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November21,2011JackN.GerardPresidentandCEOAmericanPetroleumInstitute1220LStreet,NWWashington,DC20005-4070DearMr.Gerard:AsRankingMemberoftheHouseNaturalResourcesCommittee,IwritetoinquireabouttheAmericanPetroleumInstitute'sadvertisingcampaignclaimingtheoilandgasindustrywilladdonemillionnewjobsby2018ifmoreterritory,bothonshoreandoffshore,isopenedupforoilandgasdevelopment.APIalsoclaimstheObamaadministration'splantoeliminatetheindustry'Smulti-billiondollartaxsubsidieswill,by2020,cause48,000Americanstolosetheirjobsand
reduce
governmentrevenueby$29billion.
1
TheseclaimsaresourcedtotwoAPI-fundedstudiesbytheconsultingfinnWoodMackenzie,whosechiefclientsincludeoilandgascompanies.iHowever,thejobfiguresappeartobesharplyatoddswiththeofficialjobsstatisticscompiledbytheauthoritativeBureauofLaborStatistics,anindependentstatisticalagencychargedwithmeasuringU.S.labormarketactivity,andtheCongressionalBudgetOfficehasfoundtheadministration'splantoeliminateoilandgastaxsubsidieswouldadd,notsubtract,$41billioninfederalrevenueoverthenext10years.InordertoevaluatetheclaimsmadebyAPI'sadcampaignandthediscrepanciesbetweenyourdataandthatoftheBLS,CBO,andotherindependentevaluators,Iaskthatyoupleaserespondtothefollowingquestions:1.Almost165,000Americansworkinoilandgasoccupations,accordingtotheBureauofLaborStatistics."Withmorethan
25
millionAmericansunemployedorunderemployed,it'sunlikelythatanychangesinthatpartoftheenergysectorwould
I
2
Thestudiescanbefoundathttp://www,api,org/newsroomlupload/API-US_Supply_Economic_Forecast.pdfandhttp://www.api,org/policy/taxlrecentstudiesandresearch/upload/SOAE_Wood_Mackenzie_Access_vs_Taxes.pdf
http://naturaIresources.house.9ov
JackN.GerardNovember21,2011Page2
makearealdent,"accordingtoaNov.3analysisinthe
NewYorkTimesMaqazine»
However,API'sadvertisementsseemtobesayingthattheindustrywilladdanaverageofmorethan
140,000
us.
jobsayear
forthenextsixyearsifwefollowAPI'spolicyrecipe.LeaveasidetheaccuracyoftheWoodMackenziestudyforamoment.Isn'tittruethatthestudydoesnotactuallysaytheoilandgasindustrywillhirethismanypeople(thestudy'sestimatesfallunderthecategory"jobssupported"not"jobscreated")?Yetwon'tyouradsgiveviewersthefalseimpressionthatthisisthecase?Howisitpossibletoseeyourmessageanyotherway?2.WhileAPIpromisesonemillionnewjobsby2018,theBureauofLaborStatisticsprojectsjoblosses.''Newdrillingandextractiontechniquesallowformoreefficientproductionfromareducednumberofdrillsites,"BLSreportsinitsCareerGuidetoIndustries,2010-11Edition."Asaresult,employmentinoilandgasextractionisexpectedtodeclineby16percentthrough2018.,,4BLSpredictsahostofoilandgasjobswill"declinerapidly,"includingderrickoperators,extractionworkers,drilloperators,androustaboutswhoassembleorrepairoilfieldequipment.'DoesAPIrejectBLS'sconclusions?Andifso,why?3.TheAmericanpeoplehaverejectedexpandedoilandgasdevelopmentinmanyoftheareasAPIwantsopened.AreassuchastheArcticNationalWildlifeRefugeareconsiderednationaltreasures.ExtensivedrillingofftheFloridaandCaliforniacoastshasbeenconsideredtooriskyandpotentiallydisruptivetostatetourismandotherbusinesses.AndtheDepartmentofDefenseisworriedthatupto78percentofanAPI-backedleasesaleoffVirginia'scoastwouldconflictwithNavaltrainingactivities.
6
Nonetheless,BLSnotesthatopeningcurrentlyprotectedareastoexplorationanddrillingcouldpotentiallyboostemploymentinthesector.YetforAPI'sclaimstobetrue,jobscreatedfromexpandedaccesswouldhavetonotonlyoffsetbutsignificantlyexceedtheBLS-projectedjoblossesduetotechnologicaladvancesanddepletedresourceselsewhere.DotheWoodMackenzieestimatesincorporatethejoblossesprojectedbyBLS,whichareexpectedtooccurwhetheraccessisexpandedornot?Ifnot,whynot?4.TheWoodMackenziestudypredictsexpandedaccesstoonshoreandoffshoreresourceswillcreatejobsthathavelittleornothingtodowithoilandgas.AsexplainedinanOct.
10
WashingtonPost
article,"[M]anyeconomistssaythattheAPIhasexaggeratedthe
3
AdamDavidson,"CanAnyoneReallyCreateJobs?",
NewYorkTimesMagazine
(Nov.3,2011).
4
U.S.BureauofLaborStatistics,
CareerGuidetoIndustries,2010-11Edition,
5
U.S.BureauofLaborStatistics,
OccupationalOutlookHandbook,2010-11Edition,
ocol
oco20057.htm.
6
DepartmentofDefense,OfficeoftheDeputyUnderSecretaryofDefenseforReadiness,OfficeoftheDeputyUnderSecretaryofDefenseforInstallationsandEnvironment,andOfficeoftheDirector,OperationalTestandEvaluation,Outer
ContinentalShelf(OCS):MilitaryActivities
&
FutureOilandGasDevelopment
(2010);andRosalindS.Helderman,"OilDrillingOffVirginia'sShoreWouldConflictwithMilitary,DefenseStudySays,"
WashingtonPost,
May19,2010.
JackN.GerardNovember21,2011Page3
numberofjobslinkedtotheoilandgasindustrybyincludingdirectandindirectjobs(suchassteelsuppliers),andaseldom-usedcategoryknownas'induced'jobsthatAPIsayscoverseverythingfromvaletstoday-careproviders,fromlibrarianstorocketscientists.,,7AnOct.20
Post
"FactChecker"articlegaveaRepublicanSenatorthreeoutoffourPinocchiosforclaimingtheGOP'sjobplanwouldcreatefivemillionnewjobs.sThe
Post
faultedtheSenatorforrelyingonAPI'sWoodMackenziestudy.Isittruethatthestudy'sjobsestimatesinclude"everythingfromvaletstoday-careproviders,fromlibrarianstorocketscientists"?5.TheOct.10
Post
storyalsoreportsthat,intheWoodMackenziestudy,gasstationandconveniencestorecashiers,whotypicallyearnlessthan$9anhour,makeup"thesinglebiggestcategoryofpeopleworkingdirectlyforthepetroleumindustry."Isthistrue?Howmanyandwhatpercentageofthestudy'sexpectednewjobsarelow-wagejobs?6.TheWoodMackenziedirectjobsestimatesweredeterminedby"multiplyingthenumberofeachdiscreteactivityperannumbythenumberofdirectjobsperactivity.?"ThisseemstoimplythatWoodMackenzieisassumingjobscreatedarepermanentandpersistent.Inotherwords,WoodMackenzieassumesanyjobcreatedin2012stillexistsin2018andeveryyearinbetween(andbeyond
10).
However,therewilllikelybejoblossesascertainactivitiesarecompleted,suchasbuildingnewrigs.TheWoodMackenziemodelalsodoesnotappeartoaccountforlaborandcapitalconstraintsthatcanslowordampenjobcreation.WoodMackenzie'sestimatesshowimmediateandsignificantjobincreases,butittakestimetofind,oftenrelocate,andtrainworkersforthemoretechnicalandbetterpaidpositionsthestudysayswillbecreated.
If
thesejobsbecomeavailable,asignificantshareoftheworkerswillbynecessitycomefromtheranksofthealreadyskilledandalreadyemployed-thenetforoverallemploymentmaybequitesmall,especiallyinasix-yeartimeperiod.Greaterdemandforworkerswiththeappropriateskillsalsomeanshigherlaborcosts,whichcouldcauseindustrytoscalebackandhirefewerworkersthanWoodMackenzieprojects.Theapparentfailuretoaccountforsuchfactorssignificantlyinflatestheestimatedtotalfordirectjobs,whichisonlymagnifiedbyWoodMackenzie'suseofmultiplierstocalculateindirectandinducedjobs.IsittruethattheWoodMackenziemodelassumesthatajobcreatedin2012persiststo2018andbeyond?Andisittruethatthemodeldoesnotaccountforlaborandcapitalconstraints?Ifuntrue,whatmethodsareused?
7
StevenMufsonandJiaLynnYang,"CompaniesUseFuzzyMathinJobsClaims;CandidatesStillBuy
In,"
WashingtonPost,
Oct.10,2011.
8
GlennKessler,"TheGOP'sLudicrousClaimAboutTheirJobsBill,"
WashingtonPost,
Oct.20,2011.
9
Seepage19ofthestudyathttp://www.apLorg!newsroomlupload!API-US_Supply_Economic_Forecast.pdf.
10
AlthoughAPI'sadvertisingcampaignhighlights"onemillionnewjobs"by2018,theWoodMackenziestudyactuallygivesestimatesto2030.So,itappears,notonlyisajobcreated
in
2012expectedtopersistto2018,butalsoto2030.
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