The People of America's Oil and Natural Gas Indusry

Yes. We Can Create Jobs. Thanks for Asking

Mark Green

Mark Green
Posted November 30, 2011

First off, sincere thanks to U.S. Rep. Edward Markey of Massachusetts for the set of questions sent this way recently, concerning the oil and natural gas industry's job-creating ability and other issues. Though the congressman doesn't care much for our industry and might be motivated more by politics than a quest for knowledge, it's still a great opportunity to talk about the role oil and gas can play in America's economic and energy future.

API President and CEO Jack Gerard responded to Congressman Markey in a detailed letter Wednesday. Gerard also discussed the letter's key points in a conference call with reporters:

"Some people still don't get it. And some have resorted to various antics to distort the facts about our industry's ability to create jobs, to provide an economic stimulus to our economy, and increase revenues to the federal government. We're here today to clear up any confusion that was raised recently in a letter to API by Congressman Edward Markey. ... His letter illustrates the typical misunderstandings about important industry facts and how that misunderstanding can lead to public policies that hinder, rather than help, job creation and economic growth."

Main discussion points:

Job creation - Markey dismisses projections in this fall's Wood Mackenzie study, that the oil and natural gas industry could create 1.4 million new jobs in America by 2030, with 1 million of them generated over the next seven years. Gerard said Wood Mackenzie's estimates actually are conservative compared to other job-creation models. He explained Wood Mackenzie's use of multipliers - that is, the number of indirect jobs supported by direct industry jobs - is widely accepted by other economic modelers, including the White House. That's because whether the jobs are direct or induced, every one of them is very real to the job holder. Gerard:

"Congressman Markey and other critics now appear to be calling into question the very use of multipliers to project job impacts. Not only is this concept accepted by almost all mainstream economists, but Dr. Wassily Leontief won a Nobel Prize for developing the input/output methodology that includes this effect. In fact, most recent estimates of jobs impacts, including estimates of the administration's recent jobs proposal, include direct, indirect and induced effects in their calculations. The critical point is that indirect and induced jobs created by the oil and natural gas sector are real jobs that will employ real Americans."

Taxes - The industry doesn't get subsidies - direct payments - from government. Gerard:

"There are provisions in the tax code that allow U.S. companies, including oil and natural gas companies, to recover business expenses. Nevertheless, at over 41 percent, in 2010 the oil and natural gas industry paid one of the highest effective tax rates in the U.S. Other S&P Industrials paid an effective tax rate of 26.5 percent. It is difficult to reconcile the notion of our industry receiving tax 'preferences' when we pay an effective tax rate 50 percent greater than other sectors."

Access - Key to the industry's job-creating ability is access to more of America's untapped energy resources. Specifically, Markey asked about unused offshore leases. Gerard's response:

"While companies do purchase some leases in the hopes that they will prove to be productive, not all leases that are bought turn out to be good economic prospects after further investigation. That said, companies are not eager to return leases ... (because) technology advances could make the lease economic in the near future, so they often hold on to existing leases (and pay rent to the federal government) through the end of the lease term."

On access to new areas - such as the outer continental shelf off Virginia's coast, the Eastern Gulf of Mexico and onshore lands currently off-limits - Gerard told the congressman:

"New access will bring the potential for new prospects in frontier areas with better economic potential, and therefore greater potential for new investment and job growth. In fact, the Wood Mackenzie analysis projects that it is both technically and economically feasible to increase domestic oil and natural gas production by 76 percent by 2030."

Let's be realistic. This probably won't end the questioning. But that's fine because it keeps the focus on the oil and natural gas industry's willingness to be tried and tested on jobs. That's not pride or arrogance. It's confidence, stemming from experience. This jobs dynamic already is happening - in Pennsylvania, North Dakota and other states where oil and gas production is creating jobs that create other jobs. A recent Wall Street Journal editorial:

"(The) beauty of the oil and gas boom is that multipliers aren't needed to predict job growth. It's happening right before our eyes."

Gerard:

"Our industry invested more than $470 billion in the U.S. economy in 2010 in capital investment, wages, and dividends - that's more than half the federal stimulus package enacted by Congress in 2009, yet it happens every year and doesn't require an act of Congress."

The point Gerard made earlier is worth repeating - that we have a discussion in America that leads to public policies that help, not hinder, job creation and economic growth. So again, congressman, thanks for asking.

ABOUT THE AUTHOR

Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Mark also was a reporter, copy editor and sports editor. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela live in Occoquan, Va., where they enjoy their four grandchildren.