Potential Job Creation, Economic Benefits and Revenue Sharing from Oil and Natural

Gas Exploration and Production in the Mid-Atlantic Region

Virginia Governor’s Energy ConferenceRichmond, VAOctober 17, 2014

Five Year Plans and the Mid-Atlantic

• The Department of the Interior (DOI) schedules all offshore oil and gas leases through the development of a Five Year OCS Oil and Gas Leasing Program

• The Bush Administration included a Virginia lease sale in the 2007-2012 Five Year Plan

• Lease Sale 220 was scheduled to take place in 2011• The Obama Administration cancelled Lease Sale 220

following the Macando blowout in 2010

• The current Five Year Plan – from 2012-2017 – was finalized last August and does contain any Mid-Atlantic lease sales

• DOI will begin developing the 2017-2022 Five Year Plan sometime in 2014

The Mid-Atlantic Resource Base

• The Department of the Interior conducted a resource assessment in 2011 that analyzed the oil and natural gas resource base for the entire OCS

• Part of the assessment is of Undiscovered Technically Recoverable Resources (UTRR)

• Mid-Atlantic Resource Base• Crude Oil

• 95th Percentile 600,000 barrels• Mean 3.30 billion barrels• 5th Percentile 5.58 billion barrels

• Natural Gas• 95th Percentile 1.01 trillion cubic feet• Mean 19.36 trillion cubic feet• 5th Percentile 38.94 trillion cubic feet

Benefits of Mid-Atlantic OCS Leasing: Jobs, Economic Growth and Government Revenues

• In deciding whether to support inclusion of Mid-Atlantic lease sales in the 2017-2022 program, state officials will need to consider the tremendous economic impacts and potential revenues that could be generated for the Mid-Atlantic states should offshore exploration and production take place.

• A recent report by ICF International estimates that the OCS exploration and development activity in the Mid-Atlantic could:

• Create approximately 10,588 new jobs in Delaware, Maryland, Virginia and North Carolina;

• Add $1.935 billion annually to the Gross Domestic Product; and• Generate almost $201.06 billion in government revenues at all

levels of government (federal, state and local).

Federal Revenue Sharing

• Federal Government collected $10.5 billion from leasing activity on public lands in FY2011

• Revenues collected are from Lease Bids, Rents and Royalties

• The federal government shares onshore leasing revenues with the states – 50%

• Following passage of GOMESA in 1996, the federal government shares Gulf of Mexico offshore leasing revenues with TX, LA, MS and AL – 37.5%

• In order to have revenue sharing in Mid-Atlantic, the GOMESA revenue sharing provisions will need to be extended legislatively

Benefits of Mid-Atlantic OCS Leasing:Revenue Sharing

• The revenue sharing program created for the Gulf of Mexico states in GOMESA 1996 creates a pool equal to 37.5% of the OCS leasing activities (Leasing Bids, Rents and Royalties)

• The revenue pool is divided among the states based on a formula that accounts for the location of the well head

• Valuing the Mid-Atlantic Resource Base• Average forecast prices for West Texas Intermediate (WTI) crude

and Henry Hub natural gas from the Energy Information Administration’s 2013 Annual Energy Outlook

• Oil $106.87 per barrel • Natural Gas $ 4.33 per thousand cubic feet.  

Benefits of Mid-Atlantic OCS Leasing:Revenue Sharing

• Under the OCS Lands Act, the federal government collects an 18.75% royalty rate on all oil and natural gas produced in the OCS

• About 90% of the revenues that are collected by the federal government for OCS activities come from royalties

• The remaining 10% come from Lease Bids and Rents

• The value of the royalties is based on the value of the oil and natural gas that is developed – giving us the following potential in the Mid-Atlantic:

Benefits of Mid-Atlantic OCS Leasing:Revenue Sharing

• Under the GOMESA formula, 37.5% of the revenues collected for OCS Leasing Activities goes to the Gulf Coast States

• If we apply that formula to the Mid-Atlantic resource base, we can project the following potential for revenue share to Delaware, Maryland, Virginia and North Carolina:

Summary - Benefits of Mid-Atlantic OCS Leasing and Revenue Sharing

• OCS Oil and Gas Leasing Activities and Revenue Sharing will bring significant benefits to the Mid-Atlantic Region, including:

• Approximately 10,588 new jobs in Delaware, Maryland, Virginia and North Carolina

• $1.935 billion annually to the Gross Domestic Product• Over $201 billion in government revenues at all levels of

government (federal, state and local)• $36.84 billion in revenue sharing funds for the four states

• Approximately $1.22 billion annually of 30 years

Questions?

Michael WhatleyConsumer Energy Alliance

1666 K Street, NW, Suite 500

Washington, DC 2006

P: 202-674-1750

mwhatley@consumerenergyalliance.org

www.consumerenergyalliance.org