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11-30-11 API letter to Markey on Job Claims

11-30-11 API letter to Markey on Job Claims

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Published by: jendlouhy on Nov 30, 2011
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11/30/2011

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JackN.Gerard
President&ChiefExecutiveOfficer1220LStreet,NWWashington,DC20004070USATelephoneFaxEmailwww.apLorg(202)682·8500(202)682·8110gerardj@apLorg
November30,2011TheHonorableEdwardMarkeyRankingMember,CommitteeonNaturalResourcesU.s.HouseofRepresentativeWashington,D.C.20515DearRepresentativeMarkey:ThankyoufortheopportunitytoagainhighlightthecriticalroleAmerica'soilandnaturalgasindustryplaysinoureconomyandhowwecandoevenmoreforAmericanworkersandfamiliesthroughthesafeandresponsibleproductionofadditionaldomesticresources.AsImentionedinmylettertoyouSeptember21,2011,someofyourquestionsdemonstratetheverymisunderstandingofimportantfactsregardingtheU.S.oilandnaturalgasindustrythatexplainspreciselywhytheAmericanPetroleumInstituteisengagedinapubliceducationprogram;ourindustryisanimportantdriverofeconomicgrowthandjobcreation,weprovidesignificantrevenuetothegovernment,andwereceivenosubsidies,uniquetaxcreditsordeductions.Thefactsontheseissues,andmore,areoutlinedbelowinournumberedresponsestoyourspecificquestions.Thecriticalpoint,however,isthatthebenefitsourindustrycanbringinjobcreation,economicgrowthandenergysecurityrequirecommonsensepolicychoicesfromCongressandtheadministration.IhopewecanworkwithyouandyourcolleaguesintheCongressandtheadministrationtobringthosepotentialmillionnewjobsintoreality,andwithit,significantrevenuestofundimportantgovernmentprograms.Followingarethespecificresponsesrequested:1)TheBLSstatisticthatyoureferenceisanarrowdefinitionofemploymentthatonlytakesintoaccountsalariedemployeesforoilandnaturalgasextraction.Thestated165,000employmentnumberexcludesSupportActivitiesforOilandGasandDrillingofOilandGasWellsanddoesnotincludeproprietororself-employment.A2011PricewaterhouseCoopers(PWC)studycommissionedbyAPIestimatesthatdirectemploymentinU.S.oilandnaturalgas
upstream'
wasapproximately781,700in2009.ThePWCstudyisconsistentwithBureauofEconomicAnalysis(BEA)industrialinput/outputtableswhicharethebasisforalargefractionofallpublishedeconomicimpactstudiesforalltypesofindustries.
1
TheU.S.upstreamincludes
OilandGasExtraction
(NAICScode211),
DrillingofOilandGasWells
(NAICScode213111)and
SupportActivitiesforOilandGasOperations
(NAICScode213112)
Anequalopportunityemployer
 
-2-
WhiletheBLSfiguresincludeonlydirectemployment,theWoodMackenziestudyclearlyseparatesdirectandindirect/inducedemployment.ThemainfocusoftheWoodMackenzieanalysiswastoestimateincrementaldifferencesintotalemploymentduetopotentialpro-developmentpolicychanges.Theestimatedindirectandinducedjobsthatcouldbecreatedbypro-developmentpoliciesareactuallyquiteconservativegiventhatthemultiplierusedbyWoodMackenzieissignificantlylowerthanpublishedBEAemploymentmultipliersrelevanttotheoilandnaturalgasindustry.(Seeitem#4.)Ouradsrefertototaljobssupported,ratherthansimplydirectjobcreation,becausethefullmacro-economiceffectofeconomicinvestmentgoeswellbeyonddirectemployment.Notonlyisthisconceptacceptedbyalmostallmainstreameconomists,butDr.WassilyLeontiefwonaNobelPrizefordevelopingtheinput-outputmethodologythatincludesthiseffect.Infact,mostrecentestimatesofjobsimpacts,includingestimatesoftheadministration'srecentjobsproposal,includedirect,indirectandinducedeffectsintheircalculations.Regardingthe
NewYorkTimesMagazine
quote,Irespectfullydisagree.Asexplainedabove,yourquoteof165,000jobsintheupstreamoilandnaturalgassectorisasignificantunderestimateasitdoesnotincludesupportactivities,drilling,orproprietorships/selfemployed;soyourassertionisbasedinpartuponanincorrectbaselevelofemployment.Inourcurrenttroubledeconomicperiod,toarguethatwelloveronemillionnewAmericanjobs"wouldnotmakearealdent"simplydoesnotstanduptoscrutinyandseemsbothcallousandirresponsible.Iquestionwhetherthe25millionun-orunder-employedAmericanstheyreferencewouldsharethe
Times'
view.Also,theU.S.oilandnaturalgasindustry'ssignificantroleinstimulatingoveralleconomicgrowthisoverlooked--$470billiontotheU.S.economyinspending,wagesanddividendsin2010,morethanhalfthesizeofthe2009federalstimuluspackage.AnditisnotclearthatyoufullyappreciatethetotalsizeofinvestmentthatwouldbeforthcomingbymorefullydevelopingAmerica'soilandnaturalgasresources,cumulativecapitalinvestmentfrom2012through2030couldequal$459
billion.'
Thisinvestmentcombinedwithaconservativeemploymentmultiplier(asexplainedabove)resultsinaconservativeestimateoftheemploymentimpact.2)Again,WoodMackenzie,arespectedinternationalenergyconsultingfirm,andBLSassumedifferingscenariosintheiranalysis.WoodMackenzieprojectsincrementaljobincreasesgivenpro-developmentpolicies(relativetoa"currentpolicy"baseline),whileBLS'projectiondoesnotincludepotentialemploymentgainsfromexpandedaccessorrecentbreakthroughsinproducingoilandnaturalgasfromshale(andtheanticipatedresultantemploymentincreases).Infact,the"currentpath"baselineintheWoodMackenziestudyprojectscontinuedmodestincreasesinemploymentwithoutchangestodomesticenergypolicy.IftheBLSprojectionisusedasabaseline,theincrementaljobgainsforpro-developmentpolicieswouldbeevengreater.Further,theincreasedinvestmentassociatedwithpro-developmentpolicieswouldswampanyemploymentdeclinesassociatedwithefficiencygainsintheindustry.Inanyevent,thereisgoodnewsbehindthefactthatoilandnaturalgasdevelopmentcreatesamuchsmallerfootprintusingadvancedtechnologies,anditisthroughtechnologicaladvancessuchasthecombinationofhydraulicfracturingand
2
ThisvalueisonlyforcapitalinvestmentfornewareascurrentlyofflimitsinportionsoftheRockies,theAtlanticoffshore,thePacificoffshore,theEasternGulfofMexico,andANWR.Itdoesnotincludeoperatingexpenditures,incrementalcapitalinvestmentsinareascurrentlynotofflimits,andU.S.investmentrelatedtosupportingCanadianoilsandsproduction.WoodMackenzie,
U.S.SupplyForecastandPotentialJobsandEconomicImpacts,
September2011.
 
-3-
horizontaldrillingthatallowustodevelopoilandnaturalgasresourcesinasafeandenvironmentallyresponsiblemanner.Evenbetternewsisthatwecancreatemorejobs
and
realizeenvironmentalbenefits.3)Youdon'tidentifythebasisforthisquestion,butrecentpollingdatasuggeststhatyourassumptionsregardingpublicopinionareincorrect.AccordingtoaJuneRasmussenpoll,75percentofvotersdonotthinkthe
u.s.
isdoingenoughtodevelopitsownnaturalgasandoilresources,andaNovember
Pew/WashingtonPost
pollfoundmostAmericans(nearly60percent)wantpoliciesthatallowmoreoilandnaturalgasdrillingbothonshoreandoffshore.
In
answertoyourdirectquestion,theWoodMackenzieanalysisdoesaccountforjoblossesassociatedwithdepletionofresourcesthoughitdoesnotexplicitlyaccountforanyjoblossesassociatedwithefficiencygains.However,theefficiencygainsintheindustry,basedupontheBLSstudyyoucite,arelikelyontheorderof1to2percentperannumandtheseeffectswouldbeswampedbythepositiveinvestmentinflowsduetoincreasedaccess.AccordingtoWoodMackenzieprojections,by2030totaldirectemploymentintheoilandnaturalgassectorandindirectandinducedemploymentinsupportedindustriescouldincreasebyapproximately55percentiftheappropriateU.S.pro-developmentpoliciesareinplace.Asstatedin#2above,sincetheBLSprojectiondoesnotincorporatepotentialemploymentgainsfromexpandedaccessnorrecentbreakthroughsinproducingoilandnaturalgasfromshale(underacurrentpathscenario),theirprojectedjoblossesarepremisedonincompleteinformation.Again,ifWoodMackenziehadnotassumedmodestjobcreationintheir"currentpath"baseline,incrementaljobgainswouldhavebeenevengreater.4)Asstatedin#1above,the
WashingtonPost
storyclearlydoesnotreflecttheopinionofmosteconomists,includingthoseworkingfortheadministrationorDemocrat-leaninggroupssuchasCenterforAmericanProgress,bothofwhichincludeindirectandinducedeffectsintheirjobprojections.Yes,theWoodMackenziestudydoesincludeindirectandinducedjobsnotdirectlyintheoilandnaturalgassector,asthesewouldberealjobsemployingrealAmericans.Increasedactivityintheoilandnaturalgassectorwillhavepositiveimpactsonothersectorsoftheeconomythroughpurchasesofnecessaryinputstooilandnaturalgasoperationsandincomerelatedeffects.Infact,theindirectandinducedeffectsinthestudyarelikelyunderestimated.WoodMackenzieassumedaconservative3.5multiplier(2.5indirectandinducedjobsforeverydirectjobcreated),comparedtothefarmoreaggressive2008IMPLANDatabasemultipliersfortheoilandnaturalgasindustryof4.4to6.9,whicharebasedonBEA'sinput/outputindustrytables.And,asthe
WallStreetJournal
editorsrecentlynoted,"[The]beautyoftheoilandgasboomisthatmultipliersaren'tneededtopredictjobgrowth.It'shappeningrightbeforeoureyes."Forexample,inNorthDakotawhereoilandnaturalgasproductionhasledtothenation'slowestunemploymentrate(3.55percent)andthereare16,000currentjobopenings.OrPennsylvania,whereMarcellusshaledevelopmenthasproducednotjustlowerenergypricesforfamiliesandbusinesses,butmorethan72,000jobsinthelasttwoyears.5)The
WashingtonPost
storyisincorrect.Fordirectemployment,theWoodMackenziestudyonlyaddressedtheupstreamoilandnaturalgassectorandemploymentrelatedto
u.s.
equipmentandservicespurchasedbyCanadianoilsandsproducers.Thereportdidnotaddressemploymentrelatedtodownstream

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