National Industry – State Economic Impacts
Posted August 2, 2017
Let’s take a deeper dive into PwC’s study on the economic impacts of U.S. natural gas and oil industry with a look at impacts on individual states.
First, we know that all 50 states and the District of Columbia are reached by the economic benefits reflected in the study’s top-line national numbers – 10.3 million jobs supported in 2015, $1.3 trillion economic impact and $714 billion in labor income. PwC:
The report’s findings show that the oil and natural gas industry has a widespread economic impact throughout all sectors of the economy and across all 50 states and the District of Columbia. These impacts result directly from the employment and production within the oil and natural gas industry, indirectly through the industry’s purchases of intermediate and capital goods from a variety of other US industries, by the personal purchases of employees and business owners both within the oil and natural gas industry and out of the additional income in the supply chain to the oil and natural gas industry, and from spending by shareholders out of the dividends received from oil and natural gas companies.
Energy-producing states and non-producers – all state economies are positively impacted by an industry that accounted for 7.6 percent of U.S. GDP in 2015. Yet, the state-level story also is about the opportunity for growth so that industry’s economic benefits have even greater impact in certain parts of the country. The report’s “value added” data helps illustrate.
Value added refers to the sum of value added across all industries, which for the nation is equal to our gross domestic product or GDP. It includes employee compensation, proprietors’ income, income to capital owners from property and indirect business taxes – that is, taxes borne by consumers rather than producers. The chart below shows industry’s impact in terms of value added, as a percentage of selected states’ GDP:
On the left side of the chart some of the highest percentages of state GDP attributable to the natural gas and oil industry are in producing states Alaska, Oklahoma, North Dakota, Louisiana and Texas. On the chart’s right side, industry accounts for smaller percentages of the state GDPs of South Carolina, New York, Florida, Virginia and Maryland.
New York, in particular, is a state of vast unrealized energy potential, given its location on top of the same Marcellus and Utica shale plays that have made neighboring Pennsylvania a top natural gas producer. Pennsylvania realized more than twice the value added impact to its GDP (6.3 percent) as New York (2.5 percent), in large part because New York doesn’t permit hydraulic fracturing and has blocked construction of pipeline infrastructure. We’ve written about this “tale of two states” before (see here and here). State policies are denying New Yorkers benefits that come with safe and responsible development. Karen Moreau, executive director of API New York:
“The U.S. natural gas and oil industry contributes more than $35 billion to the state’s economy and supports 258,500 jobs, in spite of Gov. Cuomo's ban on natural gas drilling and pipelines. New York is, however, more a story of what might have been had the governor approved fracking in 2012, when DEC's (New York Department of Environmental Conservation) own estimates predicted 50,000 jobs. Or maybe if he had allowed the Constitution pipeline, whose impact on the route would have meant 10,000 jobs. Instead, unemployed New Yorkers get to travel to Pennsylvania in search of opportunity in an industry which has paid a median salary of $101,000, according to the Bureau of Labor Statistics. Moving forward, we hope that the governor would stop denying New Yorkers the benefits that would come from development of our state’s vast energy resources.”
In some of the same ways, New England as a region could benefit residents in terms of jobs and as consumers by moving ahead with natural gas pipelines that are needed to keep up with energy demand, especially in winter. Steve Dodge, New England Petroleum Council executive director:
“This study is further proof of the benefits that the natural gas and oil industry brings to New England. These energy resources fuel our cars, support 239,500 jobs in the region and provide great value to our region’s economy. Also, natural gas is responsible for 50 percent of our region’s power generation. Unfortunately, with demand for this clean-burning fuel on the rise, our region’s energy infrastructure network has not kept pace – which has hurt consumers who have paid 50 percent more for electricity as compared to the rest of the country. Moving forward, we must embrace the benefits of these energy resources and ensure that there is a robust energy infrastructure network in place to deliver these energy resources to New England.”
Policy matters. Take South Carolina. It’s one of the states least impacted, from a GDP standpoint, by natural gas and oil activities and job creation. Yet it, along with other Mid-Atlantic states, could see economic growth if offshore energy development is allowed on the outer continental shelf. Bonnie Loomis, API South Carolina executive director:
“South Carolina’s economy continues to miss the boat on the significant employment and economic impacts possible through the natural gas and oil industry. We enjoy more than 67,000 jobs and more than $5 billion annually through direct, indirect and induced natural gas and oil activity, but those numbers pale in comparison to what is possible with state and federal policies that embrace environmentally appropriate domestic natural gas and oil resource development.”
Likewise, Maryland, where a state ban on hydraulic fracturing was instituted last spring. Drew Cobbs, Maryland Petroleum Council executive director:
“While most of Maryland has enjoyed lower energy prices over the past several years, the state lags far behind in realizing the opportunity for job creation and economic opportunity from the oil and natural gas industry. Recent successes in the oil and natural gas industry could still do much more. Without the right policies in place that embrace the benefits of our nation's energy resources, Maryland may continue missing out on significant opportunities for creating jobs and boosting economic revenue especially in counties in Western Maryland where these benefits are much-needed.”
America’s energy renaissance is boosting the national economy, helping lower costs for consumers and manufacturers and is leading the way on climate progress in the U.S. There’s potential for more positive impacts all across the country. With the right leadership and policy choices, it can happen.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.