Economic contributions from unconventional development mostly are driven by the 16 states with oil and natural gas production, but a "significant portion" comes from states with no production, according to a state-by-state analysis by IHS Inc.
The analysis, released on Wednesday, is the second by IHS to measure the U.S. economic benefits of unconventional oil and gas production. The first IHS review, published in October, found unconventional production supports more than 1.7 million U.S. jobs and will support almost three million by 2020 (see Shale Daily, Oct. 24). The second volume of "America's New Energy Future: The Unconventional Oil and Gas Revolution and the U.S. Economy" examines the impact of unconventional production for every state in terms of jobs, economic value and government revenue.
"The unconventional oil and gas revolution is having a bigger impact across the country, including in nonproducing states, than is generally recognized," said IHS Vice Chairman Daniel Yergin. "What we found is that the economic and financial links reach out across all the states in our highly interconnected national economy."
The 16 producing states will contribute nearly 1.3 million jobs, according to IHS. The top 10 -- Texas, North Dakota, California, Colorado, Oklahoma, Pennsylvania, Utah, Louisiana, Ohio, and Arkansas -- will contribute nearly 1.2 million jobs. The most jobs, in states with unconventional reserves, were created in Texas (576,000), Pennsylvania (102,000), California (96,500), Louisiana (78,900) and Colorado (77,600).
By 2020 the job count will rise considerably in the producing states, still led by Texas (929,400), followed by Pennsylvania (220,600), California (153,600), Oklahoma (149,600), and Ohio (143,600).
The 32 states in the Lower 48 without "major" unconventional oil and gas activity will contribute "nearly 500,000 jobs through businesses that sell goods and services critical to the lengthy supply chain that supports unconventional oil and gas development," the study found. The top 10 nonproducing states in terms of jobs are New York, Illinois, Michigan, Florida, New Jersey, Minnesota, North Carolina, Georgia, Missouri and Wisconsin.
New York, which has a moratorium on unconventional drilling, led the way with 44,400 jobs; most of the jobs are in the financial sector. It is followed by Illinois (38,600), Michigan (37,800), Missouri (37,700), and Florida (36,500) with the most jobs.
IHS said "less well-known are the economic benefits that accrue to nonproducing states that lack oil and gas resources but nonetheless host firms that sell goods and services that are critical to the lengthy supply chain supporting unconventional oil and gas development."
It is interesting to note that while the majority of future unconventional oil- and gas-related job growth will likely come from the top 10 U.S. producing states, those states have had a combined unemployment rate that is actually a bit higher than the overall U.S. average in recent years. From 2002-2004, those 10 states had an unemployment rate that was 0.4% above that for the United States as a whole.
However, since 2005, that premium has been whittled down to just 0.1%, which suggests that the creation of unconventional oil and gas jobs from formations like the Fayetteville, Haynesville and Marcellus shales has helped move the unemployment rate in the top 10 producing states to more in-line with the national average.
The review is based on an IHS CERA analysis of each play, which calculated the investment of capital, labor and other inputs required to produce these hydrocarbons. The economic effects of these investments then were calculated using proprietary economic impact assessment and macroeconomic models to generate the contributions to employment, gross domestic product growth, labor income and tax revenues that would result from the higher level of unconventional oil and gas development.
The research was supported by the American Petroleum Institute, Institute for 21st Century Energy (Energy Institute), the American Chemistry Council, America's Natural Gas Alliance and the Natural Gas Supply Association.
"Shale energy is a gamechanger for America," said Energy Institute CEO Karen Harbert. "The latest installment of this study allows us to quantify just how significant the impact on each state's economy will be. While states that produce unconventional oil and gas are benefiting immensely, this study also demonstrates that even most states that do not have oil and gas production are seeing a boost to their economy."
On a national level, IHS found that total unconventional production in the Lower 48 is expected to contribute $63 billion in federal, state and local tax receipts in 2012. Total government revenues are forecast to grow to nearly $113 billion by 2020. Nearly $238 billion would be contributed in value added to the U.S. economy in 2012. This contribution to U.S. gross domestic product is seen increasing to more than $416 billion by 2020.
"Looking ahead, the potential is there for the unconventional oil and gas revolution to have an even broader impact on the U.S. economy," said IHS's John Larson, vice president, public consulting. "By lowering the cost of key industrial inputs -- such as natural gas -- this unconventional revolution could help lay the foundation for a renaissance in U.S. manufacturing and increased competitiveness in the global economy."
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