KOGA releases economic impact of Kentucky’s oil and gas industry

“Our energy strategy is ‘all-of-the-above’ and our oil and natural gas industry is a vital part of Kentucky’s low-cost energy future,” Gov. Steve Beshear said. “The industry also supports a significant number of jobs as a major contributor to our state’s economy.”

The research presented the number of people working and investing in Kentucky’s oil and gas industry, the average annual salaries by industry sector, the amount of state taxes collected through severance taxes and the total production value of the industry to Kentucky’s economy.

In 2011, Kentucky had 14,632 producing natural gas wells and in 2012 produced over 3 million barrels of oil. Ninety-eight percent of the state’s natural gas production comes from eastern Kentucky counties while Henderson, Union, Lee and Leslie counties are the centers of oil production for Kentucky.

Over the past ten years (2002-2012) Pike, Floyd, Knott and Letcher counties have each produced over 100 billion cubic feet (Bcf) of natural gas.  Over the same period six Kentucky counties – Henderson, Union, Lee, Leslie, Perry and Letcher –each produced over 1 million barrels of oil. 

Slightly more than 9,000 Kentuckians are either salaried employees or proprietors in oil and gas and its support industries. In 2011, wage and salary employees made an average annual salary of $61,448 in Oil and Gas Extraction (NAICS 211) while the average annual salary for support industries was $50,014.

"Kentucky has been a steady producer of oil and natural gas for over a century. Today, the industry is a major economic engine, particularly in eastern Kentucky,” stated Paul Coomes.  “The region will get an economic boost as natural gas prices recover from the extremely low levels of the last few years."

Oil and natural gas severance taxes totaled $34,493,519 in 2012.  Since 2002, oil and gas severance revenues have totaled $365,987,080.63. Pike County accounts for $90,947,616 of natural gas severance revenues during the ten year period while Henderson County accounted for $8,918,344 in oil production revenues.

The 2007 Economic Census conducted by the federal Census Bureau revealed that Kentucky’s oil and gas industry’s value of shipments and capital expenditures contributed $984,609,000 to Kentucky’s economy.  Dr. Coome’s IMPLAN model for 2010 pegged the total value of production of Kentucky’s oil and gas industry at $1,108,807,000. KOGA will update both figures in 2014 when the 2012 Economic Census data and most recent IMPLAN data are released.

Permits for new wells reached a peak in 2008 at 2,014. The Great Recession’s impact on natural gas and oil prices lead to a steady decline in drilling permits over the past four years. In 2012, only 920 permits for new wells were issued by the Division of Oil and Gas. The recent uptick in natural gas prices along with oil prices hovering above $90 barrel is seen as an opportunity for Kentucky to reverse that trend in 2013.

“This landmark study will serve as a benchmark for years to come,” stated Doug Hyden, KOGA’s Board President and General Manager of the Kinzer Companies. “The industry is making a comeback from the low natural gas prices over the past few years and we’re looking forward to creating jobs in our communities and for the state.”

The Kentucky Oil & Gas Association was formed in 1931 to represent the interests of Kentucky's crude oil and natural gas industry. Thirty-four (34) Kentucky counties reported active natural gas production in 2012 while sixty (60) counties reported oil production. Nationally, Kentucky ranks 22nd in oil production and 18th in natural gas production.