Economic Impact of Oil and Gas Production on the Allegheny National Forest
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WARREN, Pa., March 24 /PRNewswire/ -- Several articles have appeared in local and regional newspapers relative to the issue of Forest Service approval of new Oil & Gas development within the Allegheny National Forest. I would like to expand on the information presented from the perspective of the devastating economic impact this moratorium or seizure of production has, and will continue to have, on our regional economy. It is important that this information be presented to allow the general public to understand the positive impact commercial activities within the ANF have on our regional economy, and the consequential negative impact this cessation and the continued interruptions and delays of these activities will have across the economy of Northwestern Pennsylvania. It is equally important to remember that these operational directives have not emanated from the local Forest Service offices. Rather, these are directives being imposed upon the local staff of the Forest Service who are obligated to comply with the directives and management philosophies imposed upon them. There are currently approximately 80 individual companies operating oil and gas activities within the ANF. These companies range from sole proprietors to large, national operations. For many of the smaller operators, the ANF represents their only location of operation. Inherent with shallow oil wells throughout this region, the majority of total ultimate recovery from each well is experienced within the first two years after the well is first brought into production. Long-term production yields taper off very quickly and remain modest but stable for the life of the well which could extend 20 to 30 years. A typical 10-year cost/revenue breakdown for a shallow well on the ANF is: Well drilling/completing costs $150,000 ("up-front" costs) Ongoing operating costs $120,000 Service taxes $22,500 Total revenues from sale of product $450,000 Income $157,500...an average of $15,750 per year. Completion of a single well requires roughly 3,200 man hours. This represents 1 1/2 workers' labor for one year. The current delay in releasing well projects on the ANF, which have been fully reviewed and permitted by the Pennsylvania Department of Environmental Protection, affects approximately 100 new well sites. Based upon the man hours per well, the equivalent of 150 full time positions have been eliminated. This represents only the direct labor involved in the well development process which includes excavation contractors, timber contractors as well as the actual well drillers and fracture teams. This does not take into account the further negative impact on other jobs throughout the community that provide goods and services to both these employees as well as the businesses themselves. Penn State University performed a study in 2008 on the impact of oil and gas production activities and found that for every 100 jobs in the oil and gas sector, an additional 23 direct support jobs, as well as 40 residential/retail support jobs are created. Thus, a loss of 150 oil and gas jobs could result in an additional loss of almost 100 indirect jobs within the community. As you can see, the impact of the oil and gas industry within Northwest Pennsylvania and Warren County is profound. Continuing to assess the impact of oil and gas coming from the ANF; let us look at the impact this oil has on the operations of the American Refining Group refinery in Bradford. -- 20% of the refineries feed stock of crude comes from the ANF. -- At $50 per barrel, this represents $100,000 per day flowing from the refinery out to the individual producers -- Approximately 8,000MCFD of natural gas is drawn from the ANF. At an average price of $6, this represents another $48,000 per day in capital being inserted into the regional economy. -- Elimination of the ANF crude from the ARG facility could result in a staff reduction of up to 40 full-time employees. Once again, this does not include the commensurate reduction in community-based businesses supporting these direct workers. The economics discussed to this point in the article have been based upon the traditional, shallow oil and gas wells historically and currently being placed throughout the region. There lies significant new potential for this region through the development of the Marcellus Shale gas formations as well. It is important that the region encourage and not discourage this expanding development opportunity that has significant positive economic potential. We have seen a dismissal of reliance on the hardwoods from the ANF by furniture makers and timber sellers due to the unreliability of harvest volumes. Application of misguided regulatory policies to the development of important Oil and Gas reserves could well result in additional regional economic devastation easily avoided through sound science and prudent management. The argument being raised which has caused the current moratorium on production within the ANF is based upon allegations made through lawsuits filed against the Forest Service for not requiring enough in the way of studies relative to the environmental impact of oil and gas well operations within the ANF. While several legal actions are at play relative to activities within the ANF, it appears that the suit which is most directly involved in this particular issue is that filed by 3 groups; Forest Service Employees for Environmental Ethics, Allegheny Defense Project and Sierra Club. The history of Oil and Gas operations throughout the region over the past century shows a remarkable record of safety and lack of any substantive damage to the surface, watershed or air quality in the region. In fact, these activities within the Browns Run and Morrison Run watersheds contributed to the improvement of the watersheds leading to the reclassification of these waterways from Cold Water Fishery to Exceptional Value. These enhancements to watershed quality levels were effected utilizing the 1986 Forest Plan operational guidelines. This situation has caused job losses throughout the region and will continue to do so until the owners of the minerals lying beneath the surface of the ANF are again provided access to their properties and are not prevented from doing so in the future. Each day that this situation continues causes irreparable harm to our community. This is an industry which is vital to Warren County. This is an industry that is serious about responsible treatment of the environment. This is an industry that deserves our respect and our support in their continuing fight for survival. The WCCBI will continue to work closely with Congressman Thompson, our elected state legislators and the U.S. Forest Service, both at the local and national levels, to see to it that the current moratorium is as short-lived as possible and oil and gas activities within the ANF return to our mutual benefit. SOURCE Warren County Chamber of Business & Industry James Decker, President/CEO of Warren County Chamber of Business & Industry, +1-814-723-3050
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