Oil and gas industry leading the way in job creation, economist says

2012-06-13T14:00:00Z 2012-06-13T21:18:42Z Oil and gas industry leading the way in job creation, economist saysBy TOM HOWARD thoward@billingsgazette.com The Billings Gazette

When John Felmy was growing up in north-central Pennsylvania, jobs were so scarce that people like him left the area just to find work.

But a recent boom in natural gas development in Felmy’s former home state has spun off a multitude of jobs that pay well enough to support a family.

“I’m seeing things that I had never seen before: ‘Help Wanted’ signs,” said Felmy, who is the chief economist for the American Petroleum Institute in Washington, D.C. Because of a blossoming in gas development, Pennsylvania has become a net exporter of natural gas, and the boom is poised to create thousands of new jobs.

Shell Oil Co.’s proposed petrochemical refinery in western Pennsylvania is expected to create up to 20,000 jobs. The plant, known as an ethane cracker, will convert natural gas into chemicals that are used in a variety of products such as plastics and tires.

 “That’s exciting, because our feedstocks are half of what they cost in other countries,” he said. “Our chemical industry, which produces fertilizers, plastics and things like that, is extremely competitive, and it’s all fueled by natural gas.”

There’s little doubt that Yellowstone County is enjoying an economic boost from the oil boom engulfing North Dakota and Eastern Montana. Car dealers, engineering companies, attorneys and metal fabricators are all seeing new business as a result. During a recent economic development forum in Fargo, N.D., Felmy asked the audience how many of them were benefiting from the oil boom. At least half of the people raised their hands, he said.

Felmy was in Billings on Wednesday to tell the Billings West Rotary Club how oil and gas development is creating new jobs across the country.

Horizontal drilling and hydraulic fracturing, the same technology that has spawned the rapid development of the Bakken oil play, enabled Pennsylvania’s gas boom, Felmy said.

He remembers seeing seismograph crews exploring nearby when he was growing up in Pennsylvania. Geologists found natural gas trapped in shale. But nobody figured out how to extract the gas until horizontal drilling and fracturing were developed. Felmy credits George Mitchell, of Mitchell Energy & Development Corp., for developing the technology that has caused an abundance of natural gas. With a glut of gas flooding the market, natural gas prices have dipped to below $3 per thousand cubic feet.

While job creation has been sluggish throughout much of the nation, Montana, North Dakota and other states with healthy oil and gas industries are enjoying much better economic conditions, Felmy said.

Felmy has studied the oil and gas industry for years, but he was among those who didn’t anticipate the technology-induced increase in oil and gas production.

He said the energy boom has continued despite the efforts of the Obama Administration.

“Oil production is up, nationwide. But it’s only up on state and private lands, and that’s because of the actions this (Obama) administration has taken,” Felmy said. “And while the president can say oil production is up, it’s not from his doing.”

The Western Energy Alliance, a Denver-based industry group, contends that a Bureau of Land Management’s proposed rule to regulate hydraulic fracturing on public lands will cost society at least $1.5 billion a year by diverting productive resources away from energy development on public land.

Building the proposed Keystone XL pipeline, which would transport crude oil from the Canadian oil sands to the Gulf Coast in the United States, would enhance energy security for the United States. Regionally, it would create an onramp for Bakken crude oil to be sent to refiners, Felmy said.

“The opponents have decided that by stopping pipelines like Keystone XL, they’re going to stop oil sands development. But that’s absurd,” Felmy said. Because Canada’s oil sands are estimated to be worth $14 trillion, Canadians will gladly send their oil to China or other countries if it can’t be shipped through the United States, he said.

Buying oil from Canada benefits both countries. For each dollar that’s sent to Canada to pay for oil, 90 cents returns to the U.S. through increased trade, Felmy said.

When the U.S. buys oil from a country in the Middle East, the economic exchange is much less, around 30 cents per dollar spent, he said.

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