Revisiting the Economic Impact of the Fayetteville Shale Kathy Deck, Director Center for Business and Economic Research June 7, 2012

Background  The Center for Business and Economic Research has been studying the effects of the Fayetteville Shale natural gas industry since  In 2008, we put out a widely-read study, discussing the likely impacts of the development of the Fayetteville Shale.

Economic Impact  Economic impact studies usually look at several variables:  Economic Output  Value Added  Employment  Tax Impacts

Economic Impacts  We used a combination of publicly available data, an industry survey, and the IMPLAN input-output model to examine the effects of the Fayetteville Shale from 2008 to 2012.

Employment Growth  From 2001 to 2010, total employment growth in Arkansas was 6,920 or 0.6 percent.  In the mining, quarrying, and oil and gas industry, employment increased by percent from 3,855 to 8,358.  This is 65 percent of total growth!

Employment Growth Industry Change % Change Natural resources and mining 18,95021,0942, % Mining, quarrying, and oil and gas extraction 3,8558,3584, % Construction 53,56648,726-4, % Manufacturing 226,992160,091-66, % Trade, transportation, and utilities 237,569231,432-6, % Information 20,96515,375-5, % Financial activities 47,67047, % Professional and business services 101,572117,71416, % Education and health services 125,513162,73837, % Leisure and hospitality 86,78298,77911, % Other services 26,24124,605-1, % Government 181,331205,54924, % Total all industries 1,127,1511,134,0716,9200.6%

Average Annual Pay  The average annual pay in the oil and gas extraction industry was $74,555 in 2010, twice the average pay of all industries in Arkansas.

Other Sector Impacts  Welspun  Saint-Gobain  American Rail  Fayetteville Express Pipeline  Broadway Pipeline

Fayetteville Shale Counties  Despite the loss of 9,558 manufacturing jobs, 5 out of the 9 Fayetteville Shale Counties experienced higher than state average employment growth from

Employment Impacts

Taxable Sales  From 2006 to 2011, state taxable sales increased by 5.7 percent.  In Fayetteville Shale counties, taxable sales increased by 20.0 percent during the same period.

Population Growth

Natural Gas Production

Expenditures

Mineral Lease and Royalty Payments  From 2008 to 2011 more than $1.2 billion of payments were made by E&P companies to mineral owners residing in all 75 Arkansas counties.  These royalty payments generate wealth in the communities, consumer expenditures, and tax revenues.

Economic Output  From 2008 to 2011, total economic activity of more than $18.5 billion was generated as a result of Fayetteville Shale activities in the state.  The 2008 projection was $14.2 billion.

Employment Impacts  2008: 5,948 direct jobs→14,511 total jobs  2009: 6,592 direct jobs →20,933 total jobs  2010: 6,794 direct jobs →20,953 total jobs  2011: 7,544 direct jobs →22,499 total jobs

Property Taxes  From , almost $109.2 million in property tax revenues were generated.

State Taxes  From Fayetteville Shale activities, taxes on employee compensation, indirect business taxes and fees, household taxes, and corporate taxes netted the state and local governments almost $2.0 billion from 2008 to 2011.

2012 Impacts  Expenditures: $2.7 billion (5.8 percent more than projected in 2008)  Economic Output: Almost $4.0 billion  Value Added: Almost $2.7 billion  Employment: 16,607 jobs

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