Updated Economic Impact of Barnett Shale

Activity in the Barnett Shale is contributing more money and more jobs to the local economy than was estimated just one year ago. Dr. Ray Perryman, founder and president of The Perryman Group, reported in his speech at the opening of this year’s Barnett Shale Expo that the economic impact of the Barnett Shale on the North Texas region increased by 51% from the estimates that he made just one year ago.

Perryman said that the natural gas activity in the Barnett Shale represents about 8% of the local economy with the total economic impact being over $8 billion which represents a 60% increase from last year. In last year’s study, Perryman said that the natural gas drilling activity in the Barnett Shale had already created over 55,000 permanent jobs. But after examining the numbers in 2007, Perryman reported that the Barnett Shale activity has created almost 84,000 jobs representing a net gain of more than 50% in a single year. “Prior estimates of the future impact of the Barnett Shale have proven to be far below the actual effect of exploration, drilling, and production on the regional business activity”, he stated.

The entire state of Texas is benefiting as well through increased economic activity of an estimated $10.2 billion in annual output and 99,726 jobs based on year-end 2007 levels of activity. This is a significant rise from the $6.4 billion in annual output and 65, 953 jobs reported last year. In addition to billions of dollars in economic activity, the State of Texas receives an estimated $212 million in severance taxes from the activity in the Barnett Shale. “Other types of State tax revenues and fees are also positively affected with the total fiscal stimulus reaching $715.5 million.

He concluded that “The Barnett Shale is a catalyst for ongoing economic vitality. Recent growth has exceeded expectations, and the resulting business and investment activity will help insulate the regional economy from the national slowdown.”

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Barnett Shale Helps Fight Recession

By Ed Ireland, Ph.D.  

 The United States may be slipping into a recession, but the economy in Texas, and especially North Texas, is expected to remain robust, due in part to the natural gas drilling in the Barnett Shale.  This activity has helped the Texas oil and gas industry return to the heights not seen since the early 1980s energy boom.  The result is the creation of many new jobs and a general expansion of the state and local economies.    In 2007, 28 percent of all new jobs in the United States were created in Texas, with over half of those in the natural resources and mining sector which includes natural gas extraction and production.  The Barnett Shale region,  which includes at least 18 counties and covers over 5,000 square miles, has already been responsible for the creation of an estimated 55,000-plus new jobs.  That number is expected to double over the next 10 years, according to a 2007 economic study by The Perryman Group, which was commissioned by the Fort Worth Chamber of Commerce.   What may come as a surprise is that most of these new jobs are not in the oil and gas industry, but rather cover virtually every sector of the economy.   According to Richard Fisher, president of the Federal Reserve Bank in Dallas, “Even though only 2 percent of our employment is related to oil and gas…we are (all) the beneficiaries and Fort Worth particularly, because of the Barnett Shale”.   The widespread benefits of drilling in the Barnett Shale are the result of a phenomenon that economists call “the multiplier effect”.  The process starts with the new dollars that are pumped into the economy from the bonuses and royalties paid to home owners and land owners to lease their mineral rights and the additional wages paid to workers in the newly created jobs.  For example, Tarrant County is estimated to have more than 1,000 landmen handling mineral rights leases for energy companies, and at least that many more scattered throughout the Barnett Shale region.  Most of those jobs did not exist a few years ago. New and expanded expenditures are also made my local governments that are receiving bonuses and royalties from leasing the mineral rights under parks and other public land.  The City of Fort Worth, for example, has already received almost $40 million from mineral leases.  The City expects to receive as much as $1 billion more over the next 25 years. This money that the City might not otherwise have had will be spent on public improvements, creating more new jobs and expanded payrolls.  The recipients of all this “new” money spend it at local business establishments on   food, clothing, housing, automobiles, entertainment and the like.  The businesses receiving those dollars will then spend that money on additional employees, expanded inventories and new locations.  This process will be repeated over and over,  resulting in a multiplied effect on the entire economy.  Even better news is that we are just at the beginning stage of all this economic growth. Drilling in the Barnett Shale is expected to continue for many years to come and each well is expected to produce natural gas for three decades or longer.  As horizontal drilling and water fracturing technologies improve, more gas will be produced from new and existing wells and the life of all wells will be extended. All and all, there is no question that gas drilling is a boon to the North Texas economy, bringing new jobs and business growth in all kinds of industries, not just the energy sector.  We are fortunate to be living in an area that is somewhat insulated from any downturn in the national economy. Virtually everyone in the region stands to benefit in some way from the Barnett Shale for years to come.

 Ed Ireland, Ph.D. is executive director of the Barnett Shale Energy Education Council, a consortium of eight of the leading energy companies operating in the Barnett Shale that are dedicated to promoting energy education and best practices as it relates to oil and gas leasing, drilling, production, transportation and marketing in the Barnett Shale. For more information, please visit http://www.bseec.org.

Updated Economic Impact of Barnett Shale

Activity in the Barnett Shale is contributing more money and more jobs to the local economy than was estimated just one year ago.  Dr. Ray Perryman, founder and president of The Perryman Group, reported in his speech at the opening of this year’s Barnett Shale Expo that the economic impact of the Barnett Shale on the North Texas region increased by 51% from the estimates that he made just one year ago.

Perryman said that the natural gas activity in the Barnett Shale represents about 8% of the local economy with the total economic impact being over $8 billion which represents a 60% increase from last year.  In last year’s study, Perryman said that the natural gas drilling activity in the Barnett Shale had already created over 55,000 permanent jobs.  But after examining the numbers in 2007, Perryman reported that the Barnett Shale activity has created almost 84,000 jobs representing a net gain of more than 50% in a single year.  “Prior estimates of the future impact of the Barnett Shale have proven to be far below the actual effect of exploration, drilling, and production on the regional business activity”, he stated.

The entire state of Texas is benefiting as well through increased economic activity of an estimated $10.2 billion in annual output and 99,726 jobs based on year-end 2007 levels of activity.  This is a significant rise from the $6.4 billion in annual output and 65, 953 jobs reported last year.  In addition to billions of dollars in economic activity, the State of Texas receives an estimated $212 million in severance taxes from the activity in the Barnett Shale.  “Other types of State tax revenues and fees are also positively affected with the total fiscal stimulus reaching $715.5 million.

He concluded that “The Barnett Shale is a catalyst for ongoing economic vitality.  Recent growth has exceeded expectations, and the resulting business and investment activity will help insulate the regional economy from the national slowdown.”

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By Ed Ireland 

The booming energy business is creating thousands of new jobs and business opportunities across the Barnett Shale region, which covers 18 counties and 5,000 square miles in North Texas. The United States may be slipping into a recession, but the North Texas economy remains robust, in large part due to the natural gas drilling and related activity in the Barnett Shale. 

This activity in the Barnett Shale area has already created an estimated 55,000-plus new jobs and will spur an additional 53,000 over the next 10 years, according to a 2007 economic study by The Perryman Group. What may come as a surprise, however, is where the new jobs are. They are not just in the oil and gas industry.  In fact, the biggest growth area is in retail, which is estimated to see more than 15,000 new jobs over the next 10 years, thanks to all the Barnett Shale activity. 

The second biggest growth area over the next decade is also surprising: restaurants and bars, with an estimated 8,000 new jobs.  Third place is shared by the construction industry and the oil and gas industry, with about 3,200 new jobs estimated over the next 10 years. 

What’s going on here? All the new cash injected into the region’s economy is fueling sales and job growth in virtually every industry, thanks to a phenomenon called “the multiplier effect”.  The new dollars come from royalty payments to homeowners and local governments, wage increases in growing businesses and new salaries for all the new jobs being created.  

For example,  Tarrant County is estimated to have more than 1,000 landmen handling mineral rights leases for energy companies in Tarrant County, and at least that many scattered throughout the Barnett Shale region.  Most of those jobs did not exist a few years ago.  Law firms are seeing new clients for cases involving leasing and mineral rights.  New hardware stores and restaurants are popping up all over to serve the new workers and activity on nearby drilling rigs.  

So there is more money in the local economy to be spent on all sorts of things such as clothes, eating out, and new homes. But with the multiplier effect, every new dollar spent sets off a chain reaction. For example, as more clothes are purchased at the retail store, a storeowner needs to buy more clothes for a larger inventory and may need to buy more clothes racks and to hire new staff. These new employees spend part of their new salaries on lunch at a nearby café.  With the cafe selling more lunches, it needs to hire more workers and buy more food. And on and on the multiplier effect ripples through the economy.  Of course local governments and school districts also benefit since more sales mean more tax revenue and more tax revenue means new parks and schools. Even better news is that we are just at the beginning stage of all this economic growth. Drilling in the Barnett Shale is expected to continue for many years to come and each well is expected to produce natural gas for at least two or three decades and possibly longer.  As horizontal drilling and water fracturing technologies improve, more gas will be produced from new and existing wells and the life of all wells will be extended. 

The businesses that support the drilling and producing activity, such as equipment manufacturers and suppliers, engineering and geology firms and well service companies that have been headquartered in West Texas and South Texas for years, are arriving in force throughout the Barnett Shale region. 

All and all, there is no question that gas drilling is a boon to the North Texas economy, bringing new jobs and business growth in all kinds of industries, not just the energy sector.  We are fortunate to be living in an area that is somewhat insulated from any downturn in the national economy. Virtually everyone in the region stands to benefit in some way from the Barnett Shale for years to come.  

Ed Ireland, Ph.D. is executive director of the Barnett Shale Energy Education Council, a consortium of eight of the leading energy companies operating in the Barnett Shale that are dedicated to promoting energy education and best practices as it relates to oil and gas leasing, drilling, production, transportation and marketing in the Barnett Shale. For more information, please visit www.bseec.org.

By Ed Ireland

For the past two decades, the growing demand for energy in the U.S. has exceeded domestic supplies of crude oil and natural gas. Simply put, U.S. consumers are using more energy than can be supplied with domestically produced oil and natural gas, so as a result, we have increased our imports of these products. The U.S. imports natural gas primarily from Mexico, Canada and Trinidad and Tobago in the form of liquefied natural gas (LNG), and crude oil primarily from OPEC countries.  

There are many negatives to this trend, but two stand out:  as a nation, we have become increasingly dependent on foreign energy supplies that are potentially unstable, and the prices that we pay have soared.

Of course, environmental concerns have curbed the production of oil and gas in many parts of the U.S.  While the debate concerning environmental protection continues, the fact remains that domestic supplies of crude oil and natural gas are still not keeping up with the demand.

Thankfully, natural gas production in the U.S. began increasing in 2006, and this is due to the so-called “unconventional” sources of natural gas, one of the most important being the Barnett Shale. 

Think about it:  Some 18 or so counties in North Texas are helping the entire U.S. become more energy independent by increasing our total reserves of natural gas.  And this from an area of the country that was considered  “pumped out” of oil and gas long ago!  

Covering more than 5,000 square miles, the Barnett Shale region is the largest natural gas field in Texas and one of the largest in the U.S.. It yields more than 12 percent of the natural gas produced in Texas and 5 percent of the total natural gas used in the U.S..

Better yet, exploration and production in the Barnett Shale has only just begun. It will take many years to drill the best-producing areas and as technology improves, less productive areas will also be drilled. Indeed, production in the Barnett Shale is expected to at least double over the next decade. Engineers and geologists believe that the wells being drilled in the Barnett Shale will produce for 20 to 30 years and possibly even longer as technologies continue to improve. 

The Barnett Shale’s contribution to the domestic energy picture goes beyond natural gas production. New technologies in drilling – primarily water fracturing (or “fracing” and improved horizontal drilling techniques – are being tested and refined right here in North Texas.  What is learned here will impact natural gas production in other shale regions in the U.S. for decades to come.  These include the Fayetteville Shale in Arkansas and the enormous Marcellus Shale, covering some 54,000 miles across several Eastern states, where exploration and drilling are underway.  It is fair to say that the Barnett Shale and similar sources of domestically produced natural gas are no longer “unconventional”.  They are in fact becoming the new conventional sources of natural gas and they offer the potential for the U.S. to become more energy self-sufficient.  The Barnett Shale is truly a bounty from below that is transforming the economy of North Texas and helping to reshape the energy picture in the U.S.

Ed Ireland, Ph.D. is executive director of the Barnett Shale Energy Education Council, a consortium of eight of the leading energy companies operating in the Barnett Shale that are dedicated to promoting energy education and best practices as it relates to oil and gas leasing, drilling, production, transportation and marketing in the Barnett Shale. For more information, please visit www.bseec.org.