The Future of Natural Gas
in West Virginia
John Deskins, Ph.D.
May 2015
Bureau of Business & Economic Research
College of Business & Economics
West Virginia University
www.be.wvu.edu/bber
Copyright ©2015 by WVU Research Corporation
Bureau of Business and Economic Research
Natural Gas and the
Broader West Virginia Economy
Bureau of Business and Economic Research
A Tale of Two Energy Industries
170
Coal Production (Millions of Short Tons, Annualized)
160
150
Natural Gas Production (Billions of Cubic Feet)
Natural Gas
450
400
350
Coal
300
140
250
130
200
120
150
110
100
100
50
90
0
Source: US Energy Information Administration; WVU BBER Econometric Model
Bureau of Business and Economic Research
Average Natural Gas Price
11
2013 dollars per thousand cubic feet
Projection
9
7
5
Source: US EIA
Notes: Projection numbers represent the US EIA projection under the reference case.
WV Oil & Gas Active Well Counts
30
Thousands of Wells
28
26
24
22
20
18
16
14
12
10
Source: WV Department of Environmental Protection
Bureau of Business and Economic Research
West Virginia Has Generally Outperformed in GDP Growth in Recent Years…
6
% change, annual
West Virginia
U.S.
5
4
3
2
1
0
-1
-2
-3
-4
Source: US Bureau of Economic Analysis
Bureau of Business and Economic Research
Real GDP Growth
112
Index, 2007=100
110
West Virginia
108
106
104
102
US
100
98
96
Source: Bureau of Economic Analysis
Bureau of Business and Economic Research
Real GDP Growth
112
Index, 2007=100
110
West Virginia
108
106
104
West Virginia
excluding
extraction
102
US
100
98
96
Source: Bureau of Economic Analysis
Bureau of Business and Economic Research
Oil & Gas and Coal Employment
40
Employment, Thousands
35
30
Oil & Gas
25
20
15
Coal
10
5
0
Sources: US Bureau of Labor Statistics; WVU BBER Econometric Model.
Bureau of Business and Economic Research
Total Employment
720
West Virginia, Thousands
United States, Millions
West Virginia
142
140
710
138
700
136
U.S.
690
134
132
680
130
670
128
Source: US Bureau of Labor Statistics
*Shaded regions indicate recessions
Bureau of Business and Economic Research
Per Capita Income Growth Has Outpaced the National Average…
Index, 1998=100
190
West Virginia
180
170
160
150
U.S.
140
130
120
110
100
90
Source: Bureau of Economic Analysis
Bureau of Business and Economic Research
…Putting Relative Income Level at Its Highest Levels in Decades
85%
Percent of US
80%
75%
70%
65%
60%
Source: Bureau of Economic Analysis
Bureau of Business and Economic Research
Regional Variation in
Natural Gas Production
Within West Virginia
Bureau of Business and Economic Research
Natural Gas Production by County, 2013
Natural Gas Production Growth, 2011-2013
Source: WV Department of Environmental Protection
Mercer
Braxton
Fayette
Clay
Preston
Calhoun
Putnam
Roane
Wayne
Jackson
Gilmer
Raleigh
Boone
Monongalia
Brooke
Lincoln
Barbour
Lewis
Wyoming
Kanawha
Logan
Mingo
McDowell
Upshur
Taylor
Tyler
Ohio
Marion
Ritchie
Marshall
Doddridge
Wetzel
Harrison
Millions
Natural Gas Production by County, > 1 bcf, 2013
180
Natural Gas Production (bcf)
160
140
120
100
80
60
40
20
0
Top 10 Gas Producing Counties, 2013
Employment Growth
108
Index, 2001=100
Top 10 Gas Producers
106
104
102
Rest of WV
100
98
96
Source: Bureau of Labor Statistics
Bureau of Business and Economic Research
Forecast Annual Employment Growth,
2014-2019
Hancock
Brooke
Ohio
Marshall
Morgan Berkeley
Monongalia
Wetzel
Preston
Marion
Tyler
Jefferson
Mineral
Hampshire
Taylor
Pleasants
Harrison
Doddridge
Tucker
Barbour
Grant
Hardy
Ritchie
Wood
Lewis
Wirt
Gilmer
Upshur
Randolph
Calhoun
Jackson
Braxton
Roane
Mason
Pendleton
Webster
Clay
Putnam
Pocahontas
Cabell
Wayne
Nicholas
Kanawha
Lincoln
Greenbrier
Fayette
Boone
2014-19 Average Annual
Employment Growth
< 0%
Mingo
Raleigh
Logan
Summers
Wyoming
Mercer
Source: WVU BBER County
Econometric Model
0% - < 0.8%
Monroe
0.8% - < 1.2%
≥ 1.2%
McDowell
Bureau of Business and Economic Research
Natural Gas and West
Virginia’s Fiscal Stability
Bureau of Business and Economic Research
WV Severance Tax Revenue by Source
700
Millions of 2014 dollars
Other
600
Natural Gas
Coal
500
400
300
200
100
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Source: US Federation of Tax Administrators
Bureau of Business and Economic Research
Human Capital in West Virginia:
Education and Health
Bureau of Business and Economic Research
75
60
Source: US Bureau of Labor Statistics
West Virginia
Mississippi
Alabama
Arkansas
New Mexico
South Carolina
Kentucky
Tennessee
Arizona
Florida
Michigan
North Carolina
Oklahoma
New York
Louisiana
Delaware
Oregon
Hawaii
Georgia
California
Pennsylvania
Ohio
US
Washington
Nevada
Idaho
Indiana
Montana
New Jersey
Maine
Missouri
Rhode Island
Illinois
Texas
Massachusetts
Connecticut
Virginia
Maryland
Vermont
Alaska
Colorado
Utah
Wyoming
Wisconsin
Kansas
New Hampshire
South Dakota
Minnesota
Iowa
Nebraska
North Dakota
Labor Force Participation Rate, 2014
Percent of Civilian Non-institutionalized Population
70
65
63
53
55
50
45
40
Bureau of Business and Economic Research
Share of People 25 Years or Older with a
Bachelor’s Degree or Higher, 2013
AK
HI
Source: 2013 American Community Survey, US Census Bureau
Share of People 25 to 34 Years Old
with a Bachelor’s Degree or Higher, 2013
AK
HI
Source: 2013 American Community Survey, US Census Bureau
All-Cause Mortality Rates, 2011
WA
ME
MT
ND
MN
VT
OR
ID
WI
SD
NY
MI
NH
MA
CT
WY
IA
RH
NJ
PA
NE
OH
NV
UT
IL
MD
DC
IN
WV
CO
CA
DE
KS
VA
MO
KY
NC
TN
OK
AZ
AR
NM
SC
MS
TX
AK
AL
GA
Age-Adjusted Deaths per
100,000 Population
LA
821.9 - 956.1
HI
FL
756.0 - 821.8
722.8 - 755.9
690.7 - 722.7
584.9 - 690.6
Source: US Centers for Disease Control
Bureau of Business and Economic Research
Share of Population 18 to 64 Years Old
with Disability, 2013
20
18.1
15
10.5
5
WV
KY
AR
MS
AL
ME
OK
TN
NM
LA
MI
MO
SC
OR
IN
MT
OH
NC
VT
SD
ID
NV
WA
GA
PA
DE
US
AZ
FL
KS
NH
WY
AK
TX
WI
RI
IO
VA
CO
MA
IL
NE
DC
NY
MD
MN
UT
ND
CA
CT
NJ
HI
10
Source: 2013 American Community Survey, 2013
After A Brief Rebound, WV Sees Population Shrink during Past 2 Years
330
United States, Millions of Residents
310
West Virginia, Millions of Residents
U.S.
290
2.10
2.05
2.00
270
1.95
250
1.90
230
West Virginia
1.85
210
190
1.80
170
1.75
150
1.70
Source: US Census Bureau
Bureau of Business and Economic Research
With More Losses on the Way as Population Continues to Age in Place
3.0%
Average annual growth, %
2003-2013
2014-2019
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
-1.0%
-1.5%
0 to 17 yrs
18 to 44 yrs
45 to 64 yrs
65 and older
Source: US Census Bureau; WVU BBER Econometric Model
Bureau of Business and Economic Research
WV Oil & Gas Extraction Workers From Outside the State
20
Percent of all WV O&G workers
18.3
18
16.3
16
14
12
9.7
10
8.6
8
6
4
2
3.4
3.3
2008
2009
1.1
0.0
0
2006
2007
2010
2011
2012
2013
Source: US Census Bureau, ACS PUMS data
Bureau of Business and Economic Research
Where Does West Virginia’s
Natural Gas Go?
Bureau of Business and Economic Research
Natural Gas Consumption in West Virginia
Billion cubic feet
120
100
Electric Power
80
Industrial
60
40
Commercial
20
Residential
0
Source: US Energy Information Administration
Segments of WV’s Manufacturing Sector Expected to Perform Well
Wood Products & Furniture
Plastics & Rubber
Transportation Equipment
Food & Beverage
Manufacturing
Other Durables
Chemicals
Nonmetallic Mineral Products
Fabricated Metals
Primary Metals
Other Nondurables
-7%
-6%
-5%
Source: Workforce WV; WVU BBER Econometric Forecast Model
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
Average annual growth, %
Bureau of Business and Economic Research
Coal versus Natural Gas in
Electric Power Generation
Bureau of Business and Economic Research
12
$ per MMBtu
Average U.S. Cost of Fossil Fuels for Power Generation
10
8
6
Natural Gas
4
2
Coal
0
Source: US Energy Information Administration
Bureau of Business and Economic Research
Share of US Electric Power Generation by Fuel Type
60%
Share of generation
Coal
50%
40%
30%
20%
Natural Gas
10%
Source: US EIA
Notes: Projection numbers represent the US EIA projection under the reference case.