University of Colorado Economic Study Shows the Oil and Gas Industry is Key to Colorado’s Economic Health and Stability

For Immediate Release

Contacts:
Doug Flanders
303-861-0362
[email protected]
 
Rachel George
[email protected]
  
New Study Shows Positive Impact of Oil and Gas to Every Coloradan
 
DENVER (December  29, 2015) – The oil and gas industry in 2014 pumped $31.7 billion into Colorado’s economy, according to a new economic study by the Business Research Division of the Leeds School of Business, University of Colorado at Boulder. The study, released today by the Colorado Oil & Gas Association (COGA), demonstrates the vital role the industry plays in the state’s economy.
 
Overall, the report found, the industry recorded $15.8 billion in production value, accounting for 38,650 direct jobs with average annual wages in excess of $105,000 —twice the average wage of all industries in Colorado. The total economic impact of the industry was $31.7 billion in 2014, supporting 102,700 jobs and $7.6 billion in compensation.
 
The report, Oil and Gas Industry Economic and Fiscal Contributions in Colorado by County, 2014, conducted by University of Colorado Boulder researchers Brian Lewandowski and Richard Wobbekind, found that in 2014 the oil and gas industry supported over 100,000 high paying workers and their families.
 
“The capital investments and industry production create jobs, income, wealth, and taxes, notably concentrated where production exists; however, as tax dollars flow into the state general fund and cash fund, the outflow of these dollars impacts every citizen in the state through investments in education, transportation, and others, “ the report stated.
 
Dan Haley, President and CEO of COGA said, “The industry’s overall tax bill represents approximately $600 of tax revenue per household in the state, and this does not include the industry’s corporate tax bill. Every Coloradan is positively impacted by this industry, no matter where you live.”
 
The report also details the significant amount of tax revenue generated by the oil and gas industry for school districts, as well as state and local governments that is well “beyond what other industries contribute. … Ad valorem taxes, for instance, are 3 times higher for oil and gas production than for commercial property within the state and 11 times higher than residential property.”
 
“Clearly, even as we work through this period of lower commodity prices, the oil and gas industry’s impact on Colorado’s economy is significant,” said Haley. “The industry continues to provide, and support, thousands of good paying jobs in all corners of the state. Governments across Colorado also depend on the oil and gas industry to pay for much-need public services. Without revenue from this industry, we would not be able to provide the necessary funding, or would have to further raise taxes, for public schools, roads, parks, and many other government services that Coloradans depend on.”
 
The study also found:


·       The oil and gas industry paid over $434.7 million in property taxes in 2014 and accounted for $156 million from the Colorado State Land Board School Trust distribution or 88 percent of the overall distribution of $178 million.

·       Severance tax revenue increased 92.9 percent from 2013 to 2014, generating $330 million in 2014 compared to $171 million in 2013.

·       In total, the oil and gas industry contributed over $1.1 billion in revenues to state and local governments, school districts, and special districts.

·       34 counties had oil production and 38 produced natural gas; 37 of Colorado’s 64 counties recorded taxable oil and gas property.

·       90 percent of Colorado’s taxable oil and gas property is in five counties: Weld, Garfield, La Plata, Rio Blanco and Montezuma.

·       Weld County produces 86 percent of the state’s oil and 25 percent of its natural gas.

·       Weld and Garfield alone accounted for 80 percent of drilling permits in 2014, with Weld having more than 66 percent of all active rigs in the state.

 
While Weld and Garfield Counties are the leaders in production, Denver, Weld, Mesa, Garfield, and Adams counties are the “center of employment for the industry,” accounting for 79 percent of the total direct jobs. Interestingly, the City and County of Denver had the most direct industry jobs in the state with nearly 13,000 paying over $161,000 dollars a year.
 
“This study clearly shows that cities and counties that either don’t have or have limited oil and production are reliant on our positive contributions to their community. When any new rules or regulations are being considered that impact oil and gas production, Weld and Garfield Counties’ voices must be heard,” Haley said. “We must avoid the domino effect of production in these two counties being negatively impacted and then the rest of the state’s employment and revenue declining as well.” 
 
This study used publicly available industry data to quantify the economic impacts of the industry in Colorado by county. The study examined the economic indicators and impacts to the county level, looking at employment, wages, and well activity to economic and fiscal impacts.
 
Go to the COGA website to see the full report on the 2014 oil and gas industries' economic and fiscal contributions in Colorado.
 
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OPEC "Effectively Dissolved" - Saudi Arabia May Go Broke Before US Oil Industry Backs Down

King-Salman-of-Saudi-Arabia

When Saudi Arabia stopped supporting oil prices last November, many thought that they could use their large national reserves to undercut the competition and force U.S. shale producers out of business. As oil prices fell, they seemed confident they could ride it out and maintain their historically-dominant market position. 

Back in December, The Economist argued that absent a major unforeseen event, America's shale industry should be able to genuinely rival Saudi Arabia as the world's marginal producer. They were right.

It now appears that Saudi Arabia's confidence was misplaced and such a strategy was, in fact, misguided. This all puts the newly-coronated King Salman in a tough position, to say the least.

Bank of America says OPEC is now "effectively dissolved". 

"It is becoming apparent that non-OPEC producers are not as responsive to low oil prices as had been thought, at least in the short-run," admits the Central Bank of Saudi Arabia in its latest stability report. "The main impact has been to cut back on developmental drilling of new oil wells, rather than slowing the flow of oil from existing wells."

While low prices have scrapped plans for a variety of high-cost and high-risk ocean investments, something environmentalists around the world can be pleased about, US shale producers are not that high-cost, and experts from IHS think companies could reduce costs another 45 percent this year.

Bloomberg-Bakken-Region-Oil-Production-and-Rig-Count

The IHS experts believe these efficiency gains are possible not only through switching production to just the highest-yielding wells. Continually advancing drilling technology allows operators to launch 5 - 10 wells in different directions from one site. Other cost saving techniques are about to be implemented as well. 

"We've driven down drilling costs by 50 per cent, and we can see another 30 per cent ahead," said John Hess, head of the Hess Corporation.

While the North American rig-count has dropped down to 664 from a high of 1608 in October, output  has still risen to a 43-year high: 9.6million barrels per day. Experts believe it is only just beginning too. Rex Tillerson, head of Exxon Mobil, recently said "The freight train of North American tight oil has kept on coming."

While the oil industries in Colorado and elsewhere have felt the challenging effects of such a shakeout, America's oil & gas industry is now more resilient and efficiency keeps improving. This is good news for consumers. Lower prices with lower volatility should boost demand, resulting in additional growth. Economists calculate that the price cut has shifted well above $1.3 trillion from producers to consumers. 

Advances in renewable energy technology will increasingly offer people the choice of using a substitute, further limiting oil's power in the future.

"Prices are not going to snap back. People are in denial," said Prince Nawaf Al-Sabah, head of Kuwait's explorer, KUFPEC.

International-monetary-fund-oil-price-budget-2015

This is troubling for countries that relied too heavily on one industry for their national income. Saudi Arabia, for example, relies on oil for 90% of its national budget. The International Monetary Fund estimates that this year's budget deficit will reach 20 per cent of GDP , or roughly $140 billion USD. The 'fiscal break-even price' is $US106.

While King Salman does face economic uncertainty, it's becoming more certain things are not going his way. He faces greater uncertainty politically-speaking. Can he maintain social stability within his country? Within the Middle Eastern region? Read more about the economics and possible political implications in an article by Ambrose Evans-Pritchard here.