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Kyle Isakower's remarks at press briefing teleconference on IHS state impacts analysis of shale revolution

As prepared for delivery

Press briefing teleconference on IHS state impacts analysis of shale revolution
Kyle Isakower, API group vice president for policy and economic analysis

Thursday, January 10, 2013

Opening statement:

Good morning everyone. Thanks for calling in.

Shale energy development has transformed the U.S. energy sector and been one of the few bright lights in our nation’s recovering economy. And it’s poised to do much more.

The positive impacts are being realized in states with little or no energy development as well as in energy producing states. Supply chains supporting domestic oil and gas development and the induced effects of company spending and investment have generated new jobs and new tax revenue across the economy.

Recent analysis by IHS confirms this. It also shows there is vast potential in the years ahead for more jobs and more revenue for our nation as a whole and for nearly all states.

Nationally, the shale revolution has been driving up U.S. oil and gas production, creating millions of jobs for Americans, and producing billions of dollars of additional revenue for our government. It also has been reducing energy imports and America’s trade deficit.

IHS concludes that since 2008, liquid fuels production, primarily oil, has grown faster in the U.S. than in any other country. In 2012, U.S. oil production rose more than in any year for more than a century and is now more than seven million barrels a day, the highest level since 1993. In the past four years, we’ve increased crude oil production by 28 percent and onshore natural gas production by more than 27 percent – an accomplishment most energy experts thought impossible.

Shale development has also increased the affordability of energy while helping to reduce U.S. greenhouse gas emissions. Last year, IHS estimated that abundant U.S. oil and gas was saving the average American family $1,000 a year in energy costs.

In addition, development has strengthened U.S. manufacturing that uses low-cost natural gas, either as a feedstock, an energy input, or both. New U.S. chemical plants are being planned, and domestic steel and fertilizer operations are being expanded. The American Chemistry Council reported that $40 billion of new investment in chemicals manufacturing have been announced. Low-cost U.S. energy is improving U.S. competitiveness by helping to offset higher U.S. wages.

Future shale energy development could expand all of these trends. It also could encourage exports of natural gas, spurring more U.S. production and new jobs. While a few companies have questioned exporting U.S. energy – particularly natural gas, believing it could raise prices for them – analyses from Brookings, Deloitte, and others show the impact on prices at home would be minor. The U.S. Department of Energy says exports would be an overall plus for our economy.

We have vast oil and natural gas resources to secure all of these benefits. The government’s latest data show that the U.S. is expected to be the largest producer of natural gas in the world by the end of the decade.

And in the years ahead America will continue to need large amounts of oil and natural gas to drive its economy. While the role of renewable energy will continue to grow, oil and natural gas will supply most of our energy for decades, according to the Energy Department.

The shale revolution does not mean replacing renewables with oil and natural gas. It means being able to produce at home far more of the vast amounts of oil and natural gas we will need, which, along with renewables, will help meet the future energy needs of an expanding economy.

Last year, IHS estimated that by 2035 new shale energy development could produce for the nation:

  • More than $5.1 trillion in cumulative capital expenditures by oil and natural gas companies,
  • Some 3.5 million U.S. jobs, and
  • More than $2.5 trillion in cumulative added revenues to government at a time when the nation will be struggling to reduce its massive debt and still fund critical programs for the American people.

In its most recent analysis, IHS focuses on the potential future state-by-state benefits of unconventional development. This includes the benefits from shale and tight gas plays, and the benefits of unconventional oil development from tight oil plays.

States where development of unconventional oil and natural gas is now occurring are expected to see tremendous growth in jobs and industry-related revenue in the years ahead, according to IHS.

For example, IHS projects that development of unconventional resources in North Dakota will support more than 114,000 jobs in the state in 2020 – and between 2012 and 2035 it will deliver $130 billion in taxes and payments to North Dakota and local government entities.

In Pennsylvania, unconventional development will support more than 220,000 jobs in 2020 while delivering to state and local government more than $60 billion in taxes and other payments over the 2012 to 2035 period. And in Texas it will support more than 929,000 jobs in 2020 while providing state and local government almost $397 billion over the 2012 to 2035 period.

Yet substantial benefits are also projected to flow to states where little or no unconventional oil and gas development is anticipated.

For example, IHS estimates New Jersey will see more than 34,000 more jobs in 2020 as a result of unconventional oil and natural gas development and a boost in revenue of more than $10 billion over the 2012 to 2035 period. New jobs coming to Oregon could exceed 15,000 in 2020 with an addition to revenue totaling nearly $6 billion over the 2012 to 2035 period. And Virginia will see more than 31,000 new jobs in 2020 and more than $6.7 billion in added state and local taxes and other payments between 2012 and 2035.

The numbers for some states are conservative because the analysis is based on current policies and on current knowledge of reserves. Additional supplies could be discovered, and policies in some states could change. Today, New York, which has large reserves of natural gas, prohibits unconventional oil and gas development. But that policy could change.

The overarching take-away from the IHS analysis is this: Americans everywhere are benefiting from the energy revolution occurring in our country. And those benefits, already substantial, could become much greater in the future, creating even more jobs, reducing our debt, and further strengthening America’s position in the world on energy.

Thanks, and now I’d be happy to take your questions.

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