The Economic Impact of Kentucky’s Oil and Gas Industry on Kentucky’s Economy

Presented by: Andrew V. McNei l l Execut ive Director – KOGA

Research Conducted by: Dr. Paul Coomes, Professor Emeritus of Economics - Univers ity of Louisvi l le

Gas Production – Kentucky Counties 2010

Source: Special thanks to Brandon Nuttall at KGS for supplying county-level data to create map. Data edited by Paul Coomes, Ph.D.

16,563

16,290

17,152

17,670

14,632

10,000

11,000

12,000

13,000

14,000

15,000

16,000

17,000

18,000

19,000

2007 2008 2009 2010 2011

Producing Gas Wells - Kentucky

Total

Number of Producing Gas Wells: 2007-2011

Source: EIA – www.eia.doe.gov

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0P

ike

Flo

yd

Kn

ott

Let

cher

Per

ry

Mar

tin

Har

lan

Les

lie

Cla

y

Kn

ox

Bel

l

Wh

itle

y

Mag

off

in

Joh

nso

n

Law

ren

ce

Top 5 Counties = 72% of Statewide Production

Top 15 Natural Gas Producing Counties: 2001-2011

Source: Kentucky Geological Survey

Bcf

100 Bcf

Oil Production – Kentucky Counties 2010

Source: Special thanks to Brandon Nuttall at KGS for supplying county-level data to create map. Data edited by Paul Coomes, Ph.D.

3,197,924

2,000,000

2,200,000

2,400,000

2,600,000

2,800,000

3,000,000

3,200,000

3,400,000

Total Barrels 2001 – 2012 = 31,059,015

Total

Average= 2,588,251 bbl

Annual Oil Production: 2001-2012

Source: Kentucky Geological Survey http://kgs.uky.edu/kgsmap/OGProdPlot/OGProduction.asp and EIA.DOE.GOV

2,170,807

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Hen

der

son

Un

ion

Lee

Les

lie

Mu

hle

nb

erg

Per

ry

Let

cher

Ho

pki

ns

Web

ster

Dav

iess

Mag

off

in

Wo

lfe

Oh

io

Clin

ton

War

ren

Ad

air

McL

ean

Pik

e

Har

lan

Bel

l

Thousand Barrels

1 million barrels

Top 20 Oil Producing Counties: 2001-2011

Top 20 Counties = 85.5% of Statewide Production

Source: Kentucky Geological Survey

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

20

01-

02

20

02

-03

20

03-

04

20

04

-05

20

05-

06

20

06

-07

20

07-

08

20

08

-09

20

09

-10

20

10-1

1

20

11-1

2

Nat Gas Severance

Oil Production Severance

1 million barrels 1 million barrels 1 million barrels

Avg / Year = $33,091,108

Source: Kentucky Geological Survey

Source: Kentucky Dept of Revenue

$ 50,585,729

Oil & Gas: Annual Severance Taxes

$2,449,082.22

$2,511,858.15

$2,841,098.28

$2,968,596.08

$3,024,619.22

$3,083,791.29

$5,019,457.37

$7,175,184.44

$8,696,690.45

$8,918,344.25

$- $4,000,000.00 $8,000,000.00

Bell

Hopkins

Perry

Muhlenberg

Webster

Letcher

Leslie

Lee

Union

Henderson

Oil Production Severance

Oil ProductionSeverance

Oil Production Severance Tax 2002-2012

Source: Kentucky Dept of Revenue

$6,611,827

$6,817,976

$8,355,619

$8,508,261

$16,457,174

$20,235,584

$24,344,182

$31,400,917

$48,303,955 $90,947,616

$0 $25,000,000 $50,000,000 $75,000,000 $100,000,000

CLAY

BELL

LESLIE

KNOX

MARTIN

PERRY

LETCHER

KNOTT

FLOYD

PIKE

Nat Gas Severance

Nat Gas Severance

Natural Gas Severance: By County 2002-2012

Source: Kentucky Dept of Revenue

2418

1367

1230

1097

920

550

$12.69

$3.80 $4.80

$4.54

$2.46

* $4.17

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

0

500

1000

1500

2000

2500

2008 2009 2010 2011 2012 2013

Permits Issued

Horizontal Permits

Wells Completed

Henry Hub Price

Kentucky Oil & Gas: 5 Year Trend

Source: KY Division of Oil and Gas Henry Hub Prices Based upon June of each year. *Exception = April 2013

4652

6074 5963

7231 8106

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2007 2008 2009 2010 2011

Total

Total

Oil and Gas Extraction: Jobs

Source: Bureau of Economic Analysis www.bea.gov

1013 1092 1000 883 873

3639

4982 4963

6348 7233

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

2007 2008 2009 2010 2011

Proprietors

Wage & Salary

NAISC 211 – Oil and Gas Extraction

Source: Bureau of Economic Analysis www.bea.gov

• Fireborn Energy

• Interest in 220 wells in Kentucky.

• Vice-President • Staking Locations

• Leasing Acreage

• Finance & Management

Industry Snapshot: Wes Cate

• Hay Exploration

• Operations Manager

• B.A. Economics

• M.B.A.

Industry Snapshot: Monica Sturgill

• Attorney at Law

• Viking Exploration LLC

• 11 Natural Gas Wells

• 2 Oil Wells

Industry Snapshot: C.V. Reynolds

Oil & Gas Employment Trends: Wage and Salary Employees

1013

1092

1000

883 873

692 734

657

573

524 615 569

551

446 384

300

400

500

600

700

800

900

1000

1100

1200

2007 2008 2009 2010 2011

211

213112

213111

Henry Hub = $2.46

Oil & Gas Extraction*

Support Activities

Drilling Oil and Gas Wells

Jobs

Year

* Wage & Salary Employees

• * Wage and Salary only. Doesn’t include “Proprietors”. • Source: Kentucky Office of Employment & Training

Henry Hub = $12.69

NAISC Sector Name “Jobs”

211 Oil and Gas Extraction (Proprietors) 7,233

211 Oil and Gas Extraction (Wage & Salary) 873

213111 Drilling Oil and Gas Wells 384

213112 Support Activities for Oil and Gas Operations 524

TOTAL 9,014

An Industry Snapshot: “Jobs”

• Source: Kentucky Office of Employment & Training – 2011 Figures & Bureau of Economic Analysis (BEA) www.bea.gov

NAISC Sector Name “Jobs”

2212 Natural Gas Distribution 790

324110 Petroleum Refineries 680

486110 Pipeline Transportation (Crude Oil) 59

486210 Pipeline Transportation (Natural Gas) 844

32512 Industrial Gas Manufacturing 242

TOTAL (Downstream) 2,615

An Industry Snapshot: “Jobs” (Downstream)

• Source: Kentucky Office of Employment & Training – 2011 Figures & Bureau of Economic Analysis (BEA) www.bea.gov

Sector Name Total Wages Avg. Annual Wage

Oil and Gas Extraction (Wage & Salary) $53,956,295 $61,788

Drilling Oil and Gas Wells $17,310,996 $45,042

Support Activities for Oil and Gas Operations $28,102,028 $53,681

Total Oil & Gas Wages (2011) $99,369,319

Average Annual Wage (2011) $55,794

An Industry Snapshot: Wages

• Source: Kentucky Office of Employment & Training – 2011 Figures & Bureau of Economic Analysis (BEA) www.bea.gov

Sector Name Total Wages Avg. Annual Wage

Natural Gas Distribution $45,204,055 $57,190

Petroleum Refineries $73,425,467 $107,913

Pipeline Transportation (Crude Oil) $5,377,967 $91,023

Pipeline Transportation (Natural Gas) $73,023,259 $86,478

Industrial Gas Manufacturing $14,310,853 $59,238

Total Oil & Gas Wages (Downstream) $211,341,601

Average Annual Wage (2011) $80,818

An Industry Snapshot: Wages (Downstream)

• Source: Kentucky Office of Employment & Training – 2011 Figures & Bureau of Economic Analysis (BEA) www.bea.gov

$0

$200,000,000

$400,000,000

$600,000,000

$800,000,000

$1,000,000,000

211213111

213112

$984,609,000

$116,957,000

$317,702,000

Total Value ofShipments

Capital Expenditures

Total = $1.4 billion

2007 Economic Census

211 – Oil and Gas Extraction 213111 – Drilling Oil and Gas Wells 213112 – Support Activities for Oil and Gas Operations

• Total Output (Value of Production)

• Intermediate Expenditures $299,198,8001

• Employee Compensation $ 64,025,090

• Proprietor Income $384,060,700

• Other Property Income $236,971,400

• Indirect Business Taxes $124,551,700

Total Output (Value of Production) = $1,108,807,700

Kentucky Oil and Gas Industry: Total Output (2010)

Source: IMPLAN version 3.0 of Kentucky, using 2010 county-level data. 1 Ex. Support services for oil and gas operations, leasing of nonfinancial intangible assets, valves and fittings, etc.

• Public education about safe hydraulic fracturing practices

• Increased EPA and ESA regulation affecting Kentucky’s industry

• Dry gas prices in a dry gas state

• Planning for potential discovery of shale-like resources.

Opportunities & Challenges for the Oil and Gas Industry Moving Forward

Kentucky Oil & Gas Association www.kyoilgas.org

@kyoilgas

The Economic Impact of the Oil & Gas Industry on Kentucky’s Economy

Presented by: Andrew V. McNeill Executive Director – KY Oil and Gas Association

Research Conducted by: Dr. Paul Coomes, Professor Emeritus of Economics - University of Louisville