Professional Documents
Culture Documents
June 2012
*Benjamin R. Cook, PhD, College of Business, Economics & Finance, Dept. 3985,
1000 E. University Ave., Laramie, WY 82071. Office: College of Business #379W.
Email: bencook@uwyo.edu
Funding for this study was provided by the Enhanced Oil Recovery Institute
(EORI), part of the School of Energy Resources at the University of Wyoming. The
author would like thank Professor David Tex Taylor from the University of
Wyoming Department of Agricultural and Applied Economics for his helpful
guidance creating a customized IMPLAN model for Wyoming and providing
feedback on this study. Additional feedback and data support were provided by Dr.
Glen Murrell, Associate Director (EORI), Nick Jones, Senior Geologist (EORI),
Vanessa Onacki, Research Assistant, and Professor Owen R. Phillips, Department of
Economics & Finance, University of Wyoming.
TABLE OF CONTENTS
ES Executive Summary ................................................................................. 3
1
Introduction .............................................................................................. 9
Conclusion ............................................................................................... 32
ES
EXECUTIVE SUMMARY
Introduction
Wyomings economy and state & local government budgets depend heavily
on the states mineral wealth, which are then by extension sensitive to price
swings in the markets for those minerals. Mineral related payments are
roughly 65% of Wyoming State revenues, with severance taxes and royalties
alone accounting for 51% of the State budget.
An economic contribution analysis of Wyomings oil and gas (O&G) industry
commissioned by the Wyoming Heritage Foundation found that for 2007 oil
and gas activities accounted for 32% of economic output, and 20% of
employment. Further, a recent and similar study commissioned by the
American Petroleum Institute (API) found that for 2009 (during the recession)
the oil and gas industrys operational impact on Wyomings economy as share
of the state was effectively higher than for any other state.
The booming supply of natural gas coming from shale plays combined with
mineral price declines following the 2008 financial crisis have dealt a
significant blow to public funds. Peaking in 2008, Wyoming mineral royalties
and severance tax collections are projected to drop 26% by 2013.
In addition to diversifying Wyomings economy so that it is less exposed to
mineral price risk, pursuing other value-added activities for minerals and
energy within the state (such as gas and/or coal to liquids) and encouraging
the development of existing resources are of fundamental importance.
The strength of oil prices relative to other minerals highlights the importance
of enhanced oil recovery within the state. While oil prices themselves face
Incremental oil is the additional oil production recovered through injecting CO2 net of the
expected production level without CO2 flooding.
Direct impacts in terms of employment, earnings, output and valueadded related to oil extraction, CO2 recycling, drilling and support
services, wholesale equipment merchants and construction services.
Economic Impacts
In 2011 the EIA reported an average first-purchase price of $83.45/barrel for
Wyoming, and the operational supply cost of purchased CO2 was assumed to
be $2.17/Mcf. 2 This leads to an estimated value of $550,138,016 for the
incremental oil, and an annual cost of $175,043,050 to supply the 221 MMcfd
of CO2 purchases.
Assumes that CO2 is tied at 2% of the oil price plus a $0.50 transportation charge. i.e. $0.50
+ 2% X $83.45 = $2.17/Mcf.
Table ES-1
Fiscal Item
Beaver Creek
Madison
Patrick Draw
Monell Unit
Total CO2-EOR
1,270,471
1,251,992
2,154,691
1,915,272
6,592,427
$83.45
$83.45
$83.45
$83.45
$83.45
Incremental Revenue
$106,020,813
$104,478,767
$179,809,005
$159,829,431
$550,138,016
36 MMcfd
41 MMcfd
114 MMcfd
30 MMcfd
221 MMcfd
$2.17/Mcf
$2.17/Mcf
$2.17/Mcf
$2.17/Mcf
$2.17/Mcf
$28,513,800
$32,474,050
$90,293,700
$23,761,500
$175,043,050
$1,447,184
$3,687,578
$9,081,254
$5,246,032
$19,462,048
Royalties to WY
$15,295,269
$3,734,768
$11,229,672
$4,842,491
$35,102,200
$0
$8,580,319
$4,315,416
$14,835,234
$27,730,969
Severances to WY
$5,356,702
$5,308,566
$9,310,960
$8,094,340
$28,070,568
Ad Valorem to Counties
$6,466,789
$6,411,644
$10,835,343
$9,854,358
$33,568,133
$28,565,944
$27,722,875
$44,772,644
$42,872,455
$143,933,918
State/Local Education
$10,245,017
$6,089,304
$12,041,127
$9,039,435
$37,414,883
State/Local General
$12,056,738
$6,082,590
$12,995,531
$8,851,371
$39,986,229
State/Local Investment
$2,679,298
$1,164,586
$2,623,577
$1,670,162
$8,137,622
$0
$2,230,883
$1,122,008
$3,857,161
$7,210,052
$24,981,052
$15,567,363
$28,782,242
$23,418,129
$92,748,786
87.45%
56.15%
64.29%
54.62%
64.44%
Table ES-2
Type of Impact
Direct
Employment
Labor Income
Value Added
Indirect
Employment
Labor Income
Value Added
Induced (Industry Activity)
Employment
Labor Income
Value Added
Induced (Mineral Payments)
Employment
Labor Income
Value Added
Total Impact/Contribution
Employment
Labor Income
Income per Job
Value Added
Multipliers
Employment
Labor Income
Value Added
Beaver Creek
Madison
Patrick Draw
Monell Unit
Wertz
Total
Contribution
35.5
$4,134,264
$90,875,267
36.1
$4,208,527
$92,507,639
71.3
$8,299,819
$182,438,339
48.5
$5,641,985
$124,016,481
191.4
$22,284,594
$489,837,726
89.9
$5,417,366
$10,776,919
91.5
$5,514,677
$10,970,503
180.4
$10,875,735
$21,635,406
122.6
$7,393,020
$14,707,144
484.3
$29,200,798
$58,089,972
45.5
$1,471,999
$3,074,839
46.3
$1,498,440
$3,130,072
91.3
$2,955,138
$6,172,951
62.1
$2,008,820
$4,196,199
245.1
$7,934,397
$16,574,061
215.9
$9,896,325
$13,926,129
132.2
$5,877,262
$8,583,631
249.1
$11,336,824
$16,098,067
198.1
$8,764,450
$12,876,491
795.3
$35,874,861
$51,484,319
386.7
$20,919,954
$54,097
$118,653,155
306.1
$17,098,905
$55,859
$115,191,844
592.1
$33,467,516
$56,524
$226,344,762
431.3
$23,808,276
$55,206
$155,796,316
1716.2
$95,294,651
$55,527
$615,986,077
10.89
5.06
1.31
8.47
4.06
1.25
8.31
4.03
1.24
8.90
4.22
1.26
8.97
4.28
1.26
INTRODUCTION
As reported by Brian Jeffries, Executive Director of the WY Pipeline Authority (WPA) May
15th, 2012. Data Source: WY Dept. of Revenue, Fiscal Year 2010 Data. Presentation slides
available at
http://www.wyopipeline.com/information/presentations/2012/Wyoming%20Pipeline%20Corr
idor%20Initiative%20copy.pdf
4
Based on the Wyoming Consensus Revenue Estimating Group (CREG) January 2012
CREG Forecast for FY2012-FY2016 available at
http://eadiv.state.wy.us/creg/GreenCREG_Jan12.pdf
The results were more conservative than the WHF report, but this analysis
still found that O&G accounted for 15.8% of Wyomings total employment,
19.9% of labor income, and 24.3% of Gross State Product.
Despite being the 8th largest domestic source of oil Wyomings annual
crude production has fallen 61% from a peak of 136 million barrels annually
(mmb/yr) in 1978 to just over 54.5 mmb/yr in 2011 (WOGCC). This fall in
production, lower oil prices from the mid-1980s through the 1990s and the
increasing importance of natural gas led to declining severance tax revenues
from crude oil; crude oil's share of total severance tax revenue fell from
around 40% in the early nineties to only 15% by 1999.
After two decades of production declines, high oil prices have led to increased
oil production activity including investments in so-called tertiary methods
such as CO2 Enhanced Oil Recovery (CO2-EOR). Aggregate oil production
has been rising since 2006 and is projected to continue increasing over the
coming years.
Peaking in 2008, Wyoming mineral royalties and severance tax collections are
projected to drop 26% by 2013 driven primarily by natural gas prices (see
Figure 1). Higher oil prices relative to natural gas, and the potential for
increased oil production through advanced methods such as CO2-EOR mean
that crude oil has an increasingly important role in Wyomings economy.
In 2004 the Wyoming State Legislature passed legislation establishing the
Wyoming Enhanced and Improved Oil Recovery Commission, along with the
Enhanced Oil Recovery Institute (EORI) at the University of Wyoming
EORIs primary mission being to work with oil operators to maximize the
potential of Wyomings oil resources through enhanced recovery
technologies.
10
Figure 1
Sources: WY CREG (Jan. 2012)
DOE-EIA Mineral Prices
$1,400
Mineral Royalties
& Severance
$16.00
26% Drop in
Severance &
Royalties by
2013
$14.00
$12.00
$1,000
$10.00
$800
NG Severance
$6.00
$1,200
$400
$4.00
$200
$2.00
Oil Severance
$0
$-
Incremental oil is the additional oil production recovered through injecting CO 2 net of the
expected production level without CO2 flooding.
11
Wyomings primary experience with CO2 flooding goes back to the 1980s
when Amoco began employing the technique on oil units (primary the
Tensleep formation) within the Lost Soldier and Wertz fields. Both projects
utilized CO2 shipped via pipeline from ExxonMobils Shute Creek Gas Plant
in southwestern Wyoming. Three additional projects have since come online
utilizing the CO2 from the Shute Creek facility; Anadarko began CO2 flooding
in both the Salt Creek field and the Monell Unit of the Patrick Draw field in
2003, and Devon Energy Corp initiated CO2 flooding at the Beaver Creek
Madison unit in 2008.7
More recently, significant investments have been made by Denbury Resources
Inc. to build their 20-inch 232-mile long Greencore Pipeline to transport
CO2 from Lost Cabin in central Wyoming up through the Powder River Basin
to the Bell Creek field in Montana. Along with several other investments and
contracts to develop or secure CO2 sources within Wyoming, Denbury has
also entered an agreement with Elk Petroleum Inc. to jointly develop the
Grieve Field providing substantial development capital, access to CO2 and
operating experience in exchange for a 65% working interest.
IMPLAN is an input-output modeling system utilized by both public and private entities to
assess economic impacts and contributions of various economic activities. IMPLAN is
produced by MIG, Inc.
7
Although not included in this study one additional project in northwestern Colorado receives
CO2 from Shute Creek facility the Rangely Weber Sand Unit operated by ChevronTexaco
which began CO2 flooding in 1986.
12
Collectively, the five oil fields with active CO2 floods in 2011 produced
7,866,664 barrels of oil 14.4% of 2011 Wyoming crude production. After
estimating the production level without CO2 approximately 6,592,427 of those
barrels can be directly attributed to CO2-EOR 12.1% of WY production.
Through the end of 2011 the combined total incremental oil produced using
CO2 in Wyoming approached 86.5 million barrels.
Following the WHF and PwC studies this analysis makes use of the
IMPLAN input-output (IO) economic modeling system, but utilized the
most recent Software Version 3.0 and the associated Wyoming database for
year 2010 (released October 2011). The IMPLAN model is widely used by
both public and private entities to study the composition and connections
within domestic economies, and the economic impacts resulting from changes
in industry and policy.
Such input-output systems rely on the construction of matrices (tables)
relating purchases in one industry to expenditures and output values across all
other industries or entities. For example, in order for Denbury to build their
Greencore Pipeline through Wyoming they must purchase steel pipe,
probably from an out-of-state manufacturer, and also hire local labor and
contractors, lease various types of equipment and utilize other in-state and
out-of-state suppliers. Those suppliers then have their own associated
expenses and wages and so on throughout the economy.
This chain of economic activity results in both direct and indirect effects
through the primary industry and the associated supply chain (inter-industry
linkages) with expenditures outside of the studied economy constituting
leakages. Further still, the income and benefits of employees within the
economy, how those households spend their earnings, as well as the
expenditure of tax revenues by government lead to yet a third layer of effects
called induced effects (or impacts).
13
The IMPLAN modeling system allows for the construction and customization
of multipliers that describe this ripple effect of economic activity as direct,
indirect and induced impacts. As applied to understanding the influence of
CO2-EOR extraction activities, capital expenditures, and mineral payments
these impacts can be described as follows:
3.1
The 2010 IMPLAN database for Wyoming includes county-level data for
each of Wyomings 23 counties consisting of spending patterns (or production
functions) for 440 industries plus various levels of government and household
types. These 23 counties can then be modeled individually, or combined to
create sub-state regions or an aggregate statewide model.
8
While the results of this study can be broken down by operator and all CO2 is supplied by
one company it is not necessarily the case that the direct employment means employment
at those companies. In principle that is the general idea, but the model itself merely calculates
the proportion of employment in the oil and gas extraction sector supported by a given
value of oil/gas production.
9
Including mineral payments as part of the induced impacts is a slightly different approach
than is typically used in similar studies. Other studies will report such impacts separately, as
opposed to part of the induced effects, and then add them to the total. It seems more natural to
think of these expenditures as an induced effect either way they are added to the total. The
primary difference that may be noticed is the size of the multipliers as typically calculated
(total impact divided by direct impact).
14
10
There are many other oil units across Wyoming that have the potential to economically
employ CO2-EOR technology. Assessing the economic contribution of these projects can be
done using a CO2-EOR Economic Scoping Model, but is beyond the scope of the present
study.
11
van t Veld, K. and Phillips, O.R. (2009). Pegging Input Prices to Output Prices in LongTerm Contracts: CO2 Purchase Agreements in Enhanced Oil Recovery. Department of
Economics & Finance, Enhanced Oil Recovery Institute, University of Wyoming, Laramie,
WY. DOE (2006). National Strategic Unconventional Resource Model: A Decision Support
System. U.S. Department of Energy, Office of Petroleum Reserves, Office of the naval
Petroleum and Oil Shale Reserves (DOE/NPOSR), Washington, DC.
15
13
BOE prices are from the Denbury Resources Inc. Corporate Presentation, May 2012.
http://www.denbury.com/Theme/Denbury/files/2012-05%20IR%20Presentation.pdf
16
The various CO2-EOR related activities considered in this study are mapped
to IMPLAN sectors as outlined in Table 1. Oil and CO2 production are
assumed to be 100% from in-state locations, and the local demand (or
purchase) percentages (LPP) for government and private household spending
is determined within IMPLAN.
3.2
17
Table 1
Fiscal Item
IMPLAN
Sector
Local Purchase
or Production
Incremental Oil
Production & Injectable
CO2 Production
20
100%
State/Local Government
Education
State/Local Government
Non-Education
Spending
Pattern
Spending
Pattern
State/Local Government
Investment
Spending
Pattern
Households 75-100k
Spending
Pattern
Mineral Royalties,
Severance and Ad
Valorem Taxes
Varies across
consumption
within the
spending pattern
The five oil fields with active CO2 floods in Wyoming are located in four
counties, have different CO2 purchase levels and produce oil from a mix of
federal, state and private mineral leases. Further, ad valorem (property) taxes
are charged net of royalties and have different mill levies in each county.
Although there are some exceptions made with respect to state severance
taxes, for this study it is assumed to be a constant 6% across the CO2 projects.
Incremental Oil & Revenues
Only the portion of each oil units production arising from CO2 injection, the
incremental oil, is included in the analysis. For each field-reservoir
combination (FRC) the monthly production history was obtained from the
Wyoming Oil & Gas Conservation Commission (WOGCC), and used to
estimate a pre-CO2 production decline path. The incremental oil was then
determined by subtracting the predicted pre-CO2 production from the total
FRC production in 2011. The production decline analysis is illustrated
graphically for each FRC in Appendix B.
18
Incremental Revenue
$106,020,813
$36,281,529
$23,059,956
$48,641,576
$104,478,767
$179,809,005
$21,617,852
$30,228,518
Total
6,592,427
$550,138,016
CO2 Purchases
As discussed earlier the CO2 pricing is typically pegged to the oil price with
oil operators entering into a combination of short-term and long-term
14
U.S. Energy Information Administration (EIA), Annual Domestic Crude Oil First
Purchase Prices by Area http://www.eia.gov/dnav/pet/pet_pri_dfp1_k_a.htm accessed April
2012.
19
15
van t Veld Klaas T. & Phillips, Owen R., Pegging Input Prices in Long-Term Contracts:
CO2 Purchase Agreements in Enhanced Oil Recovery. July 2009.
http://www.uwyo.edu/owenphillips/papers/CO2pegging071509.pdf
16
20
Table 3
Beaver Creek-Madison
Lost Soldier-Darwin/Madison
Lost Soldier-Flathead
Lost Soldier-Tensleep
Patrick Draw-Almond (Monell)
Salt Creek-Wall Creek 2
Wertz-Darwin/Madison
Wertz-Tensleep
36
6.81
4.33
9.13
41
114
4.06
5.67
$28,513,800
$5,393,897
$3,428,274
$7,231,439
$32,474,050
$90,293,700
$3,213,880
$4,494,009
Total
221
$175,043,050
18
Data on the average daily purchase rate was obtained from Glen Murrell, PhD, Associate
Director, Enhanced Oil Recovery Institute based on monthly CO2 sales data for Shute Creek.
The combined average daily purchase rate for Lost Soldier and Wertz were estimated at 30
MMcfd and then allocated proportionately between the individual FRCs based on their level
of incremental oil production.
19
Mineral lease shares estimated by Nick Jones, Senior Geologist, Enhanced Oil Recovery
Institute, and Vanessa Onacki, Undergraduate Research Assistant, using EORI/WOGCC well
locations, BLM land ownership and production data from the WOGCC and IHS/PI Dwights
Rocky Mountain Region.
21
A private rate of 18.75% would be in-line with the private royalty estimates
used in the WHF report20 and lacking the actual private royalty information
this study will assume the same.
Counties collect ad valorem taxes on mineral properties with mill levies on
100% of the assessed value (value of production in the previous year). The
majority of EOR activity was located in three counties Fremont (7.2% rate),
Natrona (6.8% rate) and Sweetwater (6.6% rate) with a portion of the Wertz
field in Carbon County (6.4% rate). For simplicity it is assumed that Wertz is
charged the two-county average of 6.5%.21
The royalty/tax rates and the mineral lease distribution by field-reservoir
combination are summarized in Table 4.
State/County Budgets & Private Households
Having determined the breakdown of severance, ad valorem and royalty
payments for each FRC, for the purposes of economic contribution the key
question is how and on what are those mineral payments spent within the
Wyoming economy. The primary institutional spending patterns included in
IMPLAN involve state/local expenditures on education, non-education, and
capital investment (infrastructure) related activities.
20
Wyoming State Board of Equalization, 2011 Wyoming Abstract & Mill Levy Report.
http://taxappeals.state.wy.us/2011%20Abstract%20and%20Mill%20Levy%20Report.xls
22
Table 4
Federal
Royalty
12.50%
Royalty/Tax Rates
State
Private
Severance
Royalty
Royalty
Tax
16.67%
18.75%
6.00%
12.50%
16.67%
18.75%
6.00%
6.61%
22.00%
0.00%
78.00%
12.50%
16.67%
18.75%
6.00%
6.61%
12.50%
0.00%
87.50%
12.50%
16.67%
18.75%
6.00%
6.61%
37.00%
0.00%
63.00%
12.50%
16.67%
18.75%
6.00%
6.61%
54.30%
1.90%
43.80%
12.50%
16.67%
18.75%
6.00%
6.79%
77.70%
9.50%
12.80%
Wertz - Darwin/Madison
12.50%
16.67%
18.75%
6.00%
6.52%
100.00%
0.00%
0.00%
Wertz - Tensleep
12.50%
16.67%
18.75%
6.00%
6.52%
100.00%
0.00%
0.00%
Field-Reservoir Combination
23
Property
Tax
7.24%
Lease Distribution
Federal
State
Private
Share
Share
Share
21.00%
79.00%
0.00%
24
Wyoming Consensus Revenue Estimating Group (CREG), January 2012 CREG Forecast
for FY2012-FY2016, http://eadiv.state.wy.us/creg/GreenCREG_Jan12.pdf
25
At the county level it is a bit unclear how much of divisional budgets goes to capital
investment/infrastructure and what is purely operational. This study assumes that school
construction amounts and all special district levies well allocated to capital investments.
Wyoming State Board of Equalization, 2011 Wyoming Abstract & Mill Levy Report.
http://taxappeals.state.wy.us/2011%20Abstract%20and%20Mill%20Levy%20Report.xls
24
Table 5
Beaver Creek
Madison
1,270,471
$83.45
$106,020,813
36 MMcfd
$2.17/Mcf
$28,513,800
$1,447,184
$15,295,269
$0
$5,356,702
$6,466,789
$28,565,944
$10,245,017
$12,056,738
$2,679,298
$0
$24,981,052
87.45%
Patrick Draw
Monell Unit
1,251,992
$83.45
$104,478,767
41 MMcfd
$2.17/Mcf
$32,474,050
$3,687,578
$3,734,768
$8,580,319
$5,308,566
$6,411,644
$27,722,875
$6,089,304
$6,082,590
$1,164,586
$2,230,883
$15,567,363
56.15%
25
Salt Creek
Wall Creek 2
2,154,691
$83.45
$179,809,005
114 MMcfd
$2.17/Mcf
$90,293,700
$9,081,254
$11,229,672
$4,315,416
$9,310,960
$10,835,343
$44,772,644
$12,041,127
$12,995,531
$2,623,577
$1,122,008
$28,782,242
64.29%
Total CO2-EOR
6,592,427
$83.45
$550,138,016
221 MMcfd
$2.17/Mcf
$175,043,050
$19,462,048
$35,102,200
$27,730,969
$28,070,568
$33,568,133
$143,933,918
$37,414,883
$39,986,229
$8,137,622
$7,210,052
$92,748,786
64.44%
ECONOMIC CONTRIBUTION
The total value of incremental oil in 2011 was estimated at $83.45 and the
annual operational cost of supplying 221 MMcfd of CO2 purchases was
estimated at $2.17/Mcf. Both the oil revenues and the operational CO2
expenditures were processed through the customized oil and gas extraction
sector 20 in IMPLAN.
The economic contributions of these activities are summarized in Table 6 by
field. The incremental extraction and supplied CO2 added roughly $564.5
million to WY State Gross Product (value added) and supported 921 jobs in
Wyoming with $59.4 million in labor earnings 191 jobs directly and 729 in
downstream and induced activity an employment multiplier of 4.81.
26
Denburys Greencore Pipeline is a 232-mile 20-inch CO2 pipeline which will run from the
Lost Cabin gas plant in central Wyoming and initially terminate at the Bell Creek field just
across the border in Montana. The first half of the Greencore Pipeline was completed in 2011,
and when finished, will have a maximum capacity of 725 MMcfd. The total capital
investment was projected at $275-$325M an expenditure that would clearly support many
additional jobs within Wyoming.
26
Table 6
Type of Impact
Direct
Employment
Labor Income
Earnings per Job
Value Added
Indirect
Employment
Labor Income
Earnings per Job
Value Added
Induced
Employment
Labor Income
Earnings per Job
Value Added
Totals
Employment
Labor Income
Earnings per Job
Value Added
Multipliers
Employment
Labor Income
Value Added
Beaver Creek
Madison
Lost Soldier
CO2 Units
Patrick Draw
Monell Unit
Salt Creek
Wall Creek 2
Wertz - CO2
Units
Total
Contribution
35.5
$4,134,264
$116,447
$90,875,267
32.7
$3,811,806
$116,447
$83,787,317
36.1
$4,208,527
$116,447
$92,507,639
71.3
$8,299,819
$116,447
$182,438,339
15.7
$1,830,179
$116,447
$40,229,164
191.4
$22,284,594
$116,447
$489,837,726
89.9
$5,417,366
$60,292
$10,776,919
82.8
$4,994,831
$60,292
$9,936,358
91.5
$5,514,677
$60,292
$10,970,503
180.4
$10,875,735
$60,292
$21,635,406
39.8
$2,398,190
$60,292
$4,770,786
484.3
$29,200,798
$60,292
$58,089,972
45.5
$1,471,999
$32,367
$3,074,839
41.9
$1,357,188
$32,367
$2,835,013
46.3
$1,498,440
$32,367
$3,130,072
91.3
$2,955,138
$32,367
$6,172,951
20.1
$651,632
$32,367
$1,361,187
245.1
$7,934,397
$32,367
$16,574,061
170.8
$11,023,629
$64,528
$104,727,025
157.5
$10,163,825
$64,528
$96,558,687
173.9
$11,221,644
$64,528
$106,608,213
343.0
$22,130,692
$64,528
$210,246,695
75.6
$4,880,001
$64,528
$46,361,137
920.8
$59,419,790
$64,528
$564,501,758
4.81
2.67
1.15
4.81
2.67
1.15
4.81
2.67
1.15
4.81
2.67
1.15
4.81
2.67
1.15
4.81
2.67
1.15
27
5.2
As noted earlier (footnote 5) many other economic impact studies simply label government
expenditures as separate impacts the only real difference in this study is that we label them
as induced impacts. Treating the total contribution of mineral payment expenditures as part
of induced seems more consistent with the spirit of what is meant by an induced impact.
28
Table 7
Type of Impact
Beaver Creek
Madison
Lost Soldier
CO2 Units
Patrick Draw
Monell Unit
Salt Creek
Wall Creek 2
Wertz - CO2
Units
Total
Contribution
105.5
117.5
241.7
67.2
747.8
Labor Income
$9,896,325
$4,858,627
$5,402,677
$11,098,135
$3,085,275
$34,341,039
$45,842
$46,066
$45,976
$45,910
$45,880
$45,920
$13,926,129
$6,804,963
$7,580,629
$15,593,613
$4,337,354
$48,242,688
Value Added
Induced (Private Royalties)
Employment
--
25.4
14.7
7.4
--
47.5
Labor Income
--
$820,549
$474,584
$238,689
--
$1,533,822
--
$32,291
$32,291
$32,291
--
$32,291
Value Added
--
$1,734,175
$1,003,002
$504,454
--
$3,241,631
130.9
132.2
249.1
67.2
795.3
Labor Income
$9,896,325
$5,679,176
$5,877,262
$11,336,824
$3,085,275
$35,874,861
$45,842
$43,392
$44,455
$45,506
$45,880
$45,106
$13,926,129
$8,539,138
$8,583,631
$16,098,067
$4,337,354
$51,484,319
Value Added
29
5.3
http://doe.state.wy.us/lmi/CES/naanav9002.htm
29
The Wyoming State Budget for 2011 was $3,160,374,710 and the combined total local
government mill levies were $1,545,643,127 - a total of $4,706,017,837
30
Table 8
Type of Impact
Direct
Employment
Labor Income
Value Added
Indirect
Employment
Labor Income
Value Added
Induced (Industry Activity)
Employment
Labor Income
Value Added
Induced (Mineral Payments)
Employment
Labor Income
Value Added
Total Impact/Contribution
Employment
Labor Income
Income per Job
Value Added
Multipliers
Employment
Labor Income
Value Added
Beaver Creek
Madison
Patrick Draw
Monell Unit
Total
Contribution
35.5
$4,134,264
$90,875,267
36.1
$4,208,527
$92,507,639
71.3
$8,299,819
$182,438,339
48.5
$5,641,985
$124,016,481
191.4
$22,284,594
$489,837,726
89.9
$5,417,366
$10,776,919
91.5
$5,514,677
$10,970,503
180.4
$10,875,735
$21,635,406
122.6
$7,393,020
$14,707,144
484.3
$29,200,798
$58,089,972
45.5
$1,471,999
$3,074,839
46.3
$1,498,440
$3,130,072
91.3
$2,955,138
$6,172,951
62.1
$2,008,820
$4,196,199
245.1
$7,934,397
$16,574,061
215.9
$9,896,325
$13,926,129
132.2
$5,877,262
$8,583,631
249.1
$11,336,824
$16,098,067
198.1
$8,764,450
$12,876,491
795.3
$35,874,861
$51,484,319
386.7
$20,919,954
$54,097
$118,653,155
306.1
$17,098,905
$55,859
$115,191,844
592.1
$33,467,516
$56,524
$226,344,762
431.3
$23,808,276
$55,206
$155,796,316
1716.2
$95,294,651
$55,527
$615,986,077
10.89
5.06
1.31
8.47
4.06
1.25
8.31
4.03
1.24
8.90
4.22
1.26
8.97
4.28
1.26
31
CONCLUSION
Wyomings economy and state & local government budgets depend heavily
on the states mineral wealth, which are then by extension sensitive to price
swings in the markets for those minerals. The booming supply of natural gas
coming from shale plays combined with near across the board mineral price
declines following the 2008 financial crisis have dealt a significant blow to
public funds.
In addition to diversifying Wyomings economy so that is less exposed to
mineral price risk, pursuing other value-added activities for mineral and
energy within the state (such as gas and/or coal to liquids) and encouraging
the development of existing resources are both of fundamental importance.
The strength of oil prices relative to other minerals highlights the importance
of Wyomings support for and deployment of enhanced oil recovery
technologies within the state. While oil prices themselves face renewed
pressure from economic troubles in Europe and the slow recovery at home,
improved oil recovery has the potential to delivery hundreds of millions of
barrels of additional production from Wyoming oil fields.
In this study for 2011 it is estimated that every 1 million barrels of
incremental oil produced with CO2 at existing EOR projects supported about
260 jobs within Wyoming. Although this number is sensitive to the lease
ownership and pricing of the produced oil, it is clear that EOR technologies
can contribute thousands of Wyoming jobs annually in coming decades.
32
APPENDIX A
IMPLAN Customization
In order to maintain consistency with the 2010 IMPLAN database, all values
for customization were either collected for 2010, or adjusted to 2010 using the
corresponding GDP deflator from IMPLAN. A detailed explanation of the
methodology used and the resulting model parameters is provided in the
following sections (refer to the final Table A-3 for final sector parameters). .
A.1
Output (Value of Production): The total industry output for the extraction
sector was based on the 2010 production of oil (58,303,404 barrels) and gas
(2,523,493,504 Mcfs) as reported by the Wyoming Oil and Gas Conservation
Commission (WOGCC). 32 The average annual 2010 prices for Wyoming
crude oil ($68.10/barrel) 33 and wellhead gas ($4.30/Mcf) 34 provided by the
U.S. Energy Information Administration (EIA).
32
Wyoming Oil and Gas Conservation Commission (WOGCC). Online Stats Book - County
Production Report, 2010 County Report (as of 04/18/12),
http://wogcc.state.wy.us/online_stats_bk/main_menu.cfm (accessed April 18th 2012).
33
Average annual 2010 domestic first purchase price of crude oil for Wyoming (EIA.gov).
January 1983-present: Form EIA-182, "Domestic Crude Oil First Purchase Report",
http://www.eia.gov/dnav/pet/pet_pri_dfp1_k_a.htm (accessed April 16th 2012).
33
34
Average annual 2010 wellhead price for Wyoming (EIA.gov). Form EIA-895A, "Annual
Quantity and Value of Natural Gas Report,
http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_SWY_a.htm (accessed April 16th 2012).
35
36
Bureau of Economic Analysis Series SA06N and SA07N for Wyoming. LineCode 201 "Oil
and gas extraction" (2010 Compensation = 485,179) / (2010 W&S = 404,769) =
1.19865651767. http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1 (accessed April
18th 2012).
37
IHS (IHS). 2011. PI/Dwights Plus Rocky Mountain Production Data, Volume 21, Issue 11,
Released: November 30, 2011.
34
Production
Cost
Lift Cost
Oil: Primary
(per barrel)
$0.42-$1.28
Oil: Secondary
(per barrel)
$1.64-$3.94
Natural Gas
(per Mcf)
$0.19-$1.13
Coalbed (per
Mcf)
$0.36
Gathering
--
--
$0.30
$0.30
Transport
$1.31
$1.31
$0.49
$0.49
Processing
--
--
$0.49
$0.49
Totals
$1.72-$2.58
$2.95-$5.25
$1.47-$2.41
$1.64
38
The Oil & Gas Journal's Pipeline Economics Report and FERC filings are the source for
this survey. Data is current to 2010. http://ogjresearch.stores.yahoo.net/us-pipelineeconomics-study.html
39
Such gathering charges are frequently mentioned in articles about the break-even price of
natural gas. See for example the article, What is the breakeven price for natural gas
producers? by Keith Schaefer, ResourceInvestor.com, April 30, 2009.
http://www.resourceinvestor.com/2009/04/30/what-is-the-breakeven-price-for-natural-gasproduc
40
Even after adjusted for inflation, this production cost is slightly higher than the $1.15
(2007=$1.10) per Mcfe used by Booz-Allen-Hamilton in the WHF (2008) study.
35
Table A-2
Product
Volume
Non-Labor Costs
58,303,404
$3.75/barrel
$218,916,875
2,523,493,504
$1.61/Mcf
$4,073,814,109
Totals (Mcfe)
2,873,313,928
$1.49/Mcfe
$4,292,730,983
Total Value Added and Value Added Components: Total value added for the
extraction sector was calculated as the difference the total value of production
($14,821,483,880) and the non-labor production costs from Table A-2. After
deducting total employee compensation ($478,993,306) from total value
added, the remaining amount was divided between Other Property Type
Income and Indirect Business Tax according the existing IMPLAN ratios for
sector 20.
A.2
41
42
Total employment from BEA series SA25N LineCode 203 Support activities for mining
divided by BLS employment in the same sector NAICS 213 (2010 BEA Employment
=12,137) / (2010 BLS Employment = 11,262) = 1.07769490321.
36
Finally, the total wages paid to the adjusted employee count were modified to
account for benefits using the ratio of total compensation to total wages
(1.145) for support activities for mining in the BEA Survey of Current
Business.43
Output (Value of Production): The value of production was determined by
first calculating the output per worker for the drilling sector ($228,763)
reported in the 2007 Economic Census44 and inflating to 2010 ($239,041 per
worker) using the IMPLAN GDP deflator (0.957). The total value of output in
the drilling sector was then estimated as the product of this output per worker
and the adjusted employee count ($612,187,396).
Total Value Added and Value Added Components: The total value added for
drilling was calculated using the ratio of value added to output for the existing
IMPLAN sector 28. Likewise, the individual components of value added were
subsequently allocated according to their corresponding ratios from the inbuilt IMPLAN drilling sector.
A.3
The support sector was customized using the same basin methodology as
described for the drilling sector.
Employment & Labor Income: Average employment for 2010 (8,433
employees) and total wages ($569,094,000) for oil and gas support operations
were obtained from the Bureau of Labor Statistics (BLS) Quarterly Census of
Employment and Wages (QCEW) under the North American Industry
Classification System (NAICS) code 213112. The level of employment was
43
Bureau of Economic Analysis Series SA06N and SA07N for Wyoming. LineCode 203
"Support activities for mining (2010 Compensation = 890,999) / (2010 W&S = 778,037) =
1.1451884679. http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1 (accessed April
18th 2012).
44
37
then adjusted (9,091) to account for self-employment using the ratio (1.078)
of total employment in support activities for mining from the Bureau of
Economic Analysis (BEA) Survey of Current Business, and BLS employment
in the same sector (NAICS code 213).
Finally, the total wages paid to the adjusted employee count were modified to
account for benefits using the ratio of total compensation to total wages
(1.145) for support activities for mining in the BEA Survey of Current
Business.
Output (Value of Production): The value of production was determined by
first calculating the output per worker for oil and gas support operations
($172,120) reported in the 2007 Economic Census and inflating to 2010
($179,854 per worker) using the IMPLAN GDP deflator (0.957). The total
value of output in the support sector was then estimated as the product of this
output per worker and the adjusted employee count ($1,635,012,138).
Total Value Added and Value Added Components: The total value added for
oil and gas support operations was calculated using the ratio of value added to
output for the existing IMPLAN sector 29. Likewise, the individual
components of value added were subsequently allocated according to their
corresponding ratios from the in-built IMPLAN drilling sector.
38
Table A-3
Customized
Drilling
(28)
2,561
Customized
Support
(29)
9,091
IMPLAN
Extraction
(20)
9,957
IMPLAN
Drilling
(28)
2,672
IMPLAN
Support
(29)
9,683
$14,821,483,880
$612,187,396
$1,635,012,138
$2,509,661,696
$1,122,572,544
$1,907,591,424
$478,993,306
$206,348,956
$613,654,289
$483,882,720
$217,921,824
$648,745,088
$0
$29,854,777
$88,784,127
$521,046,016
$31,529,154
$97,826,832
$6,587,422,618
$225,549,296
$3,900,353
$542,430,080
$592,214,976
$4,550,596
$3,462,336,985
$6,381,536
$27,495,314
$285,100,224
$16,755,722
$32,079,162
$10,528,752,896
$468,134,565
$733,834,082
$1,832,459,040
$858,421,676
$783,201,678
$478,993,306
$236,203,733
$702,438,415
$1,004,928,736
$249,450,978
$746,571,920
$420,187
$196,998
$4,292,730,983
$3,531,447
$677,202,656
$239,041
$179,854
39
$252,062
APPENDIX B
3,000
Monthly Oil Production
Pre-CO2 Decline Path
2,500
Incremental Oil
2011 = 1,270,471
Total = 2,459,387
80
1,500
60
40
1,000
500
20
120
Month-Year
1,400
100
1,200
1,000
80
800
60
600
40
400
Incremental Oil
2011 = 434,770
Total = 11,945,204
20
200
Month-Year
40
120
700
600
500
40
400
30
300
20
200
Incremental Oil
2011 = 276,333
Total = 4,951,520
10
50
100
Month-Year
6,000
250
Incremental Oil
2011 = 582,883
Total = 27,596,919
200
5,000
4,000
3,000
150
2,000
100
50
Month-Year
41
300
3,500
100
Incremental Oil
2011 = 1,251,992
Total = 7,481,084
2,500
80
2,000
60
1,500
40
20
1,000
120
500
Month-Year
16,000
14,000
350
12,000
Incremental Oil
2011 = 2,154,691
Total = 10,699,231
300
10,000
250
8,000
200
150
4,000
100
2,000
50
0
Month-Year
42
1,400
1,200
50
1,000
40
800
30
600
20
400
Incremental Oil
2011 = 259,052
Total = 4,475,320
10
200
Month-Year
3,000
350
2,500
300
2,000
250
200
1,500
150
1,000
100
500
50
Month-Year
43