Study outlines onshore independents' contributions to economy

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Apr. 11 -- Onshore independent oil and gas producers accounted for nearly 4 million direct, indirect, or induced US jobs, or more than 3% of the total US workforce in 2010, a new study by IHS Global Insight said on Apr. 11. The independents’ operations contributed $575 billion, or 4%, to US gross domestic product last year, the report commissioned by the Independent Petroleum Association of America added.

It also projected that onshore independents will return more than $930 billion to federal, state, and local governments as taxes, rents, and royalties in the next 10 years. Their activity in 2010 generated $30.7 billion in federal and state income tax, sales tax, and excise taxes, the report said.

“Additionally, independents’ upstream activity led to $38.4 billion in corporate taxes, severance taxes and federal royalty payments in 2010,” it continued. “The entire direct-indirect-induced ecosystem of the independents generated $131 billion of federal and state taxes in 2010, a figure that will increase to $189 billion by 2020.”

The report, which IPAA released in New York as its 2011 Oil & Gas Investment Symposium opened there, also noted that upstream independents capital expenditures totaled $62.6 billion in 2010, creating 6 direct and 33 total upstream jobs for every $1 million spent.

“In value added terms, every $1 million dollars of capital expenditure results in $2.4 million of direct and $5.1 million of overall contribution to GDP,” it noted. “In terms of taxes, every $1 million dollars of capex results to $1.1 million of total taxes generated in the upstream sector.”

IPAA officials responded to the study’s findings. “The headline here isn’t just that independent oil and natural gas producers know how to create jobs; we’ve been doing that since Col. [Edwin] Drake spudded his first well back in the 1850s,” said Barry Russell, the association’s president. “The headline is that independent producers are delivering jobs—millions of them—and billions in annual tax and royalty revenue for state, local and federal governments at a time and place when they have perhaps never been needed more.”

“The amazing thing here, of course, is that the findings in this study are limited only to onshore activity,” added IPAA Chairman Bruce H. Vincent. He cited a recent report which said that upstream independents operating in the Gulf of Mexico accounted for more than 200,000 jobs, $38 billion in economic benefits, and $10 billion in federal and state revenue and royalty payments.

“Unfortunately, even as we continue to seize on new opportunities onshore, offshore numbers are expected to decline, owing in large part to the position of the current administration,” said Vincent, who also is president of Swift Energy Co. in Houston.

Contact Nick Snow at nicks@pennwell.com.



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