State By State Study Shows Unconventional Gas Is A Major Boon For The US Economy

A  previous posting, “Fracked Natural Gas Changing The US Economy”,  discussed the impact that fracked gas (aka, shale gas) is having and will continue to have on employment, investment, natural gas (NG) price (current and future), and Governmental Income in the US.  That discussion was based upon a study by IHS Global Insight that they released in December, 2011, This posting will review the details of a new IHS study released in June 2012 which totals all the sources of  unconventional NG— shale gas, tight sands gas and coal bed methane—and projects the total impact these unconventional NG sources have on the Nation and each of the lower 48 States plus DC.

There are 20 States in the lower 48 that are considered unconventional NG producers.  In addition to the TOP 10 employment producers shown in the chart below, the other ten are Alabama, Illinois, Kansas, Kentucky, Mississippi, Montana, New Mexico, New York, Virginia and West Virginia,  The other 28 plus DC are considered non-producers of unconventional NG.

Let’s begin with employment resulting from the exploitation of the unconventional NG. 

The order of ranking is based upon the 2010 employment numbers. I have a little trouble with the display as it uses numbers down to the single digits out of millions; however, it does not take away from the forecast of an impressive growth rate.  The “US Total” includes the induced jobs in the non-producing States that benefit from the low-priced plentiful NG.   

IHS uses the following system to develop their results: The analysis of unconventional gas development and its contribution to the US regional economies was conducted using a top-down/bottom-up approach. The contribution was assessed separately for direct, indirect, and induced contributions defined as follow:

• Contributions of unconventional gas are those activities required to explore, produce, transport, and deliver natural gas to consumers or to provide critical supplies or onsite services that support unconventional gas activity.

• Contributions are defined as activities in outside industries that supply equipment, material and services for the development of unconventional gas and its tier suppliers.

• Contributions are the economic effects caused by workers spending their wages and salaries on consumer goods and household items.

Their study forecasts that nearly $3.2 trillion in investments will be made to  develop  unconventional gas  between 2010 and 2035.

The following IHC charts show other effects from their study,

These monies in this chart are derived from the expected Federal, State and Local tax revenues and from royalty payments.  The last column is the cumulative no. of dollars for the period 2010 to 2035.

IHC defines this chart as follows: The commonly used measure of GDP, which is simply the sum of the value added across all products and services produced in the United States, is generally considered the broadest measure of the health of the US economy. Value added to US GDP is defined as the sum of labor incomes, corporate profits, indirect business taxes paid, and depreciation. Annual value added to GDP from unconventional gas activities was more than $133 billion in 2010 and, by 2015, is projected to approach $200 billion. The majority of the value added to GDP—nearly 90%—over the 25-year forecast horizon is generated by unconventional gas production activities that take place in the 20 producing states.

IHC concludes that: Unconventional gas activity is expected to make a significant contribution to all of the economies of the lower 48 states over the next 25 years. Traditional oil and gas producing states like Texas and Louisiana will continue to lead the way in terms of their absolute contributions to the US economy. But many new and emerging energy states will drive much of the growth in the coming years, and the economic activity generated by this increase in unconventional gas activity will also reach well beyond the traditional unconventional producing states.

The full report can be seen by clicking here.

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