Economic Analysis
In any public debate, being able to quantify the real stakes is the first step toward a fair and accurate resolution.
It is said that a rolling stone gathers no moss. However, here in the Permian Basin it appears that a rolling stone rolls faster and faster. As the resources plays continue to gain momentum, the Permian Basin Petroleum Association is seeing an ever-increasing amount of state and national attention being paid to regulatory and legislative issues that are unique to the basin. In the past few weeks we have had visits by the Director of Fish, Game, and Wildlife and by Secretary of the Interior Ken Salazar, as well as a subcommittee hearing from the Texas Senate Natural Resources Committee. Adding fuel to the fire has been the recent revelation of inflammatory comments by the former EPA Region 6 Administrator that were, for many of us who have been involved in fighting against aggressive federal regulatory issues, a confirmation of an adversarial attitude on the part of the federal government towards the oil and gas industry. The comments by Dr. Al Armendariz resulted in national media attention being directed toward the Permian Basin and immediate reaction by our state and national congressmen and senators.
As if we didn’t have enough to think about, we have seen some fairly significant commodity price fluctuations, which in my opinion are primarily a result of political and financial turmoil in France, Greece, and Germany. As the value of the Euro declines, the value of the U.S. dollar rises and as the value of the U.S. dollar rises the value of crude falls. Think of crude oil commodity pricing as a type of world currency.
Through each of the state and federal issues we have faced over the past couple of years, PBPA has taken the approach of acting proactively in an attempt to stay ahead of the issues. One example of this proactive approach is an Economic Analysis that I initiated during the third quarter of 2011. The purpose of this Economic Analysis was to lay some initial groundwork for the position that federal environmental statutes are in need of fundamental reforms. While we are in the process of arguing against federal actions such as we have seen with the Dune Sagebrush Lizard, Lesser Prairie Chicken, Spotted Tail Earless Lizard, hydraulic fracturing, etc., my position has been that as we argue against these actions, we need to be able to codify the potential economic impact of these proposed actions. Texas budget numbers guru James LeBas, on loan to us from the Texas Oil and Gas Association, and staff from Susan Combs’ Texas Comptroller’s office have collectively taken on the task of finalizing an initial estimate of economic benefit resulting from the oil and gas operations. Here are some very encouraging facts that bolster our argument that regulators and legislators need to be careful in taking actions that intentionally or accidentally impair ability to create jobs and energy:
- A comparison of the first quarter of 2011 to the first quarter of 2009 shows a 43% increase of jobs. In the same time period there has been a corresponding 54% increase in wages.
- Producing wells in counties included in the “Shinnery Counties” (habitat counties for the Dune Sagebrush Lizard) as of 2010 were 42,536, with production of 98,997,044 mcf of gas and 162,712,706 bbl of oil.
- Based on 2010 drilling levels (which are conservative given the increase in drilling over the past two years), direct job loss in the Shinnery Counties would be as much 7,761 jobs lost, while the indirect job loss would be as much as 23,434 jobs.
We continue to make the argument that the creation of jobs and energy is of first priority for our state and country, and Economic Impact analysis is supporting that position.