blm oil and gas economic impact analysis · overview of approach (cont) evaluate the economic...
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BLM Oil and Gas Economic Impact AnalysisApproach to Facilitate Economic Impact Analysis for Oil & Gas Activities using IMPLAN
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Many people authored and contributed to this project
• Pinyon Environmental – Holly Bender and Lisa McDonald
• Louis Berger – Chris Dixon
• University of Wyoming – Tex Taylor
• BLM, National Operations Center – Josh Sidon
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Agenda• Background• Motivation and Objectives• Project Products• Overview of Approach
• Development• Production
• Summary
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BLM manages 700 million sub-surface acres of federal mineral estate
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What is economic impact analysis?
• Input-output analysis measures the interdependence among industries, households, and government in the regional economy, which provides an estimate of multiplier effects
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What is IMPLAN®?• Applies IO tools to estimate impacts in regional economies• Estimates direct, indirect, and induced impact estimates for:
• Jobs• Labor income• Gross regional product (i.e., value added)• Sales (revenues)
• Includes 536 industry and government sectors• Includes a trade flows model to assess local and regional purchase
coefficients• Benefits of IMPLAN –
• Available data at the county level • Can be customized with local and better information• Reasonable to purchase and use• Based on current economic conditions
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Motivation and Objectives• BLM Resource Management Plans, Master Lease Plans and
associated environmental impact statements require economic impact analysis of oil and gas activities on communities
• Analysis has been inconsistent with varying assumptions, data sources, and approaches
• Oil and gas development is a difficult activity to analyze due to its temporary and non-residential workforces
• Objective is a consistent, science-based methodology that draws on readily available data and information to estimate economic impacts
• In response, BLM has developed a transparent, objective, and defensible approach to evaluate the activities associated with the onshore federal mineral estate
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There were 4 products for the BLM oil and gas economic impact analysis project
• Literature Review • Methods Technical Report• Desk Guide: Oil and Gas Economic Impact Analysis• Economic Impact Workbook for Oil and Gas
(EIWOG)
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There were generally three types of oil and gas activities considered in this project:
• Well exploration and development investments• In-field infrastructure and facility investments• Production activities
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Overview of Approach
Defining the appropriate study area – local and national
Evaluate the economic impacts of oil and gas development
• Data Collection• Costs to drill and complete wells (costs to drill, complete
or AFE)• Capital costs of in-field infrastructure• Residency of the development workforce• Numbers of wells drilled and completed each year
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Total Costs of Well Dev’t VaryBLM Field Office Type Drilling Completion Total CostsCasper FO Horizontal $6,100,000 $4,070,000 $10,170,000Casper FO CBNG $100,000 $200,000 $300,000Kemmerer FO Horizontal $5,500,000 $4,500,000 $10,000,000Kemmerer FO CBNG $740,000 $185,000 $925,000Newcastle FO Shallow $165,000 $85,000 $250,000Newcastle FO Horizontal $5,800,000 $3,300,000 $9,100,000Newcastle FO CBNG $100,000 $200,000 $300,000Pinedale FO Vertical $2,633,000 $1,833,000 $4,466,000Pinedale FO Horizontal $5,500,000 $4,500,000 $10,000,000Pinedale FO CBNG $740,000 $185,000 $925,000Rawlins FO Vertical $1,100,000 $550,000 $1,650,000Rawlins FO Horizontal $5,500,000 $4,500,000 $10,000,000Rawlins FO CBNG $740,000 $185,000 $925,000Rock Springs FO Vertical $1,016,000 $1,357,000 $2,373,000Rock Springs FO Horizontal $5,500,000 $4,500,000 $10,000,000Thunder Basin NG Horizontal $3,560,000 $5,340,000 $8,900,000Thunder Basin NG CBNG $100,000 $200,000 $300,000
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Overview of Approach (cont)
Evaluate the economic impacts of oil and gas development (cont.)
• Specify spending profiles and local purchase percentages• Default spending profiles• Authority for Expenditures
• Run IMPLAN and estimate unit values (per well drilled and completed)
• Enter numbers of wells drilled and completed each year• Estimate impacts of development activities
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Default Spending Profile for Unconventional Oil and Gas Development IMPLAN® Sector Number Spending Profile
Percent of Category
ExpenditureDrilling37 Drilling Oil and Gas Wells 8.8%38 Support Activities for Oil and Gas Operations 21.9%56 Construction of New Highways and Streets 21.0%437 Insurance Carriers/Legal Services 3.6%445 Commercial and Industrial Machinery and Equipment Rental and Leasing 17.5%449 Architectural, Engineering, and Related Services 1.8%
395Wholesale trade – consumables and tangibles, such as equipment, cement, materials, supplies 25.4%
Total 100.0%Completion 411 Truck Transportation 2.9%37 Drilling Oil and Gas Wells 13.0%38 Support Activities for Oil and Gas Operations 14.0%445 Commercial and Industrial Machinery and Equipment Rental and Leasing 5.9%56 Construction of New Highways and Streets 5.3%
395Wholesale Trade – consumable and tangibles, such as cement, chemicals, pipe, machinery, equipment, supplies, etc. 58.9%
Total 100.0%
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Development Approach -- Modeling of Temporary Non-Local Workforces
• Need to obtain an understanding of the residency of the drilling and completion workforce
• Run all drilling and support activities for oil and gas, and construction investments through IMPLAN
• Maintain information on the direct effect of temporary workers
• In Excel workbook:• Reduce the induced economic impacts for temporary, non-
residential and • Identify the temporary non-residential workforce
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Overview of Approach (cont.)
Evaluate the economic impact of oil and gas production• Data Collection – prices, state and project oil and
gas production, federal employment and income data
• Estimate Value of Production • Calibrate IMPLAN Extraction Sector• Conduct IMPLAN to estimate unit values• Estimate economic impacts based on oil and gas
production
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Oil and Gas Production Approach• Calibration of the oil and gas extraction sector in IMPLAN
• Proprietor income includes oil and gas investment income in the oil and gas extraction sector
• Because employment estimates are inflated in the uncalibrated model, the economic output per job is much lower• Results in considerably inflated estimates of job impacts
in uncalibrated model• Calibration of the sector includes only wage and salary
employment for the local study area• Data obtained from BLS and BEA for employment and
income, and state oil and gas agencies for price and production estimates
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State of Wyoming Oil and Gas Sector
Type of Impact
Oil and Gas ExtractionOriginal
IMPLAN® Pro Model
Calibrated IMPLAN® Pro
ModelPercent
Difference
Economic Output Impact $139,809,235 $123,019,446 -12.0%
Employment 482 168 -65.1%
Labor Income $46,874,379 $12,766,536 -72.8%Ave Earning Per Job $97,270 $75,991 -21.9%Output per Worker $290,121 $732,259 152.3%
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Oil and Gas Production Approach
• Price considerations• IMPLAN is a static model based on annual
values• Major changes in price require re-calibration of
the model to adjust productivity of labor• If price in IMPLAN model year is considerably
different than current year analysis, use current prices to calibrate and estimate value of production
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National Study Area
• Development spending profile -- wholesale trade and manufacturing sectors
• Calibration of the oil and gas extraction sector• Estimate impacts of royalty and investment
income
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Summary
• Limitations – induced effects of temporary non-residential workers
• Currently the on-line IMPLAN model does not allow calibration of sectors
• Methodology is currently under review by academics, practitioners, and the industry
• Please contact if interested – [email protected]
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Comments or Questions??