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

January 2012
As a log-log model, estimated coefficient results are interpreted as elasticities, or percent changes. For example, in the
oil production coefficient, the coefficient on one-year lagged number of permits issued is 0.20. In other words, all other
things held constant, a 10 percent increase in the number permits issued the year-before-last would be associated with
a two percent increase in oil production this year. 11
TABLE 12 – Regression Results
Oil Production
Gas Production
NDL Production
Wells Spud
R-Squared
0.99
0.99
0.97
0.95
Coefficient
14.36
14.38
14.4
-1.90
Std. Error
0.063
0.69
1.14
.87
Projections of future projection were pivoted off of 2010 actual production. That is, actual values for dependent variables
for 2010 were used as the basis on which the projected percent changes were applied. This provided a Baseline and
an Alternative estimate of production and drilling for each of the years 2011 through 2015. <strong>The</strong> Baseline value was
subtracted from the Alternative value to provide the estimated impact, or delta, associated with increased leasing and
permitting activity. <strong>The</strong> analysis evaluates the differences between a “Baseline” level of permits and leases, and an
“Alternative” level of permits and leases. <strong>The</strong> regression uses a panel data set and measures cross-sectional fixed effects.
<strong>The</strong> results are presented in Table 2, 3, 4 and 5 for gas production, NGL production, oil production and new wells
respectively.
11. Natural gas liquids production is modeled as a function of natural gas production; regression results indicate an elasticity of 0.5.
37