom Tanton, the Energy and Environment Legal Institute’s Science and Technology Assessment director; Fred Siegel, a Senior Fellow at the Manhattan Institute; Steve Clemmer, the Union of Concerned Scientists’ Energy Research and Analysis director; and Steve Nadel, the American Council for an Energy-Efficient Economy’s executive director, also testified.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Cognitive Solutions for Upstream Oil and Gas

When Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST



On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected