The Future of Natural Gas in West Virginia

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1 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 Copyright 2015 by WVU Research Corporation

2

3 Natural Gas and the Broader West Virginia Economy

4 170 Coal Production (Millions of Short Tons, Annualized) A Tale of Two Energy Industries Natural Gas Production (Billions of Cubic Feet) Coal Natural Gas Source: US Energy Information Administration; WVU BBER Econometric Model

5 Average Natural Gas Price dollars per thousand cubic feet Projection Source: US EIA Notes: Projection numbers represent the US EIA projection under the reference case.

6 WV Oil & Gas Active Well Counts 30 Thousands of Wells Source: WV Department of Environmental Protection

7 West Virginia Has Generally Outperformed in GDP Growth in Recent Years 6 % change, annual 5 West Virginia U.S Source: US Bureau of Economic Analysis

8 Real GDP Growth 112 Index, 2007= West Virginia US Source: Bureau of Economic Analysis

9 Real GDP Growth 112 Index, 2007= West Virginia West Virginia excluding extraction 100 US Source: Bureau of Economic Analysis

10 Oil & Gas and Coal Employment 40 Employment, Thousands Oil & Gas Coal Sources: US Bureau of Labor Statistics; WVU BBER Econometric Model.

11 Total Employment 720 West Virginia, Thousands United States, Millions 142 West Virginia U.S Source: US Bureau of Labor Statistics *Shaded regions indicate recessions

12 Per Capita Income Growth Has Outpaced the National Average 190 Index, 1998= West Virginia U.S Source: Bureau of Economic Analysis

13 Putting Relative Income Level at Its Highest Levels in Decades 85% Percent of US 80% 75% 70% 65% 60% Source: Bureau of Economic Analysis

14 Regional Variation in Natural Gas Production Within West Virginia

15 Natural Gas Production by County, 2013

16 Natural Gas Production Growth,

17 Natural Gas Production by County, > 1 bcf, 2013 Millions Natural Gas Production (bcf) Harrison Wetzel Doddridge Marshall Ritchie Marion Ohio Tyler Taylor Upshur McDowell Mingo Logan Kanawha Wyoming Lewis Barbour Lincoln Brooke Monongalia Boone Raleigh Gilmer Jackson Wayne Roane Putnam Calhoun Preston Clay Fayette Braxton Mercer Source: WV Department of Environmental Protection

18 Top 10 Gas Producing Counties, 2013

19 Employment Growth 108 Index, 2001= Top 10 Gas Producers Rest of WV Source: Bureau of Labor Statistics

20 Hancock Brooke Forecast Annual Employment Growth, Ohio Marshall Morgan Berkeley Monongalia Wetzel Marion Preston Mineral Hampshire Jefferson Tyler Taylor Wood Pleasants Ritchie Doddridge Harrison Barbour Tucker Grant Hardy Wirt Gilmer Calhoun Lewis Upshur Randolph Pendleton Mason Jackson Roane Braxton Webster Cabell Putnam Kanawha Clay Nicholas Pocahontas Wayne Lincoln Boone Fayette Greenbrier Average Annual Employment Growth Mingo Logan Wyoming Raleigh Summers Mercer Monroe < 0% 0% - < 0.8% 0.8% - < 1.2% 1.2% Source: WVU BBER County Econometric Model McDowell

21 Natural Gas and West Virginia s Fiscal Stability

22 WV Severance Tax Revenue by Source Millions of 2014 dollars Other Natural Gas Coal Source: US Federation of Tax Administrators

23 Human Capital in West Virginia: Education and Health

24 Labor Force Participation Rate, Percent of Civilian Non-institutionalized Population 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 Source: US Bureau of Labor Statistics

25 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

26 Share of People 25 to 34 Years Old with a Bachelor s Degree or Higher, 2013 AK Source: 2013 American Community Survey, US Census Bureau HI

27 All-Cause Mortality Rates, 2011 WA MT ND ME OR ID MN VT NH WY SD WI MI NY MA RH CT NE IA PA NJ NV UT IL IN OH MD DC DE CA CO WV KS MO KY VA AZ NM OK AR TN SC NC MS AL GA AK HI TX LA FL Age-Adjusted Deaths per 100,000 Population Source: US Centers for Disease Control

28 Share of Population 18 to 64 Years Old with Disability, 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 Source: 2013 American Community Survey, 2013

29 After A Brief Rebound, WV Sees Population Shrink during Past 2 Years 330 United States, Millions of Residents West Virginia, Millions of Residents U.S West Virginia Source: US Census Bureau

30 With More Losses on the Way as Population Continues to Age in Place 3.0% Average annual growth, % 2.5% % 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

31 WV Oil & Gas Extraction Workers From Outside the State Percent of all WV O&G workers Source: US Census Bureau, ACS PUMS data

32 Where Does West Virginia s Natural Gas Go?

33 Natural Gas Consumption in West Virginia 120 Billion cubic feet Industrial Electric Power Commercial 20 Residential 0 Source: US Energy Information Administration

34 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% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% Source: Workforce WV; WVU BBER Econometric Forecast Model Average annual growth, %

35 Coal versus Natural Gas in Electric Power Generation

36 12 $ per MMBtu Average U.S. Cost of Fossil Fuels for Power Generation Natural Gas 4 2 Coal 0 Source: US Energy Information Administration

37 Share of US Electric Power Generation by Fuel Type 60% Share of generation 50% Coal 40% 30% 20% Natural Gas 10% Source: US EIA Notes: Projection numbers represent the US EIA projection under the reference case.

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