The oil and gas industry contributes significantly to Colorado’s economy, accounting for $22.9 billion in economic output, or 6.1% of the state’s economy, and providing employment for 71,000 people, according to a study released Thursday by the Colorado Energy Research Institute.
The comprehensive analysis of the economic impact of the state’s oil and gas industry in Colorado, funded by the Colorado General Assembly, was designed to evaluate the economic contribution of the oil and gas industry in terms of employment, income, industry output and taxes, based on data collected in 2005.
The study found that approximately $21 billion in total economic contribution was generated by drilling, recompletion and extraction activities, 90% of which was attributed to extraction activities. The total economic contribution for all oil and gas-related activities in the state, including private mineral royalty and lease payments and extraction tax impacts (but not including large development expenditures such as new regional pipeline development or building new facilities), was $22.9 billion.
Results of the analysis indicated that oil and gas activities within the state accounted for approximately 6.1% of Colorado’s total industry revenues, 2.2% of employment and 3.2% of total earnings. The oil and gas activities, including private mineral royalty payments and extraction taxes, generated average earnings per worker of approximately $61,000 — 32% higher than the state average.
Oil and gas activities in the state employed approximately 71,000 people. The study found that for every job directly created through oil and gas activities, another 1.67 jobs were indirectly created. And, while approximately 22% of the oil and gas-related employment was specific to the oil and gas industries, the study found that the economic good news was spread among other industries as well: 14% of the oil and gas-related employment was in government, 9% in professional services, 8% in retailing and 7% in health care and social services.
State and local government revenue — property taxes on production and equipment, severance taxes, estimated federal royalties distributed to Colorado, and state royalties — resulting from oil and gas extraction totaled $640 million in 2005, according to the study. Another $753 million in business taxes and $118 million in personal income taxes were generated by the oil and gas industries in 2005.
The $300,000 study, conducted by analysts from Booz Allen Hamilton and the University of Wyoming, used site-specific information, including capital investments, average cost to drill and complete a well, average production costs, private royalty and lease payments and service company costs. Secondary source data, including number of wells drilled and completed for each basin, oil and gas prices, oil and gas production and employment were also used in the analysis.
Colorado Gov. Bill Ritter last month signed into law two bills, the Oil and Gas Commission Reorganization bill (HB 1341) and the Surface Rights Act (HB 1252), which could have a significant effect on the future development of the state’s oil and gas resources (see Daily GPI, May 30).
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