Mr. Erik Milito - The House Committee on Natural Resources ...

January 2012
<strong>The</strong> number of new wells is also an indicator of drilling activity, which in turn is a good indicator of increased employment
in the industry, as shown in Figure 16.
Figure 16:
Relationship Between Drilling Activity and Employment
*Western States (Includes Colorado, Montana, New Mexico, North Dakota, Utah and Wyoming)
Source: Economics International Corp. calculations based on information from BLM Oil & Gas Statistics (2010) and
ICF International Rocky Mountain Forecasts (2011)
Employment impacts were modeled using IMPLAN. 5 Drilling and completion expenditures were from forecasts provided
by ICF. 6 Projections of the number of new wells drilled from the regression analysis (Table 5) were used in conjunction
with drilling and completion expenditures to project total drilling and completion expenditures. <strong>The</strong> expenditures were
mapped to IMPLAN sector 28 (drilling oil and gas wells) and sector 29 (support activities for oil and gas operations).
<strong>The</strong> dollar value of production was mapped to IMPLAN sector 20 (oil and gas extraction). Dollar denominated results are
not adjusted for inflation. For employment impacts, input expenditures were adjusted for inflation. Employment impacts
are reported as the number of full- and part-time jobs. Impacts can be separated into: 1) direct impacts and 2) indirect
and 3) induced impacts. Direct impacts are those immediately associated with a particular activity, such as employment
directly associated with drilling and completion. Indirect employment includes the impact of local oil and gas companies
buying goods and services from other local industries. Induced employment is created when spending increases due to
additional household income from higher production in the direct and indirect industries. 7
5. IMPLAN is an economic impact assessment modeling system that allows the construction of economic
models which estimate the impacts of changes in the economies of states, counties and communities.
6. ICF International. (2011) Rocky Mountain Forecasts.
7. Indirect employment includes the impact of local industries buying goods and services from other local industries.
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