The Influence of the Marcellus Shale on Employment and Wages in West Virginia

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1 Research, Information and Analysis November 212 The Influence of the Marcellus Shale on Employment and Wages in West Virginia

2 Employment and Wages and the Marcellus Shale Data from the U.S. Energy Information Administration for the past decade reveal a subtle, yet distinct shift in the use of fossil fuels for the generation of electricity in the United States. Graph 1 reflects significant movement toward natural gas as a power generation fuel source, and even more, portends the impending influence of the Marcellus Shale in the eastern U.S. The overall effect on specific industries in West Virginia due to activity within the Marcellus Shale gas field is becoming more evident as an examination of the most recent forty-eight month interim confirms. Data from the Quarterly Census of Employment and Wages (QCEW) reveals employment and wages in at least two specific industries sectors (Graph 2), have risen appreciably in some areas of the state. Statewide, employment in oil and gas extraction core industries in 211 has grown by 916, which represents an improvement of 9.5 percent since 28. The average wage has increased by more than $8,1 during this period from a level of $61,898 to an annual average pay of $7,82 in 211. Primary employment and wage growth, however, has occurred mostly in two Megawatthours 1,7, 1,5, 1,3, 1,1, 9, 7, 5, 3, 1, Source: U.S. Energy Information Administration United States Generation by Energy Source Electric Utilities, 22 - July 212 Coal Natural Gas Graph 1 1

3 industry sectors. (1) Establishments engaged in the construction of oil and gas pipelines, mains, refineries, and storage tanks have shown significant increases over the past four years. Employment in this sector stood at 1,276 in 28 and in 211 had grown by more than 5 percent to a level of 1,92. Wages during this period grew by approximately 18.9 percent from an average of $6,329 in 28 to $71,723 in 211. (2) Similarly, businesses engaged in support activities such as excavation, well surveying, running and cutting casings and other well work showed employment and wage gains. In 28 statewide employment was recorded at 2,782 and by 211 had reached a level of 3,793. This represents an increase of more than 36 percent. Wages for this industry in the interim increased more than 28 percent from an average wage of $46,615 in 28 to a level of $59,969 in 211. Though both industry sectors include oil and gas in their definition of activities, there can be no doubt the recent upswing in activity within the two can only be attributed to measurable activity in the Marcellus Shale gas field. Employment *Total employment includes NAICS codes: Employment and wage activity within the Total Employment* seven state workforce investment areas (WIA) was varied (Graph 3). Of the six core oil and gas industry sectors 1 Graph 2 in WIA 1, there were some modest wage gains while total employment fell by more than 39 percent. Although total employment 2 Oil and Gas Extraction Selected Core Industries Employment Statewide Support Activities for Oil and Gas Operations (213112) Oil and Gas Pipeline and Related Structures (23712)

4 grew less than five percent in WIA 2 and average wages improved by 2 percent, one core sector revealed a marked expansion in the four-year analysis. The drilling of gas wells in 28 employed 14. By 211 this activity employed 178, a gain of more than one thousand percent. Only time will tell if other core oil and gas extraction industries show similar gains within this WIA. In a comparable manner, WIA 3 total employment lost 397 (-19 %) over the four years. However, the oil and gas pipeline and related structures sector grew by 33 in this period, a gain of more than 168 Hancock percent. WIA 4 has a less Brooke 15 impressive story to tell by Ohio 5 posting a total employment loss of 49 in the analysis. Marshall WIA 5 As in WIA 3, the oil and gas WIA 4 WIA 6 Monongalia Wetzel pipeline and related 25 Marion Morgan Tyler Preston Berkeley structures sector provided 2 Pleasants Mineral Taylor Hampshire Jefferson Harrison some improvement by 15 Doddridge Wood Ritchie Barbour expanding modestly (+2 1 Tucker Grant Wirt 45 Lewis Hardy 5 %), adding nine jobs. WIA 4 Gilmer Upshur 35 Jackson Calhoun Mason 5 revealed some Randolph 3 Roane 25 Braxton Pendleton development in nearly all 2 WIA 3 15 Putnam core sectors with total Clay Webster 1 Cabell 5 Kanawha Pocahontas employment expanding by Nicholas Lincoln 78 to a level of Wayne WIA Mingo Logan Boone Wyoming Fayette Raleigh Summers Greenbrier Monroe McDowell Mercer Oil and Gas Extractions - WIA 1 Employment WIA 2 Selected Core Industries Graph 3 3 The most notable gains occurred in support activities for oil and gas operations where

5 employment increased from two in 28 to a level of 68 in 211. The average wage improved as well from $21,862 to $6,35 over the four years. This represents an improvement of more than 176 percent. Workforce Investment Area 6 is, as the saying goes, where the action is. Of the 1,58 total employees in the state engaged in some form of oil and gas extraction, 4,275 or 4 percent (Graph 4) of the workforce labor in this area. WIA 7 % Other 15% Percent of Total Employment in Core Industries Oil and Gas Extraction WIA 1 5% WIA 2 7% WIA 3 16% Oil and Gas Extraction Core Industries Employment in 211 Statewide 1,58 WIA WIA WIA 3 1,667 WIA 4 1,55 WIA WIA 6 4,275 WIA 7 27 Other 1,573 WIA 6 4% WIA 5 2% WIA 4 15% Core industries employment include: Petroleum and Natural Gas Extraction Natural Gas Liquid Extraction Oil and Gas Well Drilling Support Activities for Oil and Gas Operations Oil and Gas Pipeline Structures Pipeline Transportation of Natural Gas Graph 4 4

6 The region has increased its total employment by more than 1, over the four-year analysis, representing an increase of approximately 31 percent. Most notably, however, the support activities for oil and gas operations sector has expanded more than 112 percent, and boosted employment 1,16. The average wage has expanded 42 percent from a level of $44,968 in 28 to $63,889 in 211. Lastly, WIA 7 sees little effect from the oil and gas industry, employing only 27 among all the core sectors in this region. Clearly, the early influence of the Marcellus Shale activity is centered in Workforce Investment Area 6. This is expected to continue in the months ahead with more measured growth anticipated in other regions of the state. Graph 5 $8, $7, Selected Core Industries Average Wage Statewide $7, $65, $6, Support Activities for Oil and Gas Operations Average Wage Workforce Investment Area 6 $6, $55, $5, $5, $4, $45, $4, $3, $35, $2, $3, $25, Support Activities for Oil and Gas Operations (213112) Oil and Gas Pipeline and Related Structures (23712) $2, $12, $11, $1, $9, $8, $7, $6, $5, $4, $3, $2, Drilling Oil and Gas Wells Average Wage Workforce Investment Area 2 5 $7, $65, $6, $55, $5, $45, $4, $35, $3, $25, $2, Support Activities for Oil and Gas Operations Average Wage Workforce Investment Area 5

7 Note: 1 Core Industries NAICS codes used for employment and wage analysis: Crude Petroleum and Natural Gas Extraction Natural Gas Liquid Extraction Drilling Oil and Gas Wells Support Activities for Oil and Gas Operations Oil and Gas Pipeline and Related Structures Pipeline Transportation of Natural Gas 6

8 Addendum 1 Select Oil and Gas Data for Workforce Investment Areas from Quarterly Census of Employment and Wages Core Industries NAICS Title Est. Emp. Total Wages Avg. Wage Est. Emp. Total Wages Avg. Wage Est. Emp. Total Wages Avg. Wage Est. Emp. Total Wages Avg. Wage STATEWIDE Support Activities for Oil & Gas Operations $44,23,583 $44, ,6 $49,536,199 $46, ,49 $83,525,835 $56, $133,28,32 $63, Oil & Gas Pipeline & Related Structures $8,11,766 $58, $9,83,25 $56, $18,525,49 $58, $11,216,842 $59, ,259 $22,29,844 $62, ,335 $211,32,145 $63, ,779 $246,996,79 $65, ,275 $33,73,245 $71,48 Workforce Investment Area $55,514,358 $7, $42,777,745 $66, $32,32,284 $7, $32,685,2 $68,956 Workforce Investment Area Drilling Oil & Gas Wells 5 14 $46,25 $29, $4,216,498 $82, $14,337,57 $84, $19,159,66 $17, $44,76,361 $59, $35,949,476 $57, $47,19,232 $65, $56,165,768 $71,823 Workforce Investment Area Oil & Gas Pipeline & Related Structures 7 18 $14,564,556 $8, $6,157,596 $61, $22,473,29 $89, $39,655,186 $82, ,64 $165,196,111 $8, ,616 $141,166,38 $87, ,448 $123,829,115 $85, ,667 $148,852,897 $89,294 Workforce Investment Area Oil & Gas Pipeline & Related Structures $19,965,312 $51, $12,43,15 $51, $11,716,474 $6, $23,78,774 $6, ,959 $81,411,562 $41, ,634 $67,589,948 $41, ,488 $65,894,349 $44, ,55 $73,857,121 $47,65 Workforce Investment Area Support Activities for Oil & Gas Operations 1 2 $43,723 $21, $95,25 $47, $1,2,773 $44, $4,13,791 $6, $8,732,99 $56, $9,33,726 $61, $11,66,242 $67, $15,841,97 $68,284 Workforce Investment Area Support Activities for Oil & Gas Operations $44,23,583 $44, ,6 $49,536,199 $46, ,49 $83,525,835 $56, $133,28,32 $63, ,259 $22,29,844 $62, ,335 $211,32,145 $63, ,779 $246,996,79 $65, ,275 $33,73,245 $71,48 Workforce Investment Area $2,425,443 $6, $2,83,727 $71, $1,981,611 $73, $1,934,842 $71,661 Source: US Department of Labor, Bureau of Labor Statistics, Quarterly Census of Employment and Wages 7

9 Addendum 2 Key Occupations in Marcellus Shale Related Core Industries Ann SOC SOC / Job Title Wage* Education Petroleum Engineers $91,525 Bachelor's Degree Geoscientists $63,575 Bachelor's Degree Work Experience Job Training Construction Laborers $33,42 Less than High School Short-term on-the-job training Operating Engineers $4,521 High school diploma or equivalent Moderate-term on-the-job training Plumbers, Pipefitters, and Steamfitters $46,34 High school diploma or equivalent Apprenticeship Derrick Operators, Oil & Gas $45,67 Less than high school Short-term on-the-job training Rotary Drill Operators, Oil & Gas $47,228 Less than high school Moderate-term on-the-job training Service Unit Operators, Oil & Gas $43,86 Less than high school Moderate-term on-the-job training Roustabouts, Oil & Gas $27,21 Less than high school Moderate-term on-the-job training Industrial Machinery Mechanics $41,34 High school diploma or equivalent Long-term on-the-job training Less than Welders $38,329 High school diploma or equivalent year Moderate-term on-the-job training Gas Plant Operators $63,78 High school diploma or equivalent Long-term on-the-job training Truck Drivers, Heavy and Tractor-Trailer $34,711 High school diploma or equivalent 1 to 5 years Short-term on-the-job training Gas Compressor and Gas Pumping Station Operators $54,68 Less than high school Moderate-term on-the-job training Wellhead Pumpers $35,414 Less than high school Source: US Department of Labor, Bureau of Labor Statistics, WorkForce West Virginia, Research, Information and Analysis * 212 First Quarter, Occupational Employment Statistics Less than 1 year Moderate-term on-the-job training 8

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