The People of America's Oil and Natural Gas Indusry

Study: Oil and Natural Gas as Economic Dynamo

Mark Green

Mark Green
Posted February 5, 2013

An important new analysis supports what the oil and natural gas industry has been saying for some time: Drilling on public lands now closed to development could boost U.S. employment, economic growth and revenue to federal, state and local governments over both short- and long-term horizons.

Key details from the Institute for Energy Research study conducted by Dr. Joseph Mason, a professor at LSU and the University of Pennsylvania’s Wharton School:

  • $127 billion in increased gross domestic product per year for the next seven years and a cumulative $14.4 trillion increase in economic activity over the next 30 years.
  • 552,000 jobs created over the next seven years, totaling 1.9 million over the next 30 years.
  • $32 billion in annual wage increases over the next seven years, with a cumulative $3.7 trillion increase over a 37-year cycle.
  • $2.7 trillion more in tax revenues to the federal government over the next 37 years.
  • $1.1 trillion in state and local tax revenues over the next 37 years.

These are startling numbers, to be sure. Mason and his team built on a Congressional Budget Office (CBO) analysis of potential lease revenues by estimating larger effects of economic output, wages, jobs of new access to oil and natural gas reserves on federal lands. The report:

This paper illustrates that Congress has chosen to evaluate only one small piece of the economic effect of opening federal tracts to oil and gas leasing. By ignoring the investment phase, the CBO — upon the instruction of Congress — substantially underestimates the economic effects of current policy choices. Moreover, by focusing on lease revenue and ignoring the potential for increased tax revenue, Congress has doubly downplayed the fiscal effects of such a policy. By failing yet again to analyze jobs, wages, and output, Congress ignores the crucial economic reality that freeing resources can help our economy grow beyond the recent recession and its continuing drag upon economic growth.

The Mason study details the dynamic way increased domestic oil and natural gas development could drive the entire economy. Key point: Revenues that could be generated for the federal government from more oil and natural gas exploration, drilling and production would swamp projected revenue gains from tax increases on oil and natural gas companies that have been proposed and continue to be talked about by some in Washington. Mason:

"As Congress again turns its attention to the means through which our ongoing budget crises – from the debt limit to budget sequesters to the simple act of funding our government beyond the current budget resolution – there will be no doubt renewed efforts to address revenue concerns by punitively taxing the oil and gas industry in pursuit of modest revenue gains. As this analysis notes, though, the revenue potential inherent to expanding access to resources found on Federal lands and waters is orders of magnitude greater than that which is measured by the Congressional Budget Office."

The report underscores remarks by Karen Moreau, executive director of the New York State Petroleum Council, during a conference call with reporters to discuss America’s energy potential:

“There is a new energy reality of vast domestic resources of oil and natural gas brought about by advancing technology.  They have helped put the U.S. in a position to become a global superpower on energy.”

As Moreau noted, most increases in U.S. oil and natural gas production have occurred on private and state lands. Expanding access to reserves on federal lands and waters could move the country closer to energy self-sufficiency. And, as the Mason study shows, generate waves of economic benefits.

But this will only come with policies that recognize the vastness of U.S. oil and natural gas reserves – multiplied by relatively new discoveries in shale and other tight rock formations and unlocked by advancements in hydraulic fracturing and horizontal drilling. Moreau:

“For the first time in generations, we are able to see that our energy supply is no longer limited, foreign and finite; it is American and abundant. … If we seize that opportunity now and support it with sound policy decisions on taxes, regulations and access, we can lead on energy for decades and realize the economic and energy security benefits of that leadership.”


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.