Perryman: Barnett Shale Production Adding Jobs, Fueling Texas Growth

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An economist provides data on job and economic growth from the Barnett Shale in North Texas.

The economic benefits to the overall economy from the oil and gas industry “are immense, and the Barnett Shale continues to generate a significant stimulus,” Dr. Ray Perryman, president, The Perryman Group, told Rigzone.

"In Texas, the industry and related multiplier effects account for about $472 billion in real gross product each year, and add 3.8 million jobs. Royalties also continue to flow to individuals, businesses and taxing entities in the region," Perryman said.

A recent report by The Perryman Group, an economic and financial analysis firm, shows just how important one of the first big shale plays – the Barnett Shale – has been to the economy of Texas, and by inference, how important oil and gas production is to the country’s economy.

Because it is a tight formation that does not easily yield its natural gas reserves, the sprawling, Barnett Shale – which lies beneath much of the Dallas-Fort Worth, Texas area and all or parts of about 17 counties, covering more than 5,000 square miles – initially got off to a sluggish start. However, the formation is believed to contain some of the largest natural gas reserves in the country, and because of the advancements brought on by horizontal drilling and hydraulic fracturing, the formation soon began to be seen as a viable shale formation. 

Since 2001, the Barnett Shale has yielded more than 15 trillion cubic feet of natural gas, according to Perryman’s September 2014 report, “The Economic and Fiscal Contribution of the Barnett Shale.” Oil production in 2011 averaged nearly 20,000 barrels daily; production in 2014 is averaging nearly 4,800 barrels per day.

To fully appreciate job and economic growth data in the oil and gas industry, it is important to take into consideration the “multiplier effect,” which includes the indirect and induced jobs that are added when the oil and gas industry directly hires new people.

Perryman explained that there is not just one multiplier for an area, and that the multiplier varies, depending on the extent to which the associated spinoff activity is kept in the area or obtained externally.

“Multipliers are higher in areas with the full spectrum of support industries. In the Permian Basin and other long-time producing regions, we have seen the development of secondary businesses. In the case of the Barnett Shale, the fact that the play is situated near a large metropolitan area and business complex enhances the economic potential,” Perryman explained, adding that because many firms have located to the area over the past decade or so, the area around the Barnett Shale has a multiplier of 6 or more.

That means that for every direct hire in the oil and gas industry in the Barnett Shale, another 5 or more jobs are created in other sectors of the economy.

The Perryman Group reveals some of the multiplier effects of energy industry hiring and production activity in the Barnett Shale. Since 2001, the Barnett Shale provided $11.8 billion in gross product per year, and nearly 108,000 permanent jobs, according to the report.

Retail sales in Texas resulting from the impact of oil and gas exploration, drilling, operations, pipeline construction, maintenance and operations, as well as royalty and lease payments in the Barnett Shale, are estimated at $30.8 billion, while gross product was $120.2 billion, Perryman’s report indicated.   

From the economic activity provided by exploration and production in the Barnett Shale, local government entities in Texas receive more than $480 million in annual tax receipts, while the state receives nearly $645 million.

While the region as a whole has benefitted from the Barnett Shale, four counties – Denton, Johnson, Tarrant and Wise – have received the greatest benefits in job growth and economic development, according to the Texas Railroad Commission.

As well as looking at the past benefits in job and economic growth stemming from drilling in the Barnett Shale, The Perryman Group also looked ahead to the likely benefits of continued exploration and production in the formation, again taking into account the multiplier effect. In the 10-year period of 2014 to 2023, activity in the formation is projected to contribute more than $6 billion for local governments, while the State of Texas could receive nearly $8 billion, according to 2014 estimates. In addition, activity in the Barnett during the 10-year period is likely to produce an estimated 1,354,727 person-years of employment in the state.

The four core counties are likely to continue receiving the greatest share of benefits from the Barnett Shale, but the entire region is expected to benefit from exploration and production efforts in the formation.

Projections of future growth always have to take into consideration possible changes in regulation and the political climate, including environmental causes that can slow growth. However, the industry is likely to meet such challenges, Perryman said.

“While there have been some efforts to curtail hydraulic fracturing in localized areas, I think the chances of a broad regulatory shutdown of fracking and other methods to recover unconventional deposits are very slim. The industry may need to adapt and improve methods over time to reduce potential environmental effects, but I believe we will see needed technological advances coming online to keep the industry ahead of the curve, though doing so will be challenging.”

When the multiplier effect is included, oil and gas activity in the state of Texas “represents about 30 percent of all employment in the state,” Perryman said. “It is important for people to understand that these jobs are not just in the oil business specifically. Every industry sees positive benefits from the large surge of investment and income stemming from oil and natural gas exploration and production. Activity is regional, but the economic gains flow to all parts of the state.”



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