Economics Impacts of the New

Paradigm of Shale Gas and Oil

Development

Timothy J. Considine
SER Professor of Energy Economics
University of Wyoming
Shale - The New Paradigm

 Nature of shale development requires a

new perspective on economic impacts
 Steep production decline curve requires
continuous drilling (production treadmill)
 Natural gas manufacturing
 Large reserves ⇒ long development
 Economic impacts are long-lasting
 Crucial to maintain capital inflows
Considine - Economics of New
Shale Paradigm 2
Economic Impacts

 Business-to-business spending
 High transport costs place a premium
on developing local supply networks
 Individual footprint of wells are small but
land requirements are large
 Lease and bonus payments are
sizeable

Considine - Economics of New

Shale Paradigm 3
Estimating Economic Impacts

 Our 2008 study conducted a survey of

accounting records from several
Marcellus companies
 Identified spending in more than 100
NAICS codes
 Used IMPLAN to estimate economic
impacts
 Direct, indirect, and induced impacts
 Other studies found similar results
Considine - Economics of New
Shale Paradigm 4
Summary of Model Results
State Shale Play Year Job
Gains
Arkansas Fayetteville 2008 9,683

Louisiana Haynesville 2009 57,637

Texas Barnett 2008 132,497

Pennsylvania Marcellus 2009 57,357

West Virginia
Considine - Economics of New
Shale Paradigm 5
Unemployment Rates by State
(*Seasonally Adjusted )

State Play Rate*

AR Fayetteville 7.7%
LA Haynesville 7.8%
ND Bakken 3.7%
TX Barnett & EF 8.1%
PA Marcellus 9.0%
USA 9.6%

Considine - Economics of New

Shale Paradigm 6
PA Marcellus Drilling & Unemployment
Rates by County (Seasonally Unadjusted)

Considine - Economics of New

Shale Paradigm 7
More Drilling, Lower Unemployment

Considine - Economics of New

Shale Paradigm 8
Concluding Comments

 Shale development requires capital

 Models suggest significant job gains
 These results are corroborated by
comparing drilling activity and
unemployment rates
 Greater drilling is associated with lower
rates of unemployment at state &
county levels
Considine - Economics of New
Shale Paradigm 9