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The Economic Impact of the Oil and Gas Industry in Pennsylvania

Prepared for the Marcellus Shale Committee by the Pennsylvania Economy League of Southwestern Pennsylvania, LLC Suite 1100 425 Sixth Avenue Pittsburgh, Pennsylvania 15219 412.281.4783

November 2008

Table of Contents
Executive Summary Measuring the current economic impact of the Oil and Gas industry ........................................ i The Oil and Gas industry generates more than $7.1 billion a year for Pennsylvania ................ i The Oil and Gas industry pays millions of dollars to landowners across Pennsylvania ........... ii The Oil and Gas industry is growing in Pennsylvania .............................................................. ii 1. Introduction ............................................................................................................................... 1 1.1 1.2 1.3 1.4 Origins of this report ....................................................................................................... 1 The Oil and Gas industry has played a predominant role in Pennsylvania‟s history ...... 1 Economic opportunities for growth of the Oil and Gas industry in Pennsylvania .......... 2 Uses of oil and natural gas in the United States and Pennsylvania ................................. 2

2. Production of oil and gas encompasses many industries .......................................................... 4 2.1 2.2 2.3 Pre-drilling ...................................................................................................................... 4 Drilling ............................................................................................................................ 4 Post-drilling ..................................................................................................................... 5

3. Overview of the Oil and Gas industry in Pennsylvania ............................................................ 7 3.1 3.2 3.3 3.4 3.5 Pennsylvania has extensive Oil and Gas resources ......................................................... 7 Pennsylvania companies are turning a natural resource into jobs and investment ......... 8 Activity has increased in recent years ............................................................................. 9 Pennsylvania produces natural gas for local consumption ........................................... 12 The Pennsylvania Oil and Gas industry generates wealth in both rural and urban areas ........................................................................................................................................ 12

4. Measuring the economic impact of the Oil and Gas industry in Pennsylvania ....................... 14 4.1 The concept of indirect and induced economic impacts ............................................... 14

4.2 4.3

Impact summary ............................................................................................................ 15 Output: Pennsylvania‟s Oil and Gas industry generates more than $7.1 billion annually ........................................................................................................................................ 17 Employment: Pennsylvania‟s Oil and Gas industry generates more than 26,500 jobs . 20 Employee Compensation & Proprietors‟ Income: Pennsylvania‟s Oil and Gas industry generates more than $1.8 billion annually .................................................................... 21 Employee Compensation ....................................................................................... 21 Proprietors‟ Income ............................................................................................... 22

4.4 4.5

4.5.1 4.5.2 4.6

Other Investor and Property Owner Income: Pennsylvania‟s Oil and Gas industry generates nearly $2 billion annually . ............................................................................ 24

5. Conclusion ............................................................................................................................... 26

Appendix A: Economic Impact Model Results A1 A2 A3 A4 A5 Output Employment Employee Compensation Proprietors‟ Income Other Investor and Property Owner Income

indirect and induced economic output as well as jobs and compensation created by the Oil and Gas industry in Pennsylvania. November 2008 Page i .1 billion a year for Pennsylvania Pennsylvania‟s Oil and Gas industry is a vital contributor to the state‟s economy. The Oil and Gas industry generates more than $7. output directly. including income to sole-proprietors and the self-employed. Member companies are also members of either the Independent Oil and Gas Association of Pennsylvania or the Pennsylvania Oil and Gas Association.The Economic Impact of the Oil and Gas Industry in Pennsylvania Executive Summary The Marcellus Shale Committee is an independent organization comprised of oil and gas companies actively engaged in developing natural gas resources of the Marcellus Shale in Pennsylvania as well as adjoining states.including $4. $7. compensation and output of the Oil and Gas industry as well as from the impacts of the industry‟s supply and distribution chain.9 billion in investor and property owner income Figure 1 .1 billion in economic output . Nearly $1 billion in employee compensation .The Pennsylvania Oil and which includes rents received on properties along with royalties Gas industry creates $4.5 billion in and dividends.generating an additional $1. the Economy League measures direct.1 billion overall Economic Impact of the Oil and Gas Industry in Pennsylvania. The committee asked the Pennsylvania Economy League of Southwestern Pennsylvania to perform an economic impact study of the Oil and Gas industry in Pennsylvania. Measuring the current economic impact of the Oil and Gas industry Pennsylvania‟s economy benefits from the direct employment.88 in spending for every dollar paid to employees. Due to the importance of Marcellus Shale development for the oil and gas industry and the state of Pennsylvania.5 billion in direct economic impact. supporting annually through direct. The current jobs within the industry and many more in the broader economy would not exist without the activity of the Oil and Gas industry. and $1. additional 1. the two largest oil and gas industry associations in the state. Similarly. In this report. This study looks at the industry‟s annual impact on the Commonwealth‟s economy using 2007 as a baseline year. the committee is sanctioned and supported by both associations.for every direct Oil and Gas industry job.52 full and part-time jobs are generated throughout the state. $842 million in proprietors’ income.500 full and part-time jobs . the wages paid to industry employees have an effect on the broader economy as employees use their compensation to buy goods and services. More than 26. indirect or induced impacts: More than $7.

370.232 $232.Active oil and gas wells are concentrated across the western and northern portions of the state.000 companies operate at least one well in Pennsylvania.104.148 wells in 2007.250 wells 251 .424.56 2.931.Table 1 .141.260 Induced Impact $1.000 active wells in Pennsylvania.268.108 $65.88 1. In 2007. there were close to 79.2 billion across the state on new drilling activity alone.318. Indiana.000 more than the private sector average wage across the Pennsylvania. The Oil and Gas industry is growing in Pennsylvania Between 2000 and 2007.601 $274.5000 wells Figure 2 . Based on a sampling of well cost data provided to the Economy League.532 Compensation Proprietors $725. The Oil and Gas industry pays millions of dollars to landowners across Pennsylvania Land lease payments made by the Oil and Gas industry represent millions paid directly to landowners in Pennsylvania.600 10.800 $50.538 Indirect Impact $1.52 2.559 $986.065 .972 and Property Owner Income 1 The multiplier is calculated by dividing the total impact by the direct impact.414 $1.Summary of the economic impact of the Oil and Gas industry in Pennsylvania Direct Impact Output Employment $4. McKean and Warren counties More than 5000 wells Economic Impact of the Oil and Gas Industry in Pennsylvania.175. November 2008 Page ii .16 1.2500 wells 2501 . most densely in Armstrong.998. Active Oil and Gas Wells by County 2007 DEP data Fewer than 10 wells 11 .461 10.268 5.839 $372. The average wage in Pennsylvania for jobs covered by the unemployment insurance system in the Oil and Gas Extraction sector in 2007 was $63.548.364.237.504. Royalty payments made to landowners from the Oil and Gas industry are estimated at more than $200 million annually. Average annual wages in the Pennsylvania Oil and Gas industry are higher than in the private sector overall.212 $271. Approximately 2.36 Employee $342.164.354 wells in 2000 to 4.815.761 Total Impact $7.437.239 26.413.this is $20.1000 wells 1001 .998.874 Multiplier1 1. with more than 200 companies operating 100 wells or more in the state. the total number of new oil and gas wells drilled annually in Pennsylvania tripled from 1.475 Income Other Investor $1. the third highest total of any state in the United States.295.574 $842. this translates into estimated spending of $1.715.469.718.

2 The Oil and Gas industry has played a predominant role in Pennsylvania’s history Pennsylvania‟s rich history in the Oil and Gas industry began with the world‟s first commercial oil well.iii As the interest in using natural gas as a fuel increased. The Economy League is the research affiliate of the Allegheny Conference on Community Development and provides research and analysis on specific public policy priorities for the region. LLC Page 1 . the committee is sanctioned and supported by both associations. LLC (Economy League) to perform an economic impact study of the Oil and Gas industry in Pennsylvania. experienced a dip in production in the early part of the 1990sv.1 Origins of this report The Marcellus Shale Committee is an independent organization comprised of oil and gas companies actively engaged in developing natural gas resources of the Marcellus Shale in Pennsylvania as well as adjoining states. The oil and gas industry began here and has remained continuously active in the state for 150 years. using 2007 as a baseline year. Since the 1920s. This study looks at the industry‟s annual impact on the Commonwealth‟s economy.iv Pennsylvania‟s natural gas industry steadily increased through the 1980s. The Economy League has been a force for positive change since its founding in 1936. Pennsylvania also became a leading producer in that sector. The excitement around the oil boom in the early 1860‟s was repeated on a smaller scale for natural gas in 1885. Member companies are also members of either the Independent Oil and Gas Association of Pennsylvania or the Pennsylvania Oil and Gas Association. well production slowed and oil industry activity declined. the Speechley Gas Pool Well in Venango in 1865 and the Murrysville Gas Well in 1878 gave geologists an early opportunity to explore the resource.1.i. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. Economic Impact of the Oil and Gas Industry in Pennsylvania. The committee asked the Pennsylvania Economy League of Southwestern Pennsylvania. Present oil production is mostly from stripper wells that produce less than 10 barrels per day. It is widely recognized and well regarded as a nonpartisan research organization committed to sound public policy which enhances the competitiveness of the Commonwealth. Introduction 1. ii Once economical means of transmitting natural gas were developed. drilled in Titusville in 1859. and has seen growth since then. Due to the importance of Marcellus Shale development for the oil and gas industry and the state of Pennsylvania. Further research and technological improvement led to the Leidy Natural Gas Boom in 1950. 1. the two largest oil and gas industry associations in the state. Western Pennsylvania was the site of the world‟s first oil boom. the Drake Well.

and kerosene jet fuel. although the gas is also used for generating electricity. has increased because natural gas is the cleanest-burning fossil fuel and releases less carbon and other byproducts into the atmosphere. Economic Impact of the Oil and Gas Industry in Pennsylvania. down from its historic high of 23. LLC Page 2 .1. These economic factors have created opportunities for growth in the Oil and Gas industry in Pennsylvania.vi Geological prospects formerly deemed uneconomical have seen new drilling. and the industrial sector consumes 27% of the natural gas used in the Commonwealth (see figure 4). most of which comes through pipeline systems from Canada. The geology of the formation and a lack of critical technology made the deposit prohibitively expensive to access until recently. the Oil and Gas industry was already creating economic opportunities for Pennsylvanians. respectively making up 41% and 23% of the country‟s total energy consumption.1 trillion cubic feet of natural gas in 2007. It is an important raw material for the manufacturing industry. Of the 20. 15% of total energy consumed comes from natural gas (see figure 3). especially in the electric power generation industry.ix Use of natural gas as a source of energy. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.3 Economic opportunities for growth of the Oil and Gas industry in Pennsylvania Today.3 million come from domestic sources. Prices as well as technology improvements in horizontal drilling and hydraulic fracturing have spurred increased interest and activity. Motor gasoline (44%) and distillate fuel (20%) are the two biggest uses. residual fuel usage and liquefied petroleum gas round out the remaining 36%. 8. 33% of total energy consumed comes from petroleum (see figure 3). distillate fuel oil. Natural gas is best known for the blue flame used in cooking and home heating. But long before the term “Marcellus Shale” became well-known in Pennsylvania. The price of natural gas at the wellhead has increased nationally by 100% in just the last five years. comprising nearly two thirds of total petroleum consumption.3 trillion cubic feet in 2000. which has received recent attention. Jet fuel. as a motor vehicle fuel and in the industrial sector.xii In Pennsylvania. robust growth in energy demand has resulted in increasing oil and gas prices and reinvigorated the search for production around the world. The Marcellus Shale deposit. stretches across nearly twothirds of the Commonwealth.4 Uses of oil and natural gas in the United States and Pennsylvania Oil and natural gas dominate the national energy market. as well as in Pennsylvania.xi Net imports of natural gas make up sixteen percent of the national natural gas consumption.vii Crude oil is processed to make motor gasoline.8 million barrels of oil Americans demand each day. The nation consumed approximately 23.viii In Pennsylvania. 1. the share of electric power generated from natural gas grew from 12% in 1990 to 20% in 2006 as more natural gas fueled plants were built.x At the national level.

Petroleum and natural gas represent almost half the energy consumed in Pennsylvania Figure 4 .Pennsylvania use of natural gas by sectorxiii Economic Impact of the Oil and Gas Industry in Pennsylvania.Figure 3 . LLC Page 3 . November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.

the site is restored to its original contour. Once these steps are complete. construction and transmission activities. including re-interpretation of existing subsurface data. After the well is drilled and completed. moving the rig to the pad site follows this preliminary construction work. multiple strings of steel casing are cemented inside the wellbore to protect fresh water aquifers from contact with any drilling or produced fluids and to ensure that the gas can safely flow to the surface. the producing leases will continue for the life of the well and the landownerxiv receives royalty payments for the gas produced from their land. crews work around the clock drilling to the gas-bearing formation. Natural pressure of the natural gas in the reservoir rock normally allows it to flow to the surface without any mechanical help.‟ „drilling‟ and „post-drilling‟ in figure 5. 2. securing a drilling permit from the Department of Environmental Protection.xv There are many steps between the decision to drill and drilling itself. leaving a much smaller production pad where the wellhead. Production of oil and gas encompasses many industries Oil and natural gas production is a multistep process that touches many areas of the economy. If the company decides to drill and gas is present. It is much broader than extraction alone and involves economic activity before. hydraulic fracturing is often used to stimulate the formation that contains the gas. during and after a well is drilled (categorized as „pre-drilling. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. seismic surveys and other non-invasive surveying methods. coordinating with other regulatory agencies as required. To increase the flow rate of a well. The legislated oil or natural gas minimum royalty payment in Pennsylvania is a one-eighth royalty. and they all contribute to the economic impact. During drilling. oil and gas companies lease the oil and gas rights on what is typically farmland or forest from its owners for a defined period of time in the hope that the land will be productive. The well is completed by perforating holes through the casing and cement within the producing zone. Drilling of oil wells follows a similar process.2 Drilling For gas well drilling.1 Pre-drilling Geologists use a variety of advanced methods to locate potential sources of oil and gas. production equipment and tanks are located. Economic Impact of the Oil and Gas Industry in Pennsylvania.) A host of sectors are part of the supply chain for the Oil and Gas industry‟s different planning. 2. Once areas of prospective interest have been identified. which allows the gas to flow into the well. a local construction company must build an access road to the well‟s location and well pad for the rig. and sometimes the determination by a geophysical team of the optimal location of the well. including determining that the oil and gas rights belong to the landowner. LLC Page 4 .2. although the production equipment is sometimes different.

crude oil is typically hauled by trucks from the field to refineries. wax distillate and cylinder stock or bottoms. Pennsylvania grade crude oil can be processed to gasoline.3 Post-drilling To market natural gas.xvi. LLC Page 5 . November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. if any. normally to a larger gathering or transmission pipeline. permitting and acquisition of private right-of-way easements from property owners. gas oil. The gas is compressed and shipped to local gas distribution companies or the mainline interstate transmission systems. Although some processing may occur at the wellhead. a process that includes extensive analysis. Prior to marketing. are extracted to allow for safe transportation and use. There. kerosene.xviii Economic Impact of the Oil and Gas Industry in Pennsylvania. fuel oil. natural gas frequently requires some processing. xvii In Pennsylvania.2. most occurs at a separate plant following aggregation of gas from multiple wells where water vapor is removed and the heavier hydrocarbons. pipelines must be constructed to gather and transport the gas.

A drilling rig is moved to the site. 3. The wellhead and surface production equipment are installed and the drilling site is restored. 5. After drilling and other required permits are secured. Following preliminary geologic investigations. followed by production royalties if drilling occurs and oil or gas is produced.Pre-drilling Drilling Post-drilling 1. LLC Page 6 . 2. 2. 2. Crews work around the clock to drill to the gas-bearing formation. 4. a local construction company builds an access road to the well and pad for the rig. Natural gas is shipped by an interstate transmission pipeline and/or local distribution company to end users. The well is checked frequently to ensure gas is flowing out of the well safely. 3. Various types of casing are inserted into the hole and cemented in place to protect the groundwater and deliver gas to the surface. 1. 1. 3. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. Figure 5 . The natural gas flows to the surface and through a gas-fluid separator at the well site. Pipelines are built to gather and send the gas from the wells to a processing plant. prospective sites are leased from land owners. then to market. then up through the casing to the surface.Drilling a well involves many different industries Economic Impact of the Oil and Gas Industry in Pennsylvania. A liquid is pumped into the well to fracture the formation and provide a conduit for gas to flow to the well bore. involving lease bonus payments.

The upper Devonian sandstones cover most of the southwestern part of Pennsylvania and stretch through the central and northern parts of state. Oil and Gas Fields Figure 6 .3.050 billion cubic feet. begin in the northern part of the Commonwealth and run up through New York. Overview of the Oil and Gas industry in Pennsylvania 3.xix Pennsylvania also has the 13th largest proven dry onshore natural gas reserves. The natural gas industry covers a much larger area. about 1. which require a much deeper drilling depth and are drilled less extensively. at 3. Oil production is concentrated in the northwest of the state. Production comes from the tight sands of the Silurian Medina Sandstone group. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. the Oriskany Gas fields. LLC Page 7 . which begins in central Ohio running east through northwestern Pennsylvania. Lastly.Pennsylvania Oil and Gas reserves are concentrated in the northwest Source: Energy Information Agency. Economic Impact of the Oil and Gas Industry in Pennsylvania.xx The oil and gas fields are concentrated in the western part of the state (see figure 6).4% of the total United States on.1 Pennsylvania has extensive Oil and Gas resources Pennsylvania has the 21st largest proven onshore oil reserves in the United States. Department of Energy Additional exploration has led to increases in the proven reserves of natural gas in the state over the past decade.and off-shore proven reserves. stretching from southwestern Pennsylvania through the northern and central parts of the state. and more recently has also increased the proven crude oil reserves (see figure 7 and figure 8).

2 Pennsylvania companies are turning a natural resource into jobs and investment To create economic value from the natural gas and crude oil resource base. Department of Energy 60 50 40 30 20 10 0 Figure 8 . Pennsylvania companies need to drill wells. does rank in the top 20 of producers of oil and top 16 producers of natural gas.After a period of decline. Pennsylvania crude oil proved reserves have begun to increase Source: Energy Information Agency. there were Economic Impact of the Oil and Gas Industry in Pennsylvania. although not ranking among the top states for proven reserves. Department of Energy 3.xxii Based on Pennsylvania Department of Environmental Protection data.Pennsylvania dry natural gas proved reserves have increased steadily Source: Energy Information Agency.Pennsylvania Dry Natural Gas Proved Reserves (Billion Cubic Feet) Dry Natural Gas Proved Reserves (Billion Cubic Feet) Crude Oil Proved Reserves (Million Barrels) 3500 3000 2500 2000 1500 1000 500 0 Figure 7 . November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.xxi. Pennsylvania. LLC Page 8 .

Active Oil and Gas Wells by County 2007 DEP data Fewer than 10 wells 11 .241 oil and natural gas permits were issued.approximately 79. of these. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. 91 were for coal bed methane wells and five were for storage wells. McKean and Warren) each having more than 5.000 companies operating at least one well.822 were for oil wells.000 active wells.593 were for natural gas wells. 1.Active oil and gas wells are concentrated in the west Source: Pennsylvania Department of Environmental Protection In 2007.2500 wells 2501 . Table 2 . Pennsylvania has the third largest number of active wells in the United States. In recent years. Table 3 shows the number of wells by county.3 Activity has increased in recent years To drill an oil or natural gas well.250 wells 251 .000 active wells in Pennsylvania in 2007. a total of 7.1000 wells 1001 .5000 wells More than 5000 wells Figure 9 . Economic Impact of the Oil and Gas Industry in Pennsylvania. LLC Page 9 . Table 2 shows the number of permits issued in the last three years by type of well. with four counties (Armstrong. there are more than 200 companies in Pennsylvania that operate 100 wells or more in the state and 2.Well permits issued in the last three years Year Gas Well Permits Oil and Gas Well Permits 741 942 730 Oil Well Permits 2005 2006 2007 3848 4581 4593 1338 1635 1822 Coal Bed Methane Well Permits 107 115 91 Storage Well Permits All well permits 6 3 5 6042 7292 7241 In 2007. Indiana. 730 were for oil and gas wells. a permit must be issued by the Pennsylvania Department of Environmental Protection. 4. applications for permits have increased dramatically.xxiii 3.

Well permits issued in 2007 by Pennsylvania county County Gas Well Permits 64 577 0 3 2 91 50 59 268 301 40 71 59 33 326 13 345 491 320 15 162 105 58 1 14 2 69 22 420 612 4593 Oil and Gas Well Permits 0 10 3 0 0 9 0 1 2 0 0 285 55 27 9 40 26 4 15 2 91 46 5 0 0 0 27 47 12 14 730 Oil Well Permits 0 0 0 5 0 0 0 0 13 0 0 0 86 0 0 279 2 0 0 0 898 0 44 0 0 0 106 388 0 1 1822 Allegheny Armstrong Beaver Bradford Bucks Butler Cambria Centre Clarion Clearfield Clinton Crawford Elk Erie Fayette Forest Greene Indiana Jefferson Lycoming McKean Mercer Potter Somerset Susquehanna Tioga Venango Warren Washington Westmoreland Total Coal Bed Methane Well Permits 0 0 0 0 0 0 7 0 0 0 0 0 0 0 4 0 45 19 0 0 0 0 0 0 0 0 0 0 15 1 91 Storage Well Permits 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0 5 Economic Impact of the Oil and Gas Industry in Pennsylvania.Table 3 . LLC Page 10 . November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.

November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. new wells are concentrated in the western part of Pennsylvania.6% 9.6% 8.148 2004 2005 Like the existing active wells (see figure 9 above). Table 4 . The top five counties accounted for half of the total number of wells drilled from 2000 through 2007.872 1.354 1.5% 5.923 1.790 2.358 2. Table 5 .5% 5. LLC Page 11 . and the top 10 accounted for more than three-quarters of the total number of wells drilled over the same period.2% 5. McKean.194 1.4% 6.Top 10 counties for number of oil and gas wells drilled between 2000 and 2007 County 2006 2007 Figure 10 .Number of oil and gas wells drilled by county shows increases from 2001 to 2007 McKean Armstrong Indiana Fayette Westmoreland Warren Jefferson Mercer Forest Clearfield Number of new wells drilled from 2000 through 2007 3. Armstrong.443 1. Fayette and Warren counties were the location for the most new wells drilled (see table 5 for the top ten drilling locations). From 2000 through 2007.1% 5. The number of new wells drilled annually in Pennsylvania has tripled since 2000 (see table 4 and figure 10).2001 As permits are issued.779 3.167 1.220 1. companies are acting on those permits and drilling new wells.Number of new wells drilled in Pennsylvania has tripled since 2000xxiv 2002 2003 Year 2000 2001 2002 2003 2004 2005 2006 2007 Number of new wells drilled 1.124 Percent of total 14.184 4.9% 8.1% Economic Impact of the Oil and Gas Industry in Pennsylvania.248 2.655 4.972 1. Indiana.8% 8.125 1.954 1.

added to the locations of Oil and Gas industry company offices in figure 11. xxvi 3.5 The Pennsylvania Oil and Gas industry generates wealth in both rural and urban areas The Oil and Gas industry generates wealth in rural areas through extraction.xxv This represents 25% of Pennsylvania‟s natural gas consumption. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.20 company locations 21 . which provides work for construction companies and is a source of lease and royalty payments.30 company locations More than 30 company locations Figure 11 .10 company locations 11 . The industry also creates wealth in metropolitan areas where company headquarters are located.4 Pennsylvania produces natural gas for local consumption In 2006.3.5 company locations 6 . Pennsylvania consumed an estimated 746 billion cubic feet (Bcf) of natural gas while Pennsylvania Oil and Gas industry companies produced 183 Bcf. Dun and Bradstreet Economic Impact of the Oil and Gas Industry in Pennsylvania. LLC Page 12 .Oil and gas company locations in Pennsylvania Source: Economy League research.xxvii Number of Oil and Gas Company Locations Dun and Bradstreet data No company locations 1 . This widespread impact can be seen through the location of wells in figure 9 above. the most recent data available.

Oil and Gas Businesses in Pennsylvania 200 180 160 Number of Businesses 140 120 100 80 60 40 20 0 Number of Employees Figure 12 . November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. LLC Page 13 . with 75 percent having fewer than 10 employees (see figure 12).Number of employees at oil and gas business locations across Pennsylvania Source: Economy League research. Dun and Bradstreet Economic Impact of the Oil and Gas Industry in Pennsylvania.The majority of oil and gas company locations in Pennsylvania are small.

goods and services and construction. compensation.000 public and private institutions. Through its supply chain.termed Indirect Spending. This is because money spent by the Oil and Gas industry is spent again by the recipient employees and local businesses. Employees use their salaries and wages to purchase goods and services from other businesses . Measuring the economic impact of the Oil and Gas industry in Pennsylvania The economic impact of the Oil and Gas industry in Pennsylvania is not limited to the employment. Department of Agriculture. Inc. In 1993. sourced from federal agencies such as the Bureau of Economic Analysisxxviii. Similarly. The IMPLAN model organizes the economy into 505 separate industries and has comprehensive data on every geographic area of the United States. Inc. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. economists generally agree that the models can provide an approximate measure of the indirect and induced spending. LLC Page 14 . the wages paid to employees have an effect on the broader economy as employees use their compensation to buy goods and services. their tools are in use by more than 1. the technology was transferred to a new company. Because of the complexity of measuring multiplier effects. A chain reaction of indirect and induced spending continues. the Economy League used an input-output model for the state supplemented with analyses based on discussions with experts in the Oil and Gas industry. It was initially developed and used in 1984 by the U. and output of the industry itself. or MIG. There are several input-output models commonly used by economists to estimate multiplier effects. the Minnesota IMPLAN Group. all of the models have limitations. Today. This dual analysis allowed the Economy League to evaluate the impacts generated by the input-output model and explain more intuitively how some of the results from the formal model can be understood. Businesses make their own purchases and hire employees.S. Still. These jobs would not exist without the activity of the Oil and Gas industry. The Economy League employed the IMPLAN input-output model in developing the estimates of the Pennsylvania Oil and Gas industry‟s impacts on the state economy. who then spend their salaries and wages throughout the local. To estimate the overall economic impact of the Oil and Gas industry in Pennsylvania. 4. Economic Impact of the Oil and Gas Industry in Pennsylvania. regional and state economies . in conjunction with the University of Minnesota. total jobs and personal income generated by a given amount of direct spending in a particular geographic area.1 The concept of indirect and induced economic impacts The impact of Pennsylvania‟s Oil and Gas industry on the state economy is greater than the total of the industry‟s direct spending on payroll. the Oil and Gas industry creates jobs in related industries. with subsequent rounds of additional spending gradually diminished through savings.termed Induced Spending.4.

personal income. cycles through the economy in terms of indirect and induced output. and Support activities for oil and gas operations. or additional spending. and employment. Support Activities Gas Processors Attorneys Rocks and Quarries Housing Utilities Commodity Traders Other Gas Distribution Construction Iron and Steel Real Estate Machinery Manufacturers Pipelines Higher Education Travel Figure 13 . November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. Figure 13 presents an illustration of direct. or direct spending.The Oil and Gas industry has an impact on the broader economy through indirect and induced spending 4. Economic Impact of the Oil and Gas Industry in Pennsylvania. A key advantage of the IMPLAN model is that it allows the user to determine which industries receive the most indirect and induced benefit from Pennsylvania‟s Oil and Gas industry. Extraction.2 Impact summary To determine the impact of the Oil and Gas industry in Pennsylvania.taxes. indirect and induced impacts of the Oil and Gas industry. the Economy League developed a definition of the core industry that consists of the following IMPLAN industry sectors. LLC Page 15 . Induced Impact (Consumption Effect) Food and drink Indirect Impact (Supply Chain Effect) Surveyors Entertainment Cement Utilities Rig Parts Heavy Equipment Oil and Gas (Direct Effect) Drilling. using a series of multipliers to provide estimates of the number of times each dollar of input. Oil and gas extraction. Drilling oil and gas wells. and expenditures made outside the state. This economic ripple effect is measured by IMPLAN and other input-output economic models.

108 $65.295.260 Induced Impact $1.104.16 1. Employee Compensation .Payments received by self-employed individuals as income including income received by private business owners.5 billion in direct economic impact.998.141.815. Employment .718. including salaries and benefits.548.56 2. Other Investor and Property Owner Income . dividends paid by corporations and corporate profits earned by corporations.504. and $1. Employee compensation has the highest multiplier effect of any measured impact.972 and Property Owner Income 1 The multiplier is calculated by dividing the total impact by the direct impact.268 5.164.998.88 1.Includes both full.1 billion in economic output.The IMPLAN model determines impacts this industry has on the state.600 10. $842 million in proprietors‟ income.475 Income Other Investor $1. generating an additional $1.414 $1. providing support through direct. defined as follows: Output .715.239 26.364. Economic Impact of the Oil and Gas Industry in Pennsylvania.318.Summary of Oil and Gas industry economic impact in Pennsylvania Direct Impact Output Employment $4.601 $274. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. which includes rents received on properties along with royalties and dividends.538 Indirect Impact $1.52 2.413.Payroll costs for the industry.175.268. output. employee compensation. including employment.559 $986.and part-time workers.237.Value of an industry‟s total production in the study area.839 $372.532 Compensation Proprietors $725. More than 26.461 10. Nearly $1 billion in employee compensation.437. including $4. Pennsylvania‟s Oil and Gas industry is a vital contributor to the state‟s economy.874 Multiplier1 1.931.574 $842.36 Employee $342.Payments for rents received on properties.212 $271.761 Total Impact $7. an additional 1. LLC Page 16 .52 jobs are generated throughout the state. for every direct Oil and Gas industry job. As shown in table 6.370. royalties from contracts.500 full and part-time jobs.469. proprietors‟ income and property income.424. Table 6 .232 $232.9 billion in investor and property owner income.800 $50.88 in spending for every dollar paid to employees. indirect or induced impacts: Over $7. Proprietor’s Income .

704 $0 $0 $0 $0 $0 $0 $4.260 $26.161.510 $66.1 billion annually As previously mentioned. The impact of royalty payments is evident in the Oil and Gas industry‟s $180 million impact in the lessors of nonfinancial intangible assets category (which includes oil royalty companies and lessors).3% 100.437.875.584 $16.717.315.548.2% 2.736 $31.215 $3. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.903.ALL INDUSTRIES $4.814.864 $1.400.648 $786.112 $50.680 $180.1% 6.376.175.4.536 $153.878. petroleum refineries are the beneficiary of a $154 million impact. Table 7 lists the output impact of the Oil and Gas industry and the five sectors that experience the largest indirect and induced impact on output.3 Output: Pennsylvania’s Oil and Gas industry generates more than $7.600 $3.104.025. while the housing industry received an estimated $153 million induced impact.461 Total Impact $4.161. Management of companies and enterprises and wholesale trade also benefit from impacts from the Oil and Gas industry exceeding $100 million.548. including the value of the product created through the use of labor.Output impact of the Oil and Gas industry in Pennsylvania Direct Impact Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Lessors of nonfinancial intangible assets Petroleum refineries Owner-occupied dwellings Management of companies and enterprises Wholesale trade Other TOTAL IMPACT .7% 23.132 $610.566 $1.268.220 $2.1% 1.754 $176. The direct output impact represents the economic value created by the industry in a year.237.237.0% 2. Table 7 .928 $0 $131.7 billion) comes from the Oil and Gas industry sectors. LLC Page 17 . intellectual and physical capital and the support services that make it available to the market.732 $1.283.047. the Oil and Gas industry in Pennsylvania provides an overall impact of over $7 billion to the state‟s economy.900.1% 49.600 $154.176.083.616 $117.704 $2.958.336 $128.649.920.263.268 Induced Impact $4.379 $4.944 $41.618 $153. two-thirds of which ($4.194 $106.943 $7.378 $1.600 Indirect Impact $139.373.2% 2.059.658.480.437.584 $147.832 $784.768 $426.692.619. Not surprisingly.469.318.096 $3.663.064 $394.095.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.239 Percent of Total 66.976.201.0% 11.179.136.369.5% 2.410.

000 barrels of oil at an average price of $66. xxxi Likewise. In 2007. Since the actual terms of these deals are in private contracts and unavailable. in royalty payments from oil and gas sales distributed primarily to landowners in the rural counties of Pennsylvania. LLC Page 18 . generating over $239 million in revenue and approximately $30 million in royalty payments. natural gas landowners earned about $185 million in royalty payments.48 billion in natural gas revenue.5%. Economic Impact of the Oil and Gas Industry in Pennsylvania. we arrive at $215 million a year. A second estimate confirms this impact to Pennsylvania landowners. xxx. Pennsylvania produced 3. Adding these two figures together. including Oil and Gas royalty payments made to landowners.09 per mcfxxix. which corresponds to $1.Impact of Royalty Payments to Pennsylvania Residents The Economy League modeling shows a $180 million impact from lessors of nonfinancial intangible assets. This indicates that royalty payments made to landowners from the Oil and Gas industry can be estimated at more than $200 million annually. When a landowner and gas company agree to drilling for natural gas or oil on a property.05 per barrel. At 12.041 daily. we must estimate from publicly available data. This gas sold for an average price of approximately $8. or $589. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. the landowner will typically receive one-eighth of the revenue (the statutory minimum in Pennsylvania) generated for the life of the well. Pennsylvania reported natural gas production of 183 billion cubic feet (Bcf).626.

These services are often provided by local contractors. depending on the type of well being drilled.2 billion across the state. this expenditure includes associated investments in the well through site preparation. this translates into estimated spending of $1. In addition to tangible investments in the casing and equipment. Greene. This indicates that each new well drilled in Pennsylvania represents a significant expenditure. drilling and installation. In 2007. Warren. 4.Understanding the Economic Contribution of a New Well Each new oil or natural gas well represents anywhere between $150. Fayette.000 and $5 million in investment by an oil and gas company in Pennsylvania.148 news wells were drilled. Estimated Well Expenditure by County 2007 Minimal well expenditure Less than $5 million in well expenditure Between $5 and $10 million in well expenditure Between $10 -$75 million in well expenditure More than $75 million in well expenditure Figure 14 . and the scale and geographic dispersion of the investment contributes to the economy in rural parts of the Commonwealth. McKean.Estimated well expenditure is concentrated in the southwest and northwest of Pennsylvania Economic Impact of the Oil and Gas Industry in Pennsylvania. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. creating employment and economic activity in the largely rural areas where drilling occurs. Based on a sampling of well cost data provided to the Economy League. The map (figure 14 below) shows the concentration of investment in Armstrong. Washington and Westmoreland counties. Indiana. LLC Page 19 .

which has both indirect and induced impacts and legal services.538 7.942 7. Nearly all of the impacted industries benefit more from the induced effect than the indirect effect. LLC Page 20 .4% 2. Management of companies and enterprises benefits from the largest indirect impact.985 10.4 Employment: Pennsylvania’s Oil and Gas industry generates more than 26.000.194 644 635 615 582 11. recipients of induced impacts.5% 5.360 2. Table 8 .5% 2.260 Induced Impact 10 10 0 0 1.4% 2.761 Total Impact 10. the three core industry sectors generate nearly 11. Not surprisingly. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.dentistsand other health care providers Other TOTAL IMPACT . Listed in table 8 is the employment impact of the Oil and Gas industry and the five sectors that experience the largest indirect and induced impact on employment.1% 8.3% 2. which has the second largest indirect impact.2% 45% 100.Employment impact of the Oil and Gas industry in Pennsylvania Direct Impact Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Food services and drinking places Management of companies and enterprises Wholesale trade Hospitals Offices of physicians. The food services and drinking places industry sees the largest employment impact outside the Oil and Gas industry.538 Indirect Impact 395 223 4 168 55 574 274 0 0 3. nearly all of this impact is induced.947 26. hospitals and health care providers.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.276 1. whose impact is split between indirect and induced effects.4.2% 27. Other industries receiving the largest impact from the Oil and Gas industry in Pennsylvania include wholesale trade.500 full. almost all directly.307 1.6% 4.074 1.108 0 0 0 0 0 0 10.139 71 360 615 582 7.500 jobs Among the more than 26. real estate.356 2.559 Percent of Total 41.963 5.ALL INDUSTRIES 10.and part-time jobs supported by the Oil and Gas industry.

815. indirect and induced means. Management of companies and enterprises received the largest compensation benefit. Other beneficiaries include wholesale trade. LLC Page 21 .899 $180. whose impacts are entirely induced.532 $33.Employee compensation impact of the Oil and Gas industry in Pennsylvania Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Management of companies and enterprises Wholesale trade Offices of physiciansdentists.370.175 $5. over $70 million in indirect and induced impact.732 $176.128 $42.9% 6.355.7% 42.5.665.996 $109.573.283.413.340 Percent of Total 36.497 $8.328 $34.490.4% 2.514 $156.902 $264.245.654 $0 Induced Impact $245.340 Total Impact $357. and legal services. More so than any other measured impact. where the $27 million in impact primarily comes from indirect sources primarily in the form of payments from industries. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.212 $0 $19.376.3% 3.255.732 $117.787.1 Employee Compensation Pennsylvania‟s Oil and Gas industry generates through direct.256 $63.100 $271.384 $7.352 $233. employee compensation flows into other industries.809.ALL INDUSTRIES Direct Impact $342.027. nearly $1 billion in employee compensation.075.5% $0 $0 $0 $342.266.672 $34.245.779 $63. the self employed and income received by private business owners.574 3.248.396 $18.573.4% 11.806 $7. Table 9 .120 $70.806 $26.762.790.and other health care providers Hospitals Legal services Other TOTAL IMPACT .8 billion annually Employee compensation and proprietors‟ income are payments made to employees of companies.730 $372.414 $421.988.880 $63.078.826 $986.546. whose $42 million impact is split between indirect and induced impacts.815.839 $33. including salaries and benefits. health care providers and hospitals.4.7% 100.753.731 $237 $11.141.960 $0 $0 $0 Indirect Impact $14.223.2% 4.866. 4.2% 17.212 $170.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.730 $23. Listed in table 9 is the employee compensation impact of the Oil and Gas industry and the five sectors that experience the largest indirect and induced impact on employee compensation.100. with just 36% of the total impact generated within the Oil and Gas industry.9% 7.5 Employee Compensation & Proprietors’ Income: Pennsylvania’s Oil and Gas industry generates more than $1.429.

701.8% 3.850 % of Total 89.863.998.and other health care providers Lessors of nonfinancial intangible assets Scientific research and development services Other TOTAL IMPACT .911.416 $7.8% $0 $0 $0 $725.809 $6.272 $26.5.978.328 $706.127.699.180. which is defined as payments received by selfemployed individuals as income (including income received by private business owners).952 $14.660 $0 $0 $0 Indirect Impact $23.973 $56 $2.186.888 $65.697.522 $2.634 $487.108 $684.541. Listed in table 10 is the proprietors‟ income impact of the Oil and Gas industry and the five sectors that experience the largest indirect and induced impact on proprietors‟ income.080.506 $59.323.900.577.4% $29.743 $842. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.624 $6.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.491.7% 0.772 $42.475 $5.606 Total Impact $750.138.414 0. is more likely to be captured by the Oil and Gas industry than any other impact.1% 0.056 $2.718.855 $50.838 $937.296 $34. Eighty-nine percent of the industry‟s total impact arises within the industry.800 $114.687 $6.656. with impacts to sectors such as real estate and legal services being minimal.858 $5.108 $5. LLC Page 22 .863.606 1.5% $0 100.451.9% 1.2 Proprietors’ Income The $842 million impact on proprietors‟ income.936 $0 Induced Impact $940.758.350 $21.557 $3.1% 83.715.559 $2.942.099.176 $14.998. Table 10 .526 $8.887.211 $25.9% 0.4.191 $3.187.052.ALL INDUSTRIES Direct Impact $725.998.Proprietors’ income impact of the Oil and Gas industry in Pennsylvania Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Real estate Legal services Offices of physiciansdentists.

264 $41.Looking at growth in annual average wages paid by the Pennsylvania Oil and Gas industry Average annual wages in the Pennsylvania Oil and Gas industry are higher than in the private sector overall (see table 11).100 2007 $63.441 $52.065 $59.944 8% 9% Economic Impact of the Oil and Gas Industry in Pennsylvania.Pennsylvania average wages in the Oil and Gas industry compared to Pennsylvania private sectorxxxii 2003 Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Total. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.325 2006 $62.365 2004 $51.307 2005 $52. LLC Page 23 .287 4% 25% $36. all private sector industries $50. Average wages for jobs covered by the unemployment insurance system in the Oil and Gas industry have increased substantially between 2005 and 2007. Table 11 .019 $42.483 $38.836 $59.976 $42.066 $39.990 $43.536 $49. while the rest of the Pennsylvania private sector has increased at a much slower pace.053 $47.914 $46.684 2003-05 percent change 4% -7% 2005-07 percent change 19% 38% $45.618 $47.

5% 2.1% 3.904 $26.483.416 $120. Over three fourths of this impact occurs in the Oil and Gas industry. Owner-occupied dwellings have a $118 million impact.968.232 $1.824 $239.4% 6.937. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.144 $9.320 $67. royalties from contracts.060.725.ALL INDUSTRIES Direct Impact $1.404 $11. often in rural areas.424.118. Table 12 .512 $222.874 % of Total 76. The Oil and Gas industry in Pennsylvania has a notable impact on investor and property owner income in the state.651 $232.552 $118.536.788 $13.740 $180.601 Induced Impact $1.300.503 $102.649.9% 6.846.977.142 $1.072 $1.088 $37.143.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.070 $0 $66. This demonstrates one aspect of the impact of the Oil and Gas industry through the lease payments made by the industry to Pennsylvania landowners.2% 12.410.304 $0 $0 $0 $0 $0 $0 $1.861 $17.4.130.4% 1.969.507.117.6 Other Investor and Property Owner Income: Pennsylvania’s Oil and Gas industry generates nearly $2 billion annually.649.Other investor and property owner income impact of the Oil and Gas industry in Pennsylvania Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Owner-occupied dwellings Lessors of nonfinancial intangible assets Real estate Monetary authorities and depository credit intermediaries Power generation and supply Other TOTAL IMPACT .504.133. while lessors of nonfinancial intangible assets (including oil royalty companies and lessors) benefits from a $68 million impact.689 $26.917. Listed in table 12 is the other investor and property owner income impact of the Oil and Gas industry and the five sectors that experience the largest indirect and induced impact on other investor and property owner income.232 Indirect Impact $52. flowing from the Oil and Gas industry.972 Total Impact $1.486.608 $20.440.377.010.424.1% 9.176 $118.5% 57.504.761 $451 $23.599.116 $13.0% 1. nearly all of which is indirect. all induced.647.448 $342. LLC Page 24 .976.379 $34.388 $1.835.235 $78.164.642.465 $10.295.696 $120.320 $1.082.237. dividends paid by corporations and corporate profits earned by corporations.4% 100.478.364. generating nearly $2 billion in payments for rents received on properties.491 $274.931.

and received $4. 74. Bids per acre ranged from $1.xxxiii After a shift in policy in 2008. per-acre cost for each property. the Oil and Gas industry is already making payments to landowners. These land leases are negotiated privately between the landowner and the oil and gas company. Impact of Land Lease Payments to the Commonwealth of Pennsylvania The Commonwealth of Pennsylvania also leases land to the Oil and Gas industry. Land lease payments represent millions paid directly to landowners in Pennsylvania. with higher prices paid at the end of 2007.xxxiv Land lease payments represented $4.023 acres of state forest land were offered for lease sale.3 million paid directly to the Commonwealth of Pennsylvania in 2007. Based on information shared with the Economy League by representative companies.848 for the state forest land. with the higher per acre prices driving much larger total payments in 2008. Oil and gas companies lease what is typically farmland or forest from its owners for a defined period of time. The highest bids for the land came to a total of close to $190 million. but are based on a fixed price. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.Impact of Land Lease Payments to Pennsylvania Residents Before a well is drilled. LLC Page 25 . with the option to explore and drill a well on the land. the per acre land lease price paid in 2007 is estimated to be anywhere in the $10 to $2.3 million in lease payments on state owned lands in 2007. data collected from a few representative companies indicated that land lease payments totaled hundreds of millions in 2007. with an additional $190 million already realized in 2008. Estimating total 2007 land lease payments was not possible because it involves the disclosure of confidential information.000 range. However.151 to $5. Indications are that payments per acre are substantially higher in 2008 due to interest in the Marcellus Shale. Economic Impact of the Oil and Gas Industry in Pennsylvania.

Economic and technological changes have stimulated interest in the Marcellus Shale. this has the potential to generate substantial positive economic impact in Pennsylvania. 10. with a tripling in the number of wells drilled between 2000 and 2007. and a further 16.5. The Oil and Gas industry generates wealth in rural counties through royalty payments to landowners. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. which companies are turning into jobs and investment. and growth in industry wages between 2005 and 2007 strongly outpaced the state average. and stimulates a further $643 million for a total of nearly $1 billion in employee compensation across the state‟s economy resulting from Oil and Gas industry activity.1 billion in economic output in total. Average annual wages in Pennsylvania‟s Oil and Gas industry are higher than average for the state. which are currently experiencing unprecedented growth in per-acre prices. Conclusion This report revealed the following conclusions about the Pennsylvania Oil and Gas industry: The Oil and Gas industry has played a prominent role in Pennsylvania‟s history. Pennsylvania‟s Oil and Gas industry is a vital contributor to the state‟s economy.500 jobs overall.5 billion in direct economic impact. generating indirect and induced economic impact in addition to the direct impact of industry activity. LLC Page 26 . The industry pays more than $340 million in employee compensation. A host of sectors are part of the supply chain for the Oil and Gas industry. Economic Impact of the Oil and Gas Industry in Pennsylvania. the industry generates more than 26. Pennsylvania has extensive oil and gas resources. estimated at nearly $200 million in 2007. and has the opportunity for growth due to increasing prices and demand for energy.021 through indirect and induced effects. and through land lease payments. Activity in the Oil and Gas industry has been growing in recent years. and based on the 2007 impact of the Oil and Gas industry. including $4. Through its economic activity.538 jobs directly. The Oil and Gas industry generates more than $7.

2007) vii Energy Information Agency. there are some areas of the Commonwealth where oil and gas rights have been separated or “severed” from the surface estate.state. While the owner of the oil and gas rights is the owner of the surface estate in most areas of Pennsylvania. Natural Gas Gross Withdrawals and Production (2006) xxiii Pennsylvania Department of Environmental Protection.htm xix Energy Information Administration. National Income and Product Accounts. Natural Gas. Crude Oil Production (Northeast defined as Pennsylvania and states north and east) iii “Pennsylvania History .doe.2006) vi Energy Information Agency. Fact Sheet: Landowners and Oil and Gas Leases in Pennsylvania xvi NaturalGas.us/WU01/VC/visitor_info/pa_history/whole_pa_history. Natural Gas Consumption http://tonto. Natural Gas Basics 101 xviii Analytical Testing Services. LLC Page 27 . BEA Output data.com/Crude_101. search conducted using SIC code 13 which captures the Oil and Gas Industry xxviii IMPLAN's state and industry specific input-output multipliers are based on numerous data sources. 1990-2006 xii Energy Information Agency Natural Gas Supply http://www.i Energy Information Agency. Energy Consumption Estimates by Source and End-Use Sector.doe. Natural Gas Gross Withdrawals and Production as of 12/31/2006 xxxi Energy Information Agency.S. the Consumer Expenditure Survey among others. Advance Summary U. Ohio data from Energy Information Administration xxx Energy Information Agency.legis. The IMPLAN model assembles all of the data into a consistent accounting framework following the definitions and conventions of the US input-output benchmark study and the US National Income and Product Accounts. In the case of severed estates.eia. Active Operators with more than 100 Wells (2007) xxiv Pennsylvania Department of Environmental Protection.htm iv “Striking Oil. State Energy Profiles .gov/neic/infosheets/natgassupply. xxix $8. Natural Gas Consumption by End Use (2007) ii xiv The term “landowner”.eia. Spot Prices for Crude Oil and Petroleum Products 2006 Economic impact of the Oil and Gas Industry in Pennsylvania. Net Generation by State by Type of Producer by Energy Source.org.htm x Natural Gas and the Environment.explorepahistory. 2005 viii Energy Information Agency. http://wetestit.pa.html xiii Energy Information Agency. Natural Gas . International and Interstate Movements of Natural Gas by State as of 12/31/2006 Dun and Bradstreet databases. BEA Regional Economic Information System Data. BEA current benchmark I-O Study. NaturalGas.Pennsylvania.Refining.com v Energy Information Agency. Wells Drilled By County Summary 2000 through 2007 xxv Energy Information Agency.From Wellhead to Burner xvii Energy Information Association. as used in this report is intended to mean the owner of the oil and gas rights. Crude Oil. Natural Gas Wellhead Value and Marketed Production (2002 .org xi Energy Information Agency. Crude Oil Proved Reserves as of 12/3/2006 xx Energy Information Administration Dry Natural Gas Proved Reserves as of 12/31/2006 xxi Energy Information Administration. Energy Information Agency. Crude Oil 101 . and Natural Gas Liquid Reserves 2007 Annual Report xxvi xxvii Energy Information Agency. Pennsylvania Natural Gas Withdrawals from Gas Wells (1970 . royalty payments and other benefits are realized by the oil and gas owner.” www.gov/dnav/ng/ng_cons_sum_dcu_nus_a. Petroleum Products Consumption ix Energy Information Agency. including the Bureau of Economic Analysis (BEA) Covered Employment and Wages.087 used for price of natural gas based on the percent change from Ohio‟s wellhead to city gate prices (PA Wellhead price was unavailable).Pennsylvania on the Eve of Colonization” http://www. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. oil and gas lease bonuses. Crude Oil Production (2007) xxii Energy Information Administration. xv Pennsylvania Department of Environmental Protection.

Quarterly Census of Employment and Wages Commonwealth of Pennsylvania Department of Conservation and Natural Resources. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania. LLC Page 28 . Results of September 3.xxxii Bureau of Labor Statistics. 2008 Oil and Gas Lease Offering xxxiii Economic impact of the Oil and Gas Industry in Pennsylvania. Oil and gas position statement. 2008 xxxiv Commonwealth of Pennsylvania Department of Conservation and Natural Resources.

559 Total Impact 10.276 1.4% 2.3% 1.professional and similar organizations Employment services Nursing and residential care facilities Social assistance.2% 27.3% 1.9% 0.8% 0.074 1.6% 4.9% 0.8% 100.1% 8.universities.5% 2.3% 2.3% 1.investments Miscellaneous store retailers TOTAL IMPACT .dentistsand other health care providers Real estate Legal services Food and beverage stores General merchandise stores Civic.761 Induced Impact 10 10 0 0 1.and junior colleges Truck transportation Private households Securities.except child day care services Motor vehicle and parts dealers Monetary authorities and depository credit intermediaries Colleges.2% 1.108 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10.8% 0.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.260 Indirect Impact 395 223 4 168 55 574 274 0 0 141 326 21 18 157 175 0 0 14 122 12 128 0 109 11 10.2% 1.194 644 635 615 582 463 458 411 358 355 347 345 312 276 246 234 230 225 224 219 % of Total 41.538 5.942 7.9% 0.7% 1.538 7.356 2.139 71 360 615 582 322 133 390 340 199 171 345 312 262 124 222 103 225 115 208 26.commodity contracts.360 2.5% 1.Appendix A: Economic Impact Model Results A1 Employment Direct Impact Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Food services and drinking places Management of companies and enterprises Wholesale trade Hospitals Offices of physicians.ALL INDUSTRIES 10.307 1.social.7% 1.0% 0. LLC Appendix A .4% 2. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.3% 1.5% 5.

610 $27.176.179.6% 0.5% 2.740 $20.616 $117.036.369.318.220 $2.283.172 $29.767.commodity contracts.832 $784.1% 6.588 $1.712 $23.275.201.092.0% Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Lessors of nonfinancial intangible assets Petroleum refineries Owner-occupied dwellings Management of companies and enterprises Wholesale trade Real estate Hospitals Offices of physicians.268 Induced Impact $4.2% 2.496.376.0% 0.692.892 $1.504 $58.442 $28.636 $14.268.388.840 $68.1% 1.024 $26.4% 0.596 $51.348 $1.161.560 $4.830.607.840 $68.349.679.6% 0.063.908 $20.536 $153.240 $7.5% 0.8% 0.768 $426.344 $59.400.976.920.410.031.461 Total Impact $4.584 $147.1% 49.704 $2.237.175.600 Economic Impact of the Oil and Gas Industry in Pennsylvania.941.932.373.421 $7.investments Management consulting services Motor vehicle and parts dealers Scientific research and development services All other miscellaneous professional and technical TOTAL IMPACT .A2 Output Direct Impact Indirect Impact $139.652 $34.984 $18.857.736 $31.dentistsand other health Legal services Food services and drinking places Monetary authorities and depository credit intermediaries Petrochemical manufacturing Power generation and supply Insurance carriers Truck transportation Securities.875.040.330 $28.095.984 $65.210.059.0% 1.944 $41.4% 0.752 $57.7% 0.001.978.064 $394.4% 0.306.349.4% 0.469.680 $180.772 $41.187.4% 100.025. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.112 $50.379 $4.373.598.596 $3.864 $91.300 $24.620 $43.971.235.006 $17.263.903.548.496.237.186.592 $2.7% 1.252.843.600 $154.872 $47.928 $0 $131.083.572 $72.648 $786.093.782 $27.543.215 $3.022 $21.120 $6.132 $27.194 $106.336 $128.072 $72.604 $16.199.548.649.054 $31.437.510 $66.186 $24.900.764.600 $3.663.494 $0 $0 $46.104.161.724 $4.732 $64.619.735.8% 0.136.260 $26.331.ALL INDUSTRIES $4.958.169.480.291.0% 11.2% 2.096 $3.9% 0.704 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $4.754 $176.880.128.878.639. LLC Appendix A .450 $15.239 % of Total 66.584 $16.437.640 $32.618 $153.902.3% 1.315.0% 2.

110 $1.631.120 $70.899 $180.253.256 $63.762.2% 4.731 $237 $11.396 $18.013 $7.social.312 $0 $1. LLC Appendix A .384 $7.619 $14.981 $10.060 $11.826.996 $109.842.142 $13.839 $4.414 $18.0% 0.696.248.2% 17.142.902 $17.878.078.292.815.349 $3.815.4% 1.019 $2.057 $533.4% 11.5% 3.672 $34.573.245.756 $9.commodity contracts.514 $867.352 $233.103 $12.283.293.1% 1.332.dentistsand other health care providers Hospitals Legal services Food services and drinking places Securities.128 $42.376.245.021.054.9% 0.professional and similar organizations Architectural and engineering services Employment services TOTAL IMPACT .891.004 $9.3% 3.779 $63. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.8% 100.532 $9.9% 6.307 $3.691.212 $5.880 $63.370.7% 1.787.223.558.490.191 $8.investments Scientific research and development services Monetary authorities and depository credit intermediaries Management consulting services Motor vehicle and parts dealers Nursing and residential care facilities Insurance carriers Colleges.652 $570.155.ALL INDUSTRIES $342.138.140.924.485 $10.573.988.004 $10.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.937.086 $14.753.391 $10.470 Induced Impact $245.328 $34.806 $7.001.100.338.665.255.340 $33.266.762 $6.768.775.626.universities.9% 0.072 $7.0% Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Management of companies and enterprises Wholesale trade Offices of physicians.380 $6.027.993 $7.925 $9.011.732 $117.075.497 $8.9% 0.4% 1.130.745.159 $8.425.598 $464.445 Total Impact $357.1% 1.141.013.408 $10.753 $9.790.496.942.687 $4.849.574 1.475 $8.2% 1.943.and junior colleges Nondepository credit intermediation and related activities Truck transportation Food and beverage stores Civic.545.721.744 $986.806 $26.429.413.373 $5.172 $10.509 $12.4% 2.1% 1.9% 1.1% 1.103 $3.914 % of Total 36.824 $4.A3 Employee Compensation Direct Impact Indirect Impact $14.9% 7.340 $33.960 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $342.175 $5.172 $6.5% 1.652.866.007 $271.737 $372.730 $23.732 $176.826.567 $5.128.212 $170.932.654 $0 $0 $19.

800 Induced Impact $940.295.052.850 $29.211 $2.176 $14.2% 0.416 $7.156.191 $3. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.307.772 $42.074.506 $376.660 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $725.293 $1.848 $0 $1.2% 0.272 $26.115.998.056 $2.917 $633 $586.242.350 $21.681 $65.537 $724.186.990 $2.577.1% 100.322 $1.436.4% 1.8% 3.036 $591.395.170 $1.444 $1.3% 0.8% 0.863.062.838 $937.624 $6.2% 0.except car wash Advertising and related services TOTAL IMPACT .328 $706. LLC Appendix A .151 $280.358.453 $1.311.393.475 Total Impact $750.998.212 $1.034.559 $2.2% 0.089 $1.356.296 $842.526 $8.180.901 $1.831.4% 0.3% 0.9% 1.432 $1.701.5% 0.936 $0 $5.1% 0.506 $3.022.718.A4 Proprietors’ Income Direct Impact Indirect Impact $23.697.973 $56 $2.610 $386.099.2% 0.1% 0.629 $997.863.396.262 $2.715.610 $1.978.597 $976.108 Economic Impact of the Oil and Gas Industry in Pennsylvania.dentistsand other health care providers Lessors of nonfinancial intangible assets Scientific research and development services Management consulting services Pipeline transportation Architectural and engineering services Wholesale trade Truck transportation Power generation and supply Hospitals Accounting and bookkeeping services Pharmaceutical and medicine manufacturing Scenic and sightseeing transportation and support Motor vehicle and parts dealers Private households Computer systems design services Automotive repair and maintenance.272.969 $1.7% 0.835 $1.3% 0.074.376 $1.115.808.758.1% 0.453 $745.ALL INDUSTRIES $725.254 $50.051.557 $3.606 $5.414 % of Total 89.3% 0.552.699 $1.080.138.522 $2.952 $14.2% 0.817 $1.357.989 $65.805.606 $114.967 $130.108 $684.783 $0 $717.307 $2.656.831.013 $2.608 $1.0% Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Real estate Legal services Offices of physicians.9% 0.809 $6.104.358 $2.998.699.1% 0.887.862 $2.491.858 $5.052 $1.665 $1.246 $944.123 $621.541.911.942.634 $487.1% 83.900.935 $842.687 $6.187.

brokeragesand related services Petroleum refineries Nondepository credit intermediation and related activities Insurance carriers Pharmaceutical and medicine manufacturing Other State and local government enterprises TOTAL IMPACT .455 $9.189 $1.696 $120.304 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $5.849 $7.004.440.424.802 $4.511.4% Total Oil and Gas Oil and gas extraction Drilling oil and gas wells Support activities for oil and gas operations Owner-occupied dwellings Lessors of nonfinancial intangible assets Real estate Monetary authorities and depository credit intermediaries Power generation and supply Management of companies and enterprises Wholesale trade All other miscellaneous professional and technical services Legal services Nonstore retailers Offices of physicians.410.619 $232.103 $4.488.649 $274.431.5% 2.322.960.573 $4.232 $582.070 $0 $66.082.483.377.649.dentistsand other health care providers Telecommunications Food services and drinking places Petrochemical manufacturing Insurance agencies.4% 0.430.642.916 $6.118.2% $0 $0 $0 $1.3% 0.571 $2.117.968.133.300.623 $738.A5 Other Investor and Property Owner Income Direct Impact Indirect Impact $52.355.3% 0.636.512.088.740 $19.2% 0.0% Economic Impact of the Oil and Gas Industry in Pennsylvania.470.4% 6.320 $1.373.103 $246. November 2008 Pennsylvania Economy League of Southwestern Pennsylvania.339.533 $0 $1.977.5% 57.1% 1.689 $26.608 $20.394 $3.457.856.078 $7.943 0.504.330 Induced Impact $1.072 $1.478.342 $17.904 $26.565.164.824 $239.088 $37. LLC Appendix A .634.0% 0.143.931.116 $13.114.438 $5.4% 0.095 $2.917 $6.536.060.788 $13.533.507.076.438 $3.4% 0.176 $118.166 $664.363.548 $2.378.888 $7.890 $6.113 Total Impact $1.4% 1.647.255 $1.404 $11.861 $17.423 $3.552 $118.219.0% 1.448 $342.917.2% 12.137.725.443 % of Total 76.2% 0.144 $9.696 $923.843.267 $3.465 $10.972 $3.708.915.021 $5.801.383 $6.895.237.2% 0.761 $451 $23.534.856.424.389 $374.416 $120.625.9% 0.2% 0.028 $1.251 $4.232 $1.184 $4.512 $222.976.379 $34.235 $16.874 0.503 $2.486.9% 6.971.388 $1.2% 0.212 $406.ALL INDUSTRIES $1.320 $67.479 $3.969.599.2% 100.601 $3.649.850.295.937.268 $1.917 $5.1% 3.504.130.364.129 $6.085 $3.240.