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Two State Studies Tout Oil/Gas Economic Benefits

Separate academic studies in California and Colorado emerged Tuesday supporting the macroeconomic benefits of oil and natural gas development and warning against bans on hydraulic fracturing (fracking).

The California Policy Center's (CPC) new study by a University of Wyoming economist concluded that the state's energy development has a net positive impact in the form of thousands of added jobs and billions of dollars of tax revenues. A separate study by the University of Colorado (CU Boulder) Leeds School of Business research arm warned that a proposed statewide ban on fracking could cost jobs and reduce gross domestic product (GDP).

Wyoming economist Tim Considine used conservative estimates, according to the policy center, a nonpartisan think tank in Orange County, in determining that average annual employment gains between 67,000 and 299,000 are attached to more offshore oil drilling and onshore development of the Monterey Shale (see Shale Daily,March 27), leading to annual state and local tax gains in the range of $1 billion to $4.5 billion.

Noting that at least two Southern California cities have enacted (Carson) or proposed (Los Angeles) bans on fracking, CPC Executive Director Ed Ring said the Considine study supports the contention that the timing is right "to safely capitalize on developing the valuable oil/gas resources available in the state," with an emphasis on the potential of the Monterey Shale.

Colorado's pro-industry organization, which is fighting proposed fracking bans, Coloradans for Responsible Energy Development (CRED), called attention to the report out of the business school at CU Boulder, "Hydraulic Fracturing Ban: The Economic Impact of a Statewide Fracking Ban in Colorado," as estimating the loss of 93,000 jobs and up to $12 billion in GDP from a fracking ban (see Shale Daily, March 12).

The study also calculated that tax revenues could be cut $985 million for local and state governments between 2015 and 2040.

CRED's John Haubert, communications director, said the academic report by Richard Wobbekind and Brian Lewandowski will "dispel some of the misinformation about fracking [see Shale Daily, March 26] and help everyday citizens better understand the issue at hand, while also illustrating how energy is interwoven throughout Colorado's economy."

The CU Boulder business researchers said 87% of the state oil/gas activity is concentrated in five counties, while 31 other counties account for the remaining 13% of the activity. Nevertheless, the industry employment and tax impacts are much more widespread, they said.

The study was modeled to begin in 2015, assuming a 95% reduction in new oil/gas activity and continued legacy production from existing wells. "The economic impacts are presented as a change from baseline expectations -- a fracking ban shifts Colorado's employment base downward by an average of 68,000 jobs during the first five years, and by an average of 93,000 jobs between 2015 and 2040," Wobbekind and Lewandowski said.

In the "Benefits and Costs of Oil/Gas Development in California," the author said new technology has transformed the U.S. oil/gas sector; California resources are large and diverse; and onshore oil/gas is significant, considering that in 2012 oil production was 504,000 b/d, with 80% of it coming from the southern San Joaquin Valley, which rests above the 1,752-square-mile Monterey Shale.

Assuming 16 wells/square mile, Considine estimates that there are about 550,000 bbl per well of estimated recoverable reserves in the Monterey, using U.S. Energy Information Administration numbers. He also cites skeptics who think the Monterey is overestimated in terms of its potential. Considine uses three scenarios (high, medium, low) ranging from 250,000 b/d to 450,000 b/d production levels being reached by 2020 for the Monterey Shale.

He relied on a range of scenarios and each provided net economic benefits to the state ranging from $7 billion to $51 billion annually, with those net benefits being defined as value-added less the expected environmental impact costs. "Developing California's oil/gas resources, therefore, provides significant net economic benefits to society," Considine said.

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