February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 1

Date February 18 , 201 5

To Karen Milam

From Lisa Tarqu inio and Micha e l Fisher

Subject Profile of the Oil and Gas Extraction (OGE) Sector

, with Focus on Unconventional Oil

and Gas (UOG) Extra ction



## 1 Background

Recent advances in horizontal drilli ng and hydraulic fracturing along with rising oil and natural gas prices through the middle of the last decade have made the extraction of natural oil and gas from shale and tight

sand formations

– unconventional oil and gas (UOG)

– technically and economi cally feasible

. Applications of t hese advanced (or unconventional) drilling and production techniques

, coupled with large oil and gas reserves in shale and other unconventional petroleum

- bearing formations around the country, have resulted in dramatic incr eases in the number of wells drilled and hydraulically fractured in
the United States.

According to the 2013 Annual Energy Outlook (AEO 2013 ) published by the Energy Information Administration of the Department of Energy , natural gas production is expected to increase by 44 percent by 2040

, compared to 2011 production levels

. 1 EIA expects s hale gas production to be the largest
contributor to overall natural gas production by 2040

, with its production more than doubling

, and its share of total U.S. natural g as production increas ing from 34 percent in 2011 to 50 percent

. While t ight gas production is expected to increase by 2 5 percent, EIA expects its share of total natural gas production
to decline slightly (U.S. DOE, 2013a )

. 2

According to EIA, compared to 20 11 production

, total U.S. production of petroleum and other liquids 3 will grow by 26 percent in million barrels per day by 2019, mostly due to growth in onshore production of crude oil and natural gas liquids (NGL s ) from tight oil formations (including sha le formations ). 4

, 5
Between 2019 and 2040, EIA projects that total U.S. production of petroleum and other liquids will

1 All AEO2013 projections referred to in this document are for the R eference C ase scenario.

2 Throughout this document, the term “tight gas” refers to all gas produc ed from tight gas formations except for gas produced from shale formations, which is separately referred to as “shale gas.”

3 EIA’s AEO2013 projections of future oil supply include two broad categories: petroleum liquids and other liquid fuels. The

term p etroleum liquids refers to crude oil and lease condensate

– which includes tight oil, shale oil, extra

- heavy crude oil, and bitumen (i.e., oil sands, either diluted or upgraded), plant condensate, natural gas plant liquids (NGPL), and refinery gain. The te rm other liquids refers to oil shale (i.e., kerogen

- to

- liquids), gas

- to

- liquids (GTL), coal

- to

- liquids (CTL), and biofuels (including biomass

- to

- liquids) (U.S. DOE, 2013a).

4 NGL s include a wide range of components produced during natural gas processing a nd petroleum refining. NGL s include ethane, propane, normal butane (n

- butane), isobutane, and pentanes plus.

5 Throughout this document, the term “tight oil” refers to all oil produced from tight oil formations, including shale

formations. 

# Memorandum
Environment and ResourcesFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 2

decline by 8 percent , as crude oil production from tight oil formations levels off due to depletion of the more productive tight oil resou rces, and shift of tight oil production to less

- productive areas. Because

many wells drilled in tight oil and shale oil formations have limited production history, the impact of recent technology advances on future resource recovery is highly uncertain

. EI A projects that in 2040, conventionally and unconventionally produced crude oil will account for 51 percent of total U.S. liquids production, dropping from its peak of 59 percent in 2016 . EIA expects that in 2040, tight oil

– i.e., oil produced from very

- l ow

- permeability shale, sandstone, and carbonate formations

– will account for 33 percent of total U.S. oil production ( U.S. DOE, 2013a ).
According to EIA, in 2012, tight oil and shale gas accounted for 29 percent of total U.S. crude oil production and 40 percent of total U.S. natural gas production , respectively (U.S. DOE

, 201 3 g )

. As the
number of unconventional oil and gas wells in the United States increases, so too will the volume of wastewater that requires management

. The analysis and information in t his report was completed in 2013 (much of it based on EIA’s 2013 Annual Energy Outlook report). EPA will update the profile with the latest information, including the latest annual energy report, for the final rulemaking.



### 1.1 Industry Focus of this Profile

The OGE industry is identified in the North American Industry Classification System (NAICS) as NAICS

211111 : Crude Petroleum and Natural Gas Extraction , and NAICS 211112 : Natural Gas Liquid

Extraction . These two 6

- digit NAICS industry segments make up the OGE industry ( NAICS 21111 : Oil
and Gas Extraction ). Table 1

- 1 describes the two segments of the OGE industry.

To the extent possible, this profile reports data for the two OGE industry segments separately. However,

a s described below, much of the economic, financial and general business information used in this profile
is available only at a higher level of industry definition, for example, at the level of the overall Oil and Gas Extraction industry

. The UOG industry subsector lies mostly within Crude Petroleum and Natural

Gas Extraction

. The Natural Gas Liquid Extraction segment , however, does capture natural gas liquids
that may be recovered from shale or other unconventional formations.

Table 1

- 1 : OGE Industry Segments and Number of Facilities

NAICS NAICS Description Facilities Included Number of
Facilities

211111 Crude Petroleum and
Natural Gas Extraction (1) exploration, development and/or production of petroleum or natural gas from wells in which the hydrocarbons will initially flow or can be produced using normal pumping techniques or (2) the production of crude petroleum from surface shale or tar sands or from reservoirs in which the hydrocarbons are
semisolids. 5 ,956

211112 Natural Gas Liquid
Extraction (1) recovery of liquid hydrocarbons from oil and gas field gases and also included (2) sulfur recovery from natural gas

. 291

Total Oil and Gas Extraction (NAICS 21111) 6,247

Source s : U.S. DOC, 2007



## 2 Overview o f Oil and Gas and the U.S. Economy

This section provides a background review of the overall OGE industry and its products , including a
review of the demand for

, and role of

, oil and gas in the U.S. economy, oil and gas production levels, and prices. The o verall picture depicted by the data presented in this section is that between 2000 and 2012,

U.S. consumption of natural gas increased, with most of that increase occurring after 2005

. T h is increaseFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 3

in demand for natural gas has been largely met through an increase in domestic production

, mostly from
shale and tight

- sand formations, as opposed to imports

. On the other hand, c ompared to 2000, 2012 consumption of oil and petroleum products remained essentially unchanged , although it increas ed in the
middle of the analysis period. Unlike in the case of natural gas, imports play a signi ficant r o le in meeting U.S. demand for oil and petroleum products, despite the fact that in recent years this r o le diminished.

The decline in import dependence in recent years f or both natural gas and oil and petroleum products is largely due to increased domestic production , which resulted in lower U.S. prices for these commodities. 6
In turn, these lower prices lead to growth in exports of both natural gas

, and oil and petroleum products. Compared to natural gas prices, however, oil prices remain high.



### 2.1 Oil and Gas Demand and Consumption

The major products of the OGE industry are petroleum, natural gas

, and natural gas liquids. 7 Since 1990,

t he transportation sector has accounte d for the largest share of U.S. consumption of liquid fuels, which
include both petroleum and other liquids

. As discussed above, in AEO2013 projections, other liquids
include oil shale (i.e., kerogen

- to

- liquids), gas

- to

- liquids (GTL), coal

- to

- liquids (CTL) , and biofuels (including biomass

- to

- liquids) (U.S. DOE, 2013a)

. The industrial sector accounts for t he second largest
share , followed by residential and commercial consumers and electricity generators.

In the United States, consumption of OGE products

– o il, natural gas

, and natural gas liquids

– is closely linked to the nation’s overall economy. Specifically, a s GDP grows and the economy develops, demand for these products as inputs for energy production , transportation

, and certain manufacturing processe s increases

. However, improvements in energy efficiency over the last several decades have weakened this link: consumption of OGE products increases, in aggregate, with GDP, but generally at a lower rate than

GDP

. Figure 2

- 1 shows real U.S. GDP ($20 13 ) for 2000 through 201 2

, graphed against total U.S. consumption of crude oil and petroleum products

, and of natural gas ( Quadrillion Btu )

. As shown in Figure 2

- 1

, increasing ec onomic output (or total economic activity) over the 13

- year period of 2000 through 20 12 is accompanied by increased consumption of either oil and petroleum products (between 2000 and 2006) or natural gas (between 2007 and 2012 )

. Specifically, be tween 2000 and 2006, the 16

- percent growth in real

GDP w as accompanied by the 9

- percent growth in consumption of oil and petroleum products

, and a 7

- percent decline in consumption of natural gas. Between 2006 and 2012, 6

- percent growth in real GDP

was accompanied by the 18

- percent increase in consumption of natural gas and the 9

- percent increase in consumption of petroleum products. During 2009, all three metrics declined, with real GDP falling by 3 percent, and consumption of oil and petroleum products

, and natural g as declining 5 percent and 2 percent, respectively, reflecting significant recessionary pressures. Overall, between 2000 and 2012, real GDP grew by 23 percent, while consumption of natural gas increased by 9 percent and consumption of oil and petroleum pro ducts decreased by 1 percent.

W hile changes in consumption of OGE products may not match the changes in real GDP in magnitude, it
is clear that consumption is closely linked to GDP. Regardless of the direction of effect

– does economic

6 As discussed later in this profile, U.S. crude oil prices have been lower than international crude oil prices in recent years. This divergence has led to increased export of refined petroleum products, and recently to increased pressure for relaxation
of the 40

- year b an on exports of crude oil exports.

7 Natural gas liquids include ethane, propane, normal butane, isobutene, and pentanes plus, which are all longer carbon chain hydrocarbons than methane, which is the intended constituent of natural gas.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 4

growth drive oil an d gas consumption? or does oil and gas consumption drive economic growth?

– the importance of oil and gas consumption in the U.S. economy is clear.

Figure 2

- 1 : Real Gross Domestic Product (Billions; $20 13 ) w ith Total Consumption of Crude Oil and Petroleum Products and Natural Gas (Quadrillion Btu)

Source s : U.S. BEA

, 2014 and 2013; U.S. DOE, 2014 g , 2013 d , 2013 e and 2013 h

2.1.1 Consumption of Crude Oil and Petroleum Products

Domestic consumption of crude oil and petroleum products is met by a combination of domestic production and imports. As shown in Figure 2

- 1

, compared to 2000, 2012 consumption of oil and petroleum products remained essentially unchanged, although it incre ased in th e middle of the analysis period

. T otal consumption of crude oil and petroleum products p ea ked at 40 quadrillion Btu in 2005 and 2006; this increase in demand was met through imports, which also p ea ked during that time at 73 percent
of total consu mption

. 8 One reason for decline in the U.S. net dependence on imported liquid fuels since
2005 is the reduction in demand in some uses, such as personal transportation and home heating, coupled with slow growth in other applications (U.S. DOE, 2013a)

.

Bet ween 2000 and 2012, the role of imports in meeting U.S. demand for crude oil and petroleum products decreased slightly from 67 percent of total U.S. consumption to 62 percent of total U.S. consumption. The
role of d omestic ally produced crude oil and petrol eum products , on the other hand, increased steadily

8 Figure 2

- 1 assumes that domestic crude oil production, less crude oil exports, plus net imports of crude oil and petroleum products, equals total domestic consumption of crude oil and petroleum products. The calculation does not ac count for changes in inventories.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 5

since 2009, possibly due to increasing prices for oil , relative to those for natural gas ( Section 2.5 ) , which made domestic oil production more attractive ( Sec tion 2.2.1 )

.

Future domestic demand for liquid fuels will depend on the future level of activities dependent on liquid fuels, such as transportation

. Demand will also be a ffected by the fuel efficiency of the c onsumption technology, and the potential for fuel switching

, where liquid fuels are replaced with other fuel types, such as LNG, biofuels, or electricity. In 2012, the transportation sector accounted for 71 percent of petroleum and other liquids consumptio n, while the industrial sector and residential and commercial sector made up 23 percent and 5 percent of consumption, respectively. Power generation accounted for less than 1 percent of consumption (U.S. DOE, 2013c ). According to EIA, as currently anticipa ted,

c onsumption of petroleum and other liquids will grow through 2019, with the number of barrels per day falling by 5 percent between 2019 and 2040. The transportation sector will continue to account for the largest share of total consumption

, despite it s share of total consumption falling by 4 percentage points from 72 percent in 2012 to 68 percent in 2040

, due to improvements in vehicle efficiency. The industrial sector is the only end

- use sector likely to see an increase in consumptio n of petroleum and other liquids ( U.S. DOE

, 2013a )

. Going forward, as currently anticipated

, as the result of weak growth in demand for petroleum and other liquids due to tightening fuel efficiency standards in the United States coupled with faster growth in domestic produ ction of petroleum, mostly from tight oil formations, the import share of total supply of petroleum and other liquids will decline

. Further, w ith increasing domestic production and slow growth in consumption, the United States will likely become a net expo rter of petroleum products, with net exports more than doubling (on a million barrels per day basis) by 2040, compared to 2011 ( U.S. DOE

, 2013a )

.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 6

Figure 2

- 2 : Total Domestic Consumption of Crude Oil and Petrol eum Products ( Quadrillion Btu) a

a. Abt Associates analysis to combine exports, imports and field production on a Btu

- energy

- consumed basis.

Source s : U.S. DOE 2013 d

, 2013 e and 2013 h

Figure 2

- 3 presents total consumption of crude oil and petroleum products by Petroleum Administration Defense District (PADD) 9 from 2000 to 2012. Over this period, consumption of crude oil and petroleum products increased in only one PADD, PADD 4: Rocky Mountain, where it rose by 5 percent. PADD 1: East Coast saw the largest decline (11 percent) followed by PADD 5: West Coast (6 percent), PADD 3: Gulf Coast (5 percent) and PADD 2: Midwest (3 percent). In 2012, PADD 1: East Coast accounted for the largest share of U.S. consumption of crude oil and petroleum products at 28 percent , followed by
PADD 3: Gulf Coast (27 percent) and PADD 2: Midwest ( 26 percent ), PADD 5: West Coast (15 percent), and PADD 4: Rocky Mountain (4 percent)

.

9 Petroleum Administration Defense Districts (PADDs), a regional reporting concept developed during World War II, continue to be used by the EIA and other organizations to report information on petroleum (oil). PADDs were similarly used in this document to aggregate data on oil as well as natural gas, for consistency. For a breakdown of Petroleum Administration for Defense Districts by state please visit: http:// www.eia.gov/oog/info/twip/padddef.htmlFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 7

Figure 2

- 3 : Crude Oil and Petroleum Products Total Consumption in the United States by Petroleum Administration Defense District (Quadrillion Btu)

Source s : U.S. DOE, 201 3 f

2.1.2 Consumption of Natural Gas

U.S. consumption of natural gas rose throughout the 1980s and 1990s due to low prices relative to prices for oil products. This led to investments in infrastructure for natural gas, especially electric generation
facilities (Augustine et al, 2006)

. Figure 2

- 4 shows total domestic consumption of natural gas for the 13

- year analysis period of 2000 through 2012. Total consumption of natural gas continuously declined until 2005, at which point it began to steadily increase. Overall, between 2000 and 2012, total consumption of natural gas increased by 13 percent

. According to 2012 EIA data, a non

- trivial share (8 percent) of the gross domestic supply of natural gas (from domestic production and imports) was consumed in the natural gas production and delivery process, itself, as lease and plant fuel (5 percent of total) and fuel for pipeline and distribution services (3 percent of total). The remaining 92 percent of gross supply is available to natural gas consumers, and was delivered to the following sectors: electrical power (3 6 percent of total), industrial (28 percent of total), residential (16 percent of total), commercial (11 percent of total), and
vehi cle fuel (0.1 percent of total) (U.S. DOE, 201 4 f ).
Like oil consumption, natural gas consumption is met through both domesti c production and imports of natural gas . Compared to oil consumption

, however, natural gas imports make up a much smaller share of total domestic consumption of natural gas. While between 2000 and 2012 natural gas imports fluctuated,
their share of domesti c consumption overall grew through 2007, at which point it began to decline. Between 2007 and 2012, the share of natural gas imports decreased from 19 percent to 12 percent. Therefore, the overall increase in demand for natural gas was met through domestic production of natural

gas , largely due to growth in production of natural gas from shale formations

, rather than imports

. While the decline in natural gas prices, resulting from growth in domestic natural gas production, mostly due toFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 8

shale gas, made the United States a less attractive export market for other countries

, thereby reducing U.S. natural gas imports ; they also made purchases of U.S. natural gas for foreign customers more attractive, increasing exports (U.S. DOE, 2013a ). As shown in Figure 2

- 9

, later in this report, exports of natural gas increased by more than six times during the period of analysis.

Future domestic consumption of natural gas and natural gas exports is subject to uncertainties, includin g, but not limited to domestic and international economic growth, natural gas prices, prices of alternative fuels, and development of new production capacity in foreign countries, particularly from deep

- water reservoirs, shale gas deposits, and the Arctic. Within natural gas consumption, the largest changes are likely to occur in natural gas converted into liquid fuels, which is then directly consumed in transportation as compressed natural gas (CNG) or liquefied natural gas (LNG), or exported as LNG. A num ber of
factors affect whether LNG is used as a transportation fuel or exported as LNG (U.S. DOE, 2013a) . These
factors include:

 The price differential between crude oil and natural gas

. T he higher is the oil

- to

- gas price ratio, the greater is the incentive to use natural gas

, both in U.S. and foreign markets

.  The availability of LNG export terminals in the United States and import terminals in receiving
countries. Currently, LNG exports are constrained by LNG export capability

– i.e., the equipment
for com pressing and liquefying natural gas, for storing LNG, and for transferring the liquefied gas
to LNG tankers. As of January 2013, the Department of Energy had received 31 applications for LNG export permits. Eight applications involve conversion of existing LNG import terminals to export capability, while the remaining 23 applications involve construction of new LNG export terminal capacity. These applications indicate significant interest of U.S. business to increase natural gas exports in light of natural gas’ significant discount to oil prices in U.S. markets, and increasing worldwide demand for natural gas. In addition to the need for export infrastructure in the United States, receiving countries must have capacity for receiving the LNG imports.
Constrai nts exist here as well ( Ratner et al , 2013).

 Trade restrictions of export of natural gas. Under 1992 amendments to the Natural Gas Act, approval from the Department of Energy is required for exporting natural gas. Countries with
which the United States h as entered a Free Trade Agreement (FTA) qualify for natural gas export on the basis of “national interest.” However, export to non

- FTA countries requires significantly more process and time to gain necessary export approval. Over 95 percent of the export v olume in the recent applications for LNG export, as described above, involve s export s to non

- FTA countries ( Ratner el al , 2013; U.S. DOE, undated ).

As the U.S. economy continues to recover , so will primary energy consumption

. U.S. total natural gas

consum ption, as currently anticipated, will grow by 21 percent by 2040, compared to 2011. The
residential sector is the only end

- use sect or where consumption is expected to decline ; this likely decline is due to improvements in appliance efficiency and falling d emand for space heating , attributable in part to people relocating to warmer regions of the country. Nevertheless, the residential sector will remain the third largest consumer of natural gas. Natural gas consumption in the electric power sector will grow at a
faster average annual rate compared to the industrial sector through 2040, and is expected to account for 30 percent of total electricity generation by 2040 . The expected growth in natural gas usage by the electric power sector is due to a combination of factors that make natural gas generating units an attractive choice for new generation capacity : the relatively low cost of natural gas, relative to coal ; relatively low capital

costs for new capacity and/or combined cycle conversion of existing non

- na tural gas capacity ; and increasingly stringent environmental limitations on coal

- based generation (including greenhouse gas limitations) compared to natural gas generation . Nevertheless, the industrial sector, which has led naturalFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 9

gas consumption since th e 1990 s despite a major overall decline in consumption during the last decade, will continue to account for the largest share of natural gas consumption through 2040, as the recovering

energy

- intensive industries enjoy relatively low natural gas prices. Th e electric power sector has seen the largest rise in natural gas consumption since 1990 and is projected to achieve a much closer second position to the industrial sector over the next several decades

. T he t ransportation and commercial sectors
will continu e to account for relatively small shares of total natural gas consumption (U.S. DOE, 2013a)

. Figure 2

- 4 : Total Domestic Consumption of Natural Gas (Quadrillion Btu) a

a. Abt Associates analysis to combine exports, imports and field production on a Btu

- energy

- consumed basis.

Source s : U.S. DOE 2014 h , 2014 j

, and 2014 k

Figure 2

- 5 reports total consumption of natural gas in the United States by PADD for 2000 t hrough 20 12

. During this time

, c onsumption of natural gas increased in PADD 1: East C oast

, PADD 4: Rocky
Mountain , and PADD 2: Midwest by 37 percent

, 27 percent , and 1 percent , respectively, while remain ing relatively flat in PADD 5: West Coast and in PADD 3: Gu lf Coast

. In 20 12 , n atural g as c onsumption in PADD 1: East Coast, PADD 2: Midwest

, and PADD 3: Gulf Coast each constitute d approximately a quarter of total U.S. natural gas consumption. PADD 4: Rocky Mountain and PADD 5: West Coast made

up 4 percent and 15 percent of total natural gas consumption , respectively

. Of note, the Central Atlantic and New England sub

- districts of PADD 1 : East Coast , which accounted for approximately 16 percent of total domestic consumption in 20 12 , have had little local natural ga s production until the advent of shale gas production and have relied on imports from outside their regions to meet natural gas demand

. T he
Marcellus S hale provides a closer supply source and may affect market prices for natural gas in these parts of PADD 1, in part because natural gas will not need to be shipped as long a distance to reach these
markets

.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 10

Figure 2

- 5 : Natural Gas Total Consumption in the United States by Petroleum Administration
Defense Distric t (Quadrillion Btu) a

a. Data were taken from EIA, as reported by state, and aggregated to the PADD level by Abt Associates.

Source s : U.S. DOE, 2014 g



### 2.2 Domestic Production

As stated previously, t he main products of the OGE industry are petroleum, natur al gas

, and natural gas liquids

. In 20 12

, the Gulf Coast area (PADD 3) accounted for the largest share of total U.S. natural gas
and crude oil production (58 percent each). T he West Coast area (PADD 5) contributed the smallest share of total U.S. natural g as production (9 percent) , while the East Coast area (PADD 1) accounted for the smallest share of total U.S. crude oil production (less than 1 percent)

.

2.2.1 Domestic Production of Crude Oil
Beginning in 2005, the disparity between oil and natural gas prices s tarted to grow as oil prices continued to rise while natural gas prices declined (see Figure 2

- 10 ). This gap in prices, largely due to the sharp rise in production of shale gas, made oil a relatively more attractiv e option for producers. Many firms that produce both gas and oil began to focus on acquisition of

, and production from

, liquids

- rich plays over natural gas production (CHK, 2013 ; DVN, 2013 ). This shift towards liquids production is evident in the sharp ris e in production from tight oil plays , including shale, beginning in 2008. From 2007 to 2013, EIA estimated that tight oil production increased 10

- fold , from 0.34 to 3.48 million barrels per day (U.S. EPA, 2014b)

. Figure 2

- 6 shows U.S. crude oil production by PADD f or 2000 t hrough 20 1 2

. Overall

, domestic crude oil production steadily declined between 2000 and 2008

, while steadily increas ing after that

. This rise in crude domestic oil production during the last decad e coincides with an increase in domestic production ofFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 11

tight oil after 2008 (U.S. DOE, 2013a )

. Overall, between 2000 and 2012, domestic crude oil production
increased by 11 percent.

At the regional level, PADD 2: Midwest , where production more than doubled since 2000, saw the largest
increase. PADD 4: Rocky Mountains also saw a substantial increase of 49 percent, followed by PADD 1:
East Coast (22 percent) and PADD 3: Gulf Coast (18 percent). PADD 5: West Coast experien ced a relatively large decrease of 3 9 percent

. In 2012, PADD 3: Gulf Coast accounted for more than half of
total U.S. crude oil production , while PADD 2: Midwest and PADD 5: West Coast accounted for nearly
one fifth each

. PADD 4: Rocky Mountains and PADD 1: East Coast accounted for the smalles t shares of total U.S. crude oil production, at 7 percent and less than 1 percent, respectively.

Domestic production of light crude oil from tight formations (and consequent reduction in imports of light crude oil) has increased substantially over the last few years at the same time that imports of heavier
crude oils have increased. As a result, U.S. petroleum and energy transportation firms have made significant investments in crude midstream infrastructure, including pipelines that will bring higher
quant ities of light sweet crudes to petroleum refineries along the U.S. Gulf Coast. Substantial investments are also being made in rail infrastructure for shipping oil from areas with limited pipeline capacity

. However, recent accidents in rail transportation o f crude oil are creating pressure to shift away from this transportation mode, and to accelerate construction of pipeline capacity. Going forward, more investments may have to be made to ensure sufficient transportation infrastructure.

Future production o f crude oil in the United States is highly uncertain and will depend on many factors, including the production profiles of individual wells over time, the costs of drilling and operating those wells, the generated revenues, and advancement of production te chnologies. These factors are especially important in the case of tight oil, as its production moves into less

- explored areas. In addition, as noted above, less is known about the depletion profiles and longevity of tight oil formations because of the
rela tively short period that substantial production from these formations has been underway. The currently expected future growth in lower 48 onshore crude oil production will result primarily from continued development of tight oil resources, mostly in the Ba kken (PADD 2: Midwest and PADD 4: Rocky Mountain ) , Eagle Ford Formation (PADD 3: Gulf Coast) , and Permian Basin (PADD 3: Gulf Coast) ( U.S. DOE, 2013a )

. According to EIA, as currently anticipated

, total U.S. production of petroleum a nd other liquids will g row by 26 percent ( in terms of barrels per day ) by 2019, mostly due to increased production of tight oil, compared to 2011 levels . However, between 2019 and 2040, domestic production of petroleum and other liquids will decline by 8 percent due to depletion of resources in high er productivity fields , and extension of activity into lower productivity fields

. Because oil production from tight formations is a relatively recent phenomenon

, the ongoing exploration, appraisal, and development programs will expand operators’ knowledge about producing reservoirs

, and could result in development of methods for increased production from existing production fields and/or discovery and development of additional tight
oil resources

. Therefore , whether and when tight oil p roduction may start tapering off is highly uncertain

. As currently anticipated, by 2040, tight oil production will account for 33 percent of total U.S. daily oil production ( U.S. DOE, 2013a )

. According to EIA, t he Bakken and Three Forks formations ( PADD 2: Midwest and PADD 4: Rocky
Mountains ) will account for 32 percent of cumulative tight oil production between 2012 and 2040

, with the Eagle Ford Formation and Permian Basin (PADD 3 : Gulf Coast ) account ing for 24 and 22 percent

, respectively . The Austin Chal k (PADD 3: Gulf Coast) , Niobrara (PADD 4: Rocky Mountain) , Monterey (PADD 5: West Coast) , Woodford (PADD 2: Midwest) , and other formations will account for theFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 12

remaining 22 percent of cumulative tight oil production

. NGL production will also increase, most ly due to expected s trong growth in shale gas production ( U.S. DOE, 2013a )

. Figure 2

- 6 : Crude Oil Production in the United States by Petroleum Administration for Defense Districts (Quadrillion Btu)

Source s : U.S. DOE

, 2013 d

2.2.2 Domestic Production of Natural Gas
Natural gas, and especially unconventional natural gas, ha s become increasingly significant to the U.S.

energy economy. This rising importance largely results from its lower air pollution characteristi cs compared to coal, its substantial, and increasing, domestic supply, and the presence of a well

- developed processing and transmission/distribution infrastructure in the United States (GWPC and ALL, 2009). The energy sector has become progressively more r eliant on natural gas with the electric power sector ’s consumption of natural gas increasing by more than 50 percent between 1996 and 2005 (Augustine et al, 2006). In 2009, natural gas accounted for just under a quarter (23 percent) of total U.S. energy su pply and the majority of natural gas was from domestic resources , unlike the case for petroleum products (McRae and Ruppel, 2011)

. As discussed above, the dependence of the electric power sector on natural gas is likely to increase going forward. Furthermo re, the increase in supplies of domestic natural gas, largely
from shale gas development, coupled with reduced industrial demand due to economic weakness, has
reduced natural gas prices to levels below those forecast ed earlier in the decade (McRae and Rupp el, 2011). Increased natural gas production from shale and tight

- sands formations also has the potential to
further reduce U.S. dependence on energy

- related imports.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 13

Figure 2

- 7 reports natural gas marketed producti on by PADD. 10 Between 2000 and 200 5

, natural gas producti on declined by 6 percent and increas ed steadily after that resulting in an increase of 34 percent
between 2006 and 20 12

. Between 2000 and 2012 , total marketed production of natural gas in the United

S tates as a whole grew by 25 percent over the analysis period , with an average annual growth rate of 0 .8
percent.

The greatest increase in marketed production of natural gas occurred in PADD 1: East Coast

, where production increased by more than five times during the 13

- year analysis period . Marketed production of natural gas increased in other districts as well, nearly doubling in PADD 4: Rocky Mountain , followed by
PADD 5: West Coast (45 percent), PADD 2: Midwest (6 percent), and PADD 3: Gulf Coast ( 4 per cent)

. In 20 12

, approximately 60 percent of total U.S. marketed production of natural gas occurred in PADD 3:
Gulf Coast , followed by PADD 1: East Coast (12 percent), PADD 2: Midwest (11 percent), PADD 4: Rocky Mountain (10 percent), and PADD 5: West Coast (9 percent)

.
The U.S. OGE industry depends on the availability of oil and gas resources in the United States, so growth in the industry depends on current levels of production as well as available oil, natural gas, and natural gas liquids resources for f uture production

. Future growth of natural gas production, including that of unconventional gas, will also depend on whether or not natural gas prices rebound going forward. Low natural gas prices will likely have an adverse effect on all natural gas extra ction activity, including shale and tight gas, as natural gas producers find they are receiving diminishing returns on their investments in natural gas wells. Many OGE companies have investments in both oil and natural gas/natural gas liquids
extraction an d as the price of oil continues to rise while natural gas prices stay low, companies may switch investment from natural gas to oil. Chesapeake Energy, one of the major UOG companies, made such a transition in 2010 (Phillips, 2010). However, multiple source s have continued to project output growth based on increasing production of shale gas and tight oil. For instance, a ccording to the Bureau of Labor Statistics ( BLS ) , OGE output will increase by 28 percent

, by 2022, compared to 2012 (U.S. DOL,
201 3b ). Accor ding to EIA, natural gas production will likely increase by 44 percent by 2040, compared to the 2011 production levels , mostly due to growing development of shale gas, tight gas, and coalbed
methane resources

. E IA expects shale gas production to contribut e the largest share to overall natural gas production growth

, with its production more than doubling and its share of total U.S. natural gas production increas ing from 34 percent in 2011 to 50 percent in 2040. While tight gas producti on is expected to incr ease by 25 percent, EIA expects its share of total natural gas production to decline slightly . The growth in CBM is not realized until 2035 when natural gas prices and demand levels are high enough to spur more drilling (U.S. DOE, 2013a )

.

10 Marketed production is defined by the EIA as “g ross withdrawals less gas used for repressuring, quantities vented and flared, and non

- hydrocarbon gases removed in treating or processing operations (i ncludes all qu antities of gas used in field and processing plant operation s)

. ”February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 14

Figure 2

- 7 : Natural Gas Marketed Production in the United States by Petroleum Administration for Defense Districts (Quadrillion Btu) a

a. Data were taken from the EIA, reported by state, and then aggregated by PADD. EIA da ta for federal offshore natural gas marketed production in the Gulf of Mexico was added to PADD 3: Gulf Coast.

Source s : U.S. DOE, 2014 h



### 2.3 Net Imports

Net imports of oil and natural gas, which reflect the balance between U.S. imports and exports, are an imp ortant measure of the country’s dependence on non

- U.S. sources of these energy products, which are vital to our economy. Over the last several decades, the United States has been a net importer of both oil and natural gas , despite being a source of product ion for both resources. While in 2012, the U.S. was still a net importer for oil and natural gas, the rise in domestic production from unconventional oil and gas is leading to major changes in U.S. dependence on foreign oil and natural gas as exports rise rapidly and imports decline . The decline in U.S. demand for foreign oil has already affected international oil prices, as witnessed by the decline in Brent Crude oil prices in 2013 (U.S. DOE, 2014 i ). Furthermore, according to
EIA’s AEO2013 R eference C ase, the United States is projected to become a net exporter of natural gas by 2018 (U.S. DOE, 2014a)

. The United States’ substantial dependence on oil imports has exposed the U.S. economy to substantial
risk from rapidly increasing oil price s and supply disru ption , with serious market disturbances in the early and late 1970s presenting significant challenges in terms of simultaneous occurrence of recession and input

- based price inflation . The substantial improvements in energy efficiency achieved since the 197 0s coupled with increased domestic petroleum and natural gas production in recent years, largely due to production of oil and gas from unconventional formations and by unconventional production tech n iques

, puts the United States at the verge of energy inde pendence, a stated policy objective for more than four
decades.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 15

2.3.1 Net Imports of Crude Oil and Petroleum Products

Figure 2

- 8 presents U.S. net imports of crude oil and petroleum products against imports and exports f or 2000 through 2012

. Especially evident in the beginning of the period, c hanges in n et imports are largely
dr iven by changes in imports

, with exports of crude oil facing significant limitations due to U.S. regulations. 11 Net imports of crude oil and petrol eum products increased through 2005 , but have declined steadily after that

. These changes in net imports are consistent with the overall changes in consumption of crude oil and petroleum products coupled with the overall changes in the domestic production of crude oil during the period

. This decline in imports during the last few years coincides with the rapid rise in production of tight oil, which began in 2008. The trend in net imports over this period generally reflects that of imports ; however, while bo th net imports and imports declined since 2006, the higher decline in net imports, compared to that of imports, reflects the fast and steady increase in exports of crude oil and petroleum products beginning in 2006. Overall, between 2000 and 2012, U.S. imp orts of crude oil and petroleum products fell by about 8 percent, while exports increased by 208 percent, leadings to a n overall
29

- percent dro p in net imports. The continuing increase in domestic crude oil production will lead to
continue d decline in net imports of crude oil and petroleum production for the foreseeable future. Some analysts expect the U nited States to surpass Russia and Saudi Arabia as the world’s top oil producer by 2015, and be close to energy self

- sufficiency in the next two decades ( Sm ith , 2013)

. However, if domestic production of tight oils slows down due to faster depletion of resources in current production than currently anticipated , net imports of crude oil and petroleum product s may begin to decline at a lower

rate.

11 U.S. regulations on the export of crude oil set aside only a few, specific types of oil, such as crude oil produced in the Co ok Inlet, that qualify automatically for a U.S. oil export lice nse. For all other types of crude oil, would

- be

- exporters must apply for an export license, which has had the effect of limiting U.S. crude oil exports (Clayton, 2013).February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 16

Figure 2

- 8 : N et Imports of Crude Oil and Petroleum Products in the United States (Quadrillion Btu) a

a. Data from EIA is reported in thousands of barrels and was converted to quadrillion Btu.

Source s : U.S. DOE 2013 e an d 2013 h

2.3.2 Net Imports of Natural Gas

Figure 2

- 9 presents net imports, imports, and exports of natural gas in the United States for 2000 through

2012. As is the case with crude oil and petroleum production, for natur al gas, the trend in net imports over this period generally reflects that of imports; however, this relationship becomes weaker as exports of natural gas increase significant ly and stead ily. Overall, between 2000 and 2012, while natural gas imports
de creas ed by 17 percent, natural gas exports increased by more than six times , resulting in a 57

- percent
de crease in net imports. Between 2000 and 2007, imports and net imports of natural gas increase d by 22
percent and 7 percent, respectively, while exports more than tripled

. However, increasing domestic production of natural gas, mostly from shale formations , resulted in lower natural gas prices, making the United States a less attractive market to sell in, which reduc ed U.S. natural gas imports, but a more

attr active market to buy from, which increas ed U.S. natural gas exports. Consequently, between 2007 and 2012, while imports declined by 32 percent, exports increased by 97 percent, leading to a 60

- percent decline in net imports.

According to EIA, going forward

, total domestic natural gas consumption is likely to be outpaced by natural gas production, led by growing development of shale gas resources. Consequently, assuming U.S. natural gas prices remain relatively low, exports are expected to grow as impor ts co ntinue to decline, making the United States a net exporter of natural gas. I n 2020, net exports will likely account for less than 1 percent of total U.S. natural gas consumption and by 2040 will account for 12 percent (U.S. DOE,
2013a ; U.S. DOE, 2014 c ).February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 17

Figure 2

- 9 : N et Imports of Natural Gas in the United States (Quadrillion Btu) a

a. Data from EIA is reported in million cubic feet and was converted to quadrillion Btu.

Source s : U.S. DOE 2014

j and 2014 k



### 2.4 Economic Output

The OGE sector’s contribution to the U.S. economy may also be understood in terms of economic output

, which is the value of goods and services produced by the economy, as a whole, or by a particular sector

. Often, economic output is express ed in real terms

– i.e., removing the effects of inflation

– so that output
can be measured over time on a basis that does not include the effect of inflation

- based price increases.
Increases in value that result from inflation

- based price increases don’t reflect actual increases in the quantity of goods and services that are produced and are available for consumption

. The Industrial
Production Index (IPI) is a measure of real output in a given year , expressed as a percentage of real output in the base year

, in this case 2007 ; therefore, this index shows how much production occurred in a given year relative to the production that occurred in 2007

. Real output in this case represents quantity, not the actual value of the dollar, and of goods and services made

. Table 2

- 1 p rovides the Federal Reserve System’s IPI for the OGE industry sector for 2000 to 201 2

. Between 2002 and 2005, real output i n the
overall OGE industry (NAICS 211 11 ) fell every year

, but increas ed steadi ly after that , with the largest increase of 15 percent occurring in 2012 . Overall, during the 13

- year period of 2000 through 201 2, real output increased by 19 percent

, at an average annual growth rate exceeding 1 percent. Real output in the
NAICS 211111: C rude Petroleum and Natural Gas Extraction segment underwent approximately the same changes. Real output in the NAICS 211112: Natural Gas Liquid Extraction segment fluctuat ed throughout the analysis period

, but overall increased by 24 percent ; again, the la rgest growth of 14 percent occurred in 2012

.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 18

Table 2

- 1 : Industrial Production Index for the OGE Sector, by Year and Se gment a

Oil and Gas Extraction (NAICS 211 11 ) Crude Petro leum and Natural Gas Extraction (NAICS 211111) Natural Gas Liquid Extraction (NAICS 211112)
Year Index 2007=100 % Change Index 2007=100 % Change Index 2007=100 % Change

2000 106.90 N/A 106.79 N/A 107.50 N/A

2001 107.69 0.7% 107.89 1.0% 104.37

- 2.9%

2002 105.40

- 2.1% 105.40

- 2.3% 104. 61 0.2%

2003 104.17

- 1.2% 104.84

- 0.5% 95.44

- 8.8%

2004 101.56

- 2.5% 101.58

- 3.1% 100.76 5.6%

2005 97.72

- 3.8% 97.83

- 3.7% 95.68

- 5.0%

2006 98.12 0.4% 98.17 0.4% 97.09 1.5%

2007 100.00 1.9% 100.00 1.9% 100.00 3.0%

2008 101.22 1.2% 101.29 1.3% 99.77

- 0.2%

2009 106.34 5.1% 106.32 5.0% 106.92 7.2%

2010 109.69 3.1% 109.36 2.9% 116.60 9.1%

2011 115.57 5.4% 115.16 5.3% 124.19 6.5%

2012 126.68 15.5% 126.37 15.6% 132.97 14.0%

2000

- 201 2 Comparison Total Percent Change 18.5% 18.3% 23.7% Average Ann ual Growth Rate 1.4% 1.4% 1.8%

a. IPI in a given year is a measure of real output in that year , expressed as a percentage of real output in the base year, in this case 2007; therefore, this index shows how much production occurred in a given year re lative to the production that occurred in 2007. Real output in this case represents quantity, not the actual value of the dollar, and of goods and services made.

Source s : FRS, 2013b



### 2.5 P rices in the OGE Industry Sector

While oil and natural gas are often co nsidered together, the way in which prices are set for each commodity differs. While the price of oil is influenced more by global supply and demand

, and
international market conditions

, U.S. natural gas prices are determined largely on a regional basis, i n response to supply and demand conditions in North America . U.S. natural gas prices vary regionally
across the United States mostly due to regional l imitations on transportation and storage coupled with
differences in supply/demand characteristics across regional markets

. While these two products have some commonalities in the i r uses, they are not perfect substitutes as they require different transportation

, processing , and consumption infrastructure. I n instances where oil and natural gas can be used as substitutes, the price of one affects the demand for the other

. In recent years,
the oil

- to

- gas price ratio has reached historically high levels (McRae and Ruppel, 2011).

Natural gas is priced and traded at different locations , or market hubs at the inters ection of major pipeline
systems. Generally, t he trading price of natural gas differs across the major hubs, depending on the supply
and demand for natural gas at a specific location

. There are over 30 major market hubs in the United States, with the Henry Hub, located in Erath, Louisiana

, being the most important na tural gas hub in
North America. T he settlement prices at the Henry Hub are used as benchmarks for the natural gas market
in North America. O ther m ajor pricing locations include wellhead, where n atural gas is produced

, and citygate , where distribution companies receive gas from a pipeline. The wellhead price, hub price

, and citygate price are all directly linked, with differences reflect ing the cost of transporting natural gas by pipeline from wel lhead to the hub

, and then to the citygate.

Natural gas trades in t wo distinct markets: the spot market, and the futures market. Essentially, the spot
market is the daily market, where natural gas is bought and sold for immediate delivery

. For
understandin g the price of natural gas on a specific day, the spot market price is most informative. The futures market consists of buying and selling natural gas for future delivery under contract s; theseFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 19

transactions may be carried out at spot prices or forward pric es, i.e., prices expected to exist at the time of physical delivery

. Futures transactions are often used to shield market participants

– e.g., a local natural gas distribution company, or an industrial consumer

– from volatility in spot prices. Natural gas futures
are traded on the New York Mercantile Exchange ( NYMEX ); these are Henry Hub contracts in that they reflect the price of natural gas for physical delivery at this hub (NGSA, undated)

. For oil prices, the Brent crude oil price is an international b enchmark for light sweet crude oil and is used to price approximately two thirds of the world ’ s internationally traded crude oil. Brent crude oil is
sourced from the North Sea and trades on the London

- based Intercontinental Exchange ( ICE ) and the

NYMEX

. An other benchmark for crude oil, which is lighter and sweeter than Brent, is the West Texas
Intermediate ( WTI ) price. WTI oil is a very high quality crude oil and is refined mostly in the Midwest and Gulf Coast regions in the United States and trades on the Chicago Mercantile Exchange (CME) and

N Y ME X. Cushing, Oklahoma is the largest U.S. oil

- storage hub for WTI oil. While Brent crude recently
has been regarded as a better indicator of global oil prices, WTI prices are generally regarded as a better
reflectio n of the U.S. oil market

. Historically, WTI has traded closely to Brent ; however, during the last few years

, WTI crude has traded at a discount to Brent crude. The chief reason behind this price spread
for otherwise near

- perfect substitute commodities is t he rapid inflow of oil into Cushing from areas like
North Dakota and Canada , which has strained the transportation infrastructure needed to move crude oil from Cushing, Oklahoma, where WTI is quoted

, to the Gulf Coast for refining

. The resulting excess of supply at this market transaction node has depressed the WTI price compared to global prices, as better reflected in the Brent crude price. Like natural gas, both WTI and Brent oil trades in spot and future
markets

. Figure 2

- 10 reports prices for natural gas and crude petroleum for 2000 through 201 2 , measured in dollars per million Btu (MMBtu ) as the U.S. average wellhead price for natural gas, and as spot price s for

WTI and Brent for crude oil

. Overall, between 2000 an d 2012, the price of WTI oil more than tripled,
increas ing from $ 5.24 per MMBtu to $ 16.22 per MMBtu . During the same time, the price of natural gas
fell by 28 percent, from $ 3.58 per MMBtu to $ 2.59 per MMBtu. Throughout this period, oil prices
increased su bstantially and steadily except during the recession period of 2008

- 2009. In contrast, natural gas prices increased to a much lower degree, and continued largely in a downtrend since 2008. The decline in natural gas prices during recent years results from abundant U.S. production of natural gas made possible largely through growth in shale and tight gas production, while oil prices increased in response to global demand. Markets are beginning to arbitrage this spread on both the demand and supply
sides as c onsumers shift from oil to natural gas use where possible, and oil and gas developers shift their focus from natural gas to petroleum liquids production. The chart also shows the disparity between Brent and WTI prices (described above), which began in 2010

. By 2013 (not shown) , this gap had already begun to narrow as (1) infrastructure was put in place to transport tight oil from the Bakken, Permian and Eagle Ford to refineries and (2) the increase in U.S. light sweet crude oil production, mostly due to the rise in production from tight oil formations, led to a decline in U.S. need for foreign crude oil and exerted downward pressure on Brent crude prices ( U.S. 2014 i )

.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 20

Figure 2

- 10 : Prices in the OGE Industry (D ollars per MMBtu) a

a. Wellhead price is reported by EIA in dollars per thousand cubic feet and both oil prices are reported in dollars per barre l. These values were converted to dollars per million Btu.

Source s : U.S. DOE, 2014 d

, 2014 e , and 2014 l

Pe nding further resolution of transportation system constraints in the United States, the spread between WTI and Brent oil prices will likely continue to narrow. According to EIA, by 2025, the spread will likely be as small as $2 per barrel. Overall, future oil prices are uncertain and will likely depend on: (1) the economics of petroleum liquids supply from non

- OPEC countries, (2) OPEC investment and production decisions, (3) the economics of other nonpetroleum liquids supply, and (4) world demand for petrol eum and other liquids. Demand in the OECD countries depends primarily on price, while demand in non

OECD regions, where larger growth in world demand is occurring , is driven primarily by rates of economic growth that are particularly uncertain. Overall, go ing forward, the combination of increasing oil production and lower demand for liquid fuels may put downward pressure on oil prices, all else equal. On the other hand, continuing economic recovery and resulting increase in energy demand may push oil prices upwards. The high uncertainty regarding future oil prices is reflected in the fact that EIA ’ s AEO2013, three main projections show markedly different changes in oil prices. All three projections show a price of just below $100 dollars per barrel in 2013 b ut while the reference case and high oil price case show increases to over $150 per barrel and over $225 dollars per barrel, respectively, the low oil price case shows a decline to about $75 per barrel. According to EIA, if crude oil prices are to increase going forward, they are likely to do so more slowly than natural gas prices, bringing the oil

- to

- gas price ratio down from its 2012 level ( U.S. DOE, 2013a ).

Future U.S. natural gas prices are also uncertain and will depend on many factors, including, but not limited to, rates of resource recovery and decline from producing natural gas fields, especially shale gas wells, LNG exports and imports, and domestic and international economic growth. Higher economicFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 21

growth will result in higher natural gas consumpt ion through higher levels of housing starts, growing
commercial

- floor space, and increasing industrial output. Increasing natural gas production will result in faster depletion of existing natural gas resources, leading to a more rapid increase in the cost of new production as newer, less productive resources are brought into production, pushing natural gas prices higher. As previously described, currently low natural gas prices are likely to make natural gas production less attractive to existing and poten tial OGE firms, reducing natural gas production, at least in a relative
sense in the near

- term. At the same time lower natural gas prices may result in greater natural gas exports, depending on economic conditions outside the United States, setting the sta ge for upward pressure on natural gas prices. EIA projects Henry Hub prices to grow in all of its AEO2013 resource recovery and
economic cases , with the Reference Case predicting a doubling in prices from just under $4 per MMBtu
in 20 11 to nearly $8 per MM Btu (2011 dollars) in 20 40 (U.S. DOE, 2013a ). In a study by Deloitte

, the reference case Henry Hub spot prices increase by more than $3 per MMBtu between 2011 and 2030 while in an alternative case prices decline by about $2 per MMBtu, just between 2016 and 2030 (Choi and Robertson, 2011).



## 3 OGE Industry Structure and Economic Performance

This section reviews industry structure and recent economic/financial performance for the overall Oil and
Gas Extraction industry ( NAICS 21111 ) and its two s egments : Crude Pe troleum and Gas Extraction ( NAICS 211111 ) and Natural Gas Liquid Extraction ( NAICS 211112 )

. The review includes:

 Industry structure by number of firms/establishments and business size
 Revenue, employment, and payroll
 Pricing and market power

T he OGE indust ry has grown over the past decade: (1) the number of firms and number of establishments
in the United States have risen by approximately 2 percent and 5 percent, respectively

, (2) the number of OGE industry employees has increased by 43 percent, ( 3 ) revenu e has nearly doubled, and ( 4 ) annual payroll has increased substantially

. On the other hand, t he character of the industry

, with regards to firm
size

, has seen little change as the ratio of small firms (those with less than 500 employees) to large firms

re mained relatively constant

.



### 3.1 Number of Firms and Establishments

Table 3

- 1 reports the number of firms in the NAICS 21111: Oil and Gas Extraction sector by segment using data from the Statistics of U.S. Businesses ( SUSB) for the period 2000

- 2008

. Census defines firms

as: “ a business organization consisting of one or more domestic establishments in the same state and industry that were specified under common ownership or control. The firm and the establishment are the same for single

- establishment firms. For each multi

- establishment firm, establishments in the same industry within a state will be counted as one firm

- the firm employment and annual payroll are summed
from the associated establishments ” (U.S. DOC, undate d)

. The number of firms in the overall Oil and Gas

Extraction sector fluctuated during this period but increased by more than 2 percent overall , with the greatest increase in the number of firms occurring in 2006 ( less than 5 percent). T he Crude Petroleum and

Gas Extraction segment saw similar changes during that time period, with the number of firms increasing modestly by less than 2 percent overall. The number of firms in the Natural Gas Liquid Extraction
segment , on the other hand, increased substantiall y, by 62 percent. The greatest increase in the number of
firms in the Natural Gas Liquid Extraction segment took place in 2002 (35 percent).

Census defines establishment as: “ a single physical location where business is conducted or where
services or indu strial operations are performed ” (U.S. DOC, undated)

. B etween 2000 and 20 11, t heFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 22

number of establishments in the overall Oil and Gas Extraction sector , reported in Table 3

- 2

, saw a larger
increase of 5 percent , wit h largest the increases of 6 to 7 percent occurring i n 2006

, 2008 , and 2011

. As is the case with the number of firms, the Crude Petroleum and Gas Extraction segment saw similar changes in the number of establishments during that time period, with an overal l increase of 7 percent . Between 2000 and 2012, the number of establishments in t he Natural Gas Liquid Extraction segment , on the other hand, fell by 28 percent, at an average annual rate of 3 percent

.
As both tables

– Table 3

- 1 and Table 3

- 2

– show, the Crude Petroleum and Gas Extraction segment makes up nearly the entire Oil and Gas Extraction se ctor in terms of the number of firms and
establishments

. Specifically, i n 20 11

, the Crude Petroleum and Gas Extraction segment accounted for 98 percent of all firms and 96 percent of all establishments in the overall Oil and Gas Extraction sector

.

Table 3

- 1 : Number of Firms in the OGE Industry Sector , by Year and Segment

Year Oil and Gas Extraction

(NAICS 21111) Crude Petro leum and Natural Gas Extraction (NAICS 211111 ) Natural Gas Liquid Extraction (NAICS 211112)

Number % Change Number % Change Number % Change

2000 6,472 N/A 6,417 N /A 84 N/A

2001 6,435

- 0.6% 6,377

- 0.6% 84 0.0%

2002 6,317

- 1.8% 6,238

- 2.2% 113 34.5%

2003 6,273

- 0.7% 6,170

- 1.1% 135 19.5%

2004 6,288 0.2% 6,187 0.3% 136 0.7%

2005 6,317 0.5% 6,215 0.5% 137 0.7%

2006 6,606 4.6% 6,498 4.6% 144 5.1%

2007 6,528

- 1.2% 6,424

- 1.1% 139

- 3.5%

2008 6,641 1.7% 6,550 2.0% 124

- 10.8%

2009 6,500

- 2.1% 6,411

- 2.1% 120

- 3.2%

2010 6,513 0.2% 6,415 0.1% 130 8.3%

2011 6,628 1.8% 6,523 1.7% 136 4.6%

2000

- 2011 Comparison Total Percent Change 2.4% 1.7% 61.9% Average Annual
G rowth Rate 0.2% 0.1% 4.5%

Source s : SUSB, 2000

- 2011

Table 3

- 2 : Number of Establishments in the OGE Industry Sector , by Year and Segment

Oil and Gas Extraction (NAICS 21111) Crude Petro leum and Natural Gas Extraction (NAICS 211111 Natural Gas Liquid Extraction (NAICS 211112)

Year Number % Change Number % Change Number % Change

2000 7,740 N/A 7,273 N/A 467 N/A

2001 7,691

- 0.6% 7,254

- 0.3% 437

- 6.4%

2002 7,629

- 0.8% 7,135

- 1.6% 494 13.0%

2003 7,493

- 1 .8% 6,968

- 2.3% 525 6.3%

2004 7,372

- 1.6% 6,883

- 1.2% 489

- 6.9%

2005 7,390 0.2% 6,948 0.9% 442

- 9.6%

2006 7,803 5.6% 7,276 4.7% 527 19.2%

2007 7,542

- 3.3% 7,221

- 0.8% 321

- 39.1%

2008 7,993 6.0% 7,643 5.8% 350 9.0%

2009 7,891

- 1.3% 7,568

- 1.0% 323

- 7. 7%

2010 7,859

- 0.4% 7,521

- 0.6% 338 4.6%

2011 8,095 7.3% 7,757 7.4% 338 5.3%

2000

- 2011 Comparison Total Percent Change 4.6% 6.7%

- 27.6% Average Annual Growth Rate 0.4% 0.6%

- 2.9%

Source s : SUSB, 2000

- 2011February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 23



### 3.2 Number of Small Firms

As discussed earl ier, t he overall Oil and Gas Extraction sector is subdivided into the Crude Petroleum
and Natural Gas Extraction and Natural Gas Liquid Extraction segments. Small Business Administration (SBA) criteria define a small firm as having 500 or fewer employees

, in both segments

. Table 3

- 3 reports
the distribution of firms by firm size for 2000 through 20 11

. The percentage of small firms in the overall
Oil and Gas Extraction sector remained relatively constant during this period at a pproximately 9 9
percent. The Crude Petroleum and Natural Gas Extraction segment similarly maintained a high percentage of small firms, about 9 9 percent, throughout the period. On the other hand, the number of
small firms in the Natural Gas Liqui d Extraction segment increased substantially ; as a result, the percentage of small firms in this segment began at 60 percent in 2000 and rose to 7 3 percent in 20 11

.

Table 3

- 3 : Number of Firms in the OGE Indus try Sector by Year , Segment, and
Firm Size

Oil and Gas Extraction (NAICS 21111) Crude Petroleum and

Natural Gas Extraction (NAICS 211111) Natural Gas and Liquid
Extraction (NAICS 211112)

Year Employment

Group Number of

Firms % of Total Number of
Fi rms % of Total Number of Firms % of Total

2000 <500 6,373 98.5% 6,327 98.6% 50 59.5%

>500 99 1.5% 90 1.4% 34 40.5%

2001 <500 6,343 98.6% 6,292 98.7% 55 65.5%

>500 92 1.4% 85 1.3% 29 34.5%

2002 <500 6,224 98.5% 6,154 98.7% 77 68.1%

>500 93 1.5% 84 1.3% 36 31.9%

2003 <500 6,183 98.6% 6,092 98.7% 99 73.3%

>500 90 1.4% 78 1.3% 36 26.7%

2004 <500 6,195 98.5% 6,103 98.6% 98 72.1%

>500 93 1.5% 84 1.4% 38 27.9%

2005 <500 6,230 98.6% 6,137 98.7% 100 73.0%

>500 87 1.4% 78 1.3% 37 27.0%

2006 <500 6, 513 98.6% 6,416 98.7% 104 72.2%

>500 93 1.4% 82 1.3% 40 27.8%

2007 <500 6,423 98.4% 6,329 98.5% 98 70.5%

>500 105 1.6% 95 1.5% 41 29.5%

2008 <500 6,546 98.6% 6,462 98.7% 89 71.8%

>500 95 1.4% 88 1.3% 35 28.2%

2009 <500 6,407 98.6% 6,328 98.7% 84 7 0.0%

>500 93 1.4% 83 1.3% 36 30.0%

2010 <500 6,420 98.6% 6,334 98.7% 92 70.8%

>500 93 1.4% 81 1.3% 38 29.2%

2011 <500 6,530 98.5% 6,436 98.7% 99 72.8%

>500 98 1.5% 87 1.3% 37 27.2%

2000

- 20 11 Comparison

Total Percent Change <500 2. 5 % 1

. 7 % 9 8.0%
>500

- 1

. 0 %

- 3

. 3 % 8

. 8 % Average Annual
Growth Rate <500 0. 2 % 0. 2 % 6 .4%
>500

- 0. 1 %

- 0. 3 % 0. 8 %
Source s : SUSB, 2000

- 2011



### 3.3 Employment

Table 3

- 4 presents the number of employees for the overall Oil and Gas Extractio n sec tor and by segment for 2000 through 20 11 . Over this period, total industry employment increased substantially, by 43
percent , with the largest increase of 53 percent and the largest drop of 24 percent occurring in 2007 and 2008, respectively

. Employment in t he Crude Petroleum and Natural Gas Extraction segment saw similar changes, increasing by 48 percent during the analysis period. While employment i n the Natural Gas Liquids Extraction segment also increased during that time , this increase was much smaller , at 7 percent

.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 24

While in 2007, the Crude Petroleum and Natural Gas Extraction segment saw the largest increase in employment of 70 percent, the Natural Gas Liquids Extraction segment saw the largest decline of 40
percent. The employment contraction in 2008 , and also in 2007 in case of the Natural Gas Liquids

Extraction segment

, i s likely due to the economic downturn during that time

. According to BLS, employment in the overall Oil and Gas Extraction sector will continue to increase; by 2022, total sector

- w ide employment is projected to increase by 33.9 percent, compared to 2012 ( U.S. DOL, 201 3b ) . Employment in all but a few occupations within the overall Oil and Gas Extraction sector (file clerks, data entry and information processing workers, and machine t ool cutting setters, operators, and tenders, metal and plastic) will grow by 2.9 percent to 39.1 percent. The occupations with the highest expected growth include petroleum engineers, industrial machinery mechanics, logisticians and market research analyst s and marketing specialists (U.S. DOL, 201 3a ).

Table 3

- 4 : Number of Employees in the OGE Industry Sector by Year and Segment

Year Oil and Gas Extraction (NAICS 21111) Crude Petroleum and Natural Gas
Extracti on (NAICS 211111) Natural Gas Liquid Extraction (NAICS 211112)

Number % Change Number % Change Number % Change

2000 83,012 N/A 73,704 N/A 9,308 N/A

2001 87,980 6.0% 78,394 6.4% 9,586 3.0%

2002 88,280 0.3% 76,794

- 2.0% 11,486 19.8%

2003 83,447

- 5.5% 70,534

- 8.2% 12,913 12.4%

2004 82,879

- 0.7% 69,723

- 1.1% 13,156 1.9%

2005 85,562 3.2% 72,350 3.8% 13,212 0.4%

2006 92,683 8.3% 78,367 8.3% 14,316 8.4%

2007 141,809 53.0% 133,286 70.1% 8,523

- 40.5%

2008 107,100

- 24.5% 98,880

- 25.8% 8,220

- 3.6%

2009 1 07,394 0.3% 98,516

- 0.4% 8,878 8.0%

2010 109,199 1.7% 99,502 1.0% 9,697 9.2%

2011 118,959 8.9% 108,954 9.5% 10,005 3.2%
2000

– 20 11 Comparison Total Percent Change 43.3% 47.8% 7.5% Annual Average Growth Rate 3.3% 3.6% 0.7%

Sources: SUSB

, 2000

- 2 0 11

Combining the data shown in Table 3

- 4 on employment with the number of firms reported in Table 3

- 1 provides estimates of average employment per firm. In 2011, Oil and Gas Extractio n sector firms employed, on average, 18 employees while the average number of employees per firm in the Crude
Petroleum and Natural Gas Extraction segment and Natural Gas Liquid Extraction segment was 17 and 74, respectively.



### 3.4 Revenue and Payroll in the OGE Industry Segments

R evenue and payroll d ata from the Economic Census for years 1997, 2002, and 2007 also can provide insight into the effects of changing business conditions on the overall Oil and Gas Extractio n sector and its two segments throu ghout the period of analysis. As reported in Table 3

- 5 , b etween 1997 and 2007, the
overall Oil and Gas Extractio n sector grew in revenue, annual payroll

, and revenue less payroll. Likewise, the Crude Petroleum and Natu ral Gas Extraction segment experienced increases in all three
metrics during that time, despite decline s in 2002 . While between 1997 and 2007 revenue and revenue less payroll in the Natural Gas Liquid Extraction segment increased , annual payroll fell.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 2 5

Table 3

- 5 also displays average revenue per company (calculated as total revenues for the industry divided by the number of companies). For both the overall Oil and Gas Extractio n sector and the Crude
Petroleum and Natura l Gas Extraction segment, average revenue rose between 1997 and 2007 wi th the majority of the increase occurring between 2002 and 2007. A verage revenue in the Natural Gas Liquid

Extraction segment also rose throughout the time period, but declined between 1997 and 2002. Comparing the two segments, average revenue values for the Natural Gas Liquid Extraction segment are significantly higher than those in the Oil and Gas Extractio n sector ; one explanation of this difference is
that while total revenues for th e Oil and Gas Extractio n sector are higher, this segment also has a higher number of companies (see Section 3.1 above)

.

Table 3

- 5 : Key Economic Performance Statistics for OGE Industry Sector, by Year and Segme nt, 1997

- 2007

Year Revenue

(Millions; $2013) Average Revenue

per Company (Millions, $2013) Annual Payroll

(Millions; $2013) Revenue Less

Payroll (Millions; $2013)
Oil and Gas Extraction (NAICS 21111)

1997 $140,327 $20 $7,520 $132,808

2002 $141,625 $22 $6,713 $134,912

2007 $279,309 $54 $10,504 $268,805
Total Percent Change
1997

- 2007 99.00% 167.10% 39.70% 102.40%

Average Annual Growth
Rate 1997

- 2007 7.10% 10.32% 3.40% 7.30%

Crude Petroleum and Natural Gas Extraction (NAICS 211111)

1997 $1 06,447 $1 6 $6,781 $99,666

2002 $105,217 $1 7 $6,110 $99,107

2007 $232,972 $46 $9,953 $223,019
Total Percent Change
1997

- 2007 118.90% 196.37% 46.80% 123.80%

Average Annual Growth
Rate 1997

- 2007 8.10% 11.48% 3.90% 8.40%

Natural Gas Liquid Ext raction (NAICS 211112)

1997 $33,881 $38 1 $739 $33,142

2002 $36,408 $29 4 $603 $35,805

2007 $46,337 $41 4 $551 $45,786
Total Percent Change
1997

- 2007 36.80% 8.68%

- 25.50% 38.20%

Average Annual Growth
Rate 1997

- 2007 3.20% 0.84%

- 2.90% 3.30%

S ources: U.S. DOC, 1997, 2002, and 2007



### 3.5 Capacity Utilization

Capacit y utilization measures output as a percentage of total potential output based on available capacity. The Federal Reserve Bank reports capacity utilization for the overall Oil and Gas Extra ction sector . As depicted in Figure 3

- 1 , capacity utilization declined between 2000 and 2005 from almost 95 percent to just below 90 percent. As discussed earlier, d uring this period, the number of firms and establ ishments in the OGE sector and its two segments declined ( Section 3.1 ), along with domestic production ( Section 2.2
and Section 2.3 ) . This may have been partly caused by the recession of early 2000s

. B etween 2005 andFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 26

201 2 , capacity utilization overall increased steadily

, except for a mild decline in 2008

, again, likely due to weakening of the overall economy. The larger incr eases in capacity utilization occurred between 2005
and 2007 , in 2009, and in 2012

. The overall i ncrease in capacity utilization since 2005 coincides with the increase in natural gas production during that period and with production of domestic crude oil s ince

2008. Compared to 2000, capacity utilization in the Oil and Gas Extraction sector increased slightly by 3 percent to 98 percent ; such high capacity utilization leaves only modest room for production growth without capacity/infrastructure investments.

Figure 3

- 1 : Capacity Utilization for OGE Industry (NAICS 211 11 )

Source s : F

RS , 2013 a



### 3.6 Market Structure

, Pricing

, and Concentration in the OGE Industry Sector

The oil and gas industry has been traditionall y viewed as a tiered industry, with companies ranging from independent oil and gas exploration and production companies

, to mid

- tier oil and gas companies that usually have some level of vertical integration (e.g., to include transportation, refining, and/ or wholesale and retail distribution) in their operations, to major international companies , which have fully integrated operations and are among some of the largest companies in the world (APA, 2013; APC, 2013; CHK, 2013). U.S. OGE firms operate in compet itive markets

, comprised of a large number of firms both nationally and in given production regions , and produce commodities with uniform characteristics

. Consequently, natural gas and crude oil prices at the point of production

– the wellhead

– are largel y beyond the influence of the individual U.S. producer . The market power of U.S. OGE firms is further limited by t he potential for imports to enter domestic supply channels and displace domestic production if and as U.S. producers attempt to increase price s. This last point is of greater importance for crude oil

, compared to natural gas, due to the relative ease of crude oil transportation and storage

, and the resulting potential for imports to enter U.S. markets. However, domestically produced natural gas also faces priceFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 27

competition from imports through pipeline shipments from Canada and Mexico or import shipments of

LNG.

3.6.1 Market Structure and Pric ing in the OGE Industry Sector
Within the OGE industry, the markets for oil and natural gas differ substantiall y. The main differences are
discussed below.

Oil
The oil market is a globally integrated market with multiple supply sources that are connected to multiple
markets. This is in a large part due to the physical characteristics of oil, which allow it to be e asily transported in a number of ways and at a moderate cost (McRae and Ruppel, 2011). The largest producers of oil are Saudi Arabia, Russia, and the U nited S tates . However, the largest eight oil companies, as of 2005, were all national oil companies of th e OPEC states , with Russian companies coming in at 10 and 11
and Exxon Mobil at 12. While OPEC ’ s influence over oil prices has varied over time, in 2005 OPEC accounted for 65 percent of global oil reserves. As an international cartel, OPEC places producer quotas
on members in an effort to manage world oil prices. Other oil companies, even major producer s like Exxon Mobil, have relatively smaller reserves and have no influence over price ( Grant et al, 2006 ). Therefore, crude oil producers tend to be price ta kers

– meaning that they do not exert control over the price they receive at the point of production, the wellhead price . On the other hand, prices are greatly influenced by global demand for oil, with the largest source of demand being the U.S. and China ( Grant et al, 2006 ). While the U nited S tates is also one of the largest crude oil produc ers , it remains a major importer of oil ; as a result the level of U.S. imports can sign ificantly influence oil prices. The recent upsurge in U.S. oil production, largel y from tight oil plays, with a consequent decline in U.S. imports

, has exerted downward pressure on international oil prices, as seen in recent Brent crude prices ( Figure 2

- 10 ) ( U.S. DOE, 2014 i ).

Natural Gas

Unlike the oil market

, natural gas markets divide roughly into three broad regionalized markets: North America, Europe (including North Africa and Russia), and Asia (with links to the Persian Gulf). In North America, specifically within the United States, there is a relatively mature, integrated natural gas market with a robust spot market for the natural gas commodity. In U.S. natural gas markets, natural gas spot prices are determined by overall supply and demand (McRae and Ruppel, 2011). There is potential for

mar ket and pricing power along the natural gas supply chain

– particularly at the natural gas transportation stage because of the limited pipeline network and general monopoly tendencies of a company controlling access to a major pipeline. However, this marke t power potential does not extend to the natural gas producer since like crude oil producers, natural gas producers have relatively small reserves with no influence over price. 12 Therefore, n atural gas producers also tend to be price takers.

Natural gas pr ices are determined by a combination of national and regional market factors. A “ general ” national price for natural gas is determined by broad supply and demand conditions in the overall

12 The potential for market power does exist at the level of natural gas transportatio n and distribution because of the ability for pipelines and/or distribution companies to provide transportation and distribution services in a monopoly or oligopoly market structure. The pricing power from the transportation and distribution ‘bottlenecks’ can work both in the direction of the consumer, who may face limited supply choices for receiving natural gas, and in the direction of the natural gas producer, who may face limited choices for shipping gas from the point of production to market. For the s e reason s , shipment rates for interstate natural gas pipelines require approval from the U.S. Federal Ener gy Regulatory Commission (FERC), and natural gas sales prices for natural gas distribution companies, which distribute gas to local consumers, remain r egulated by state regulatory commissions

.February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 28

domestic market. Because supply is relatively fixed in the short run , prices can fluctuate substantially with changes in demand

– e.g., due to changing economic conditions, or weather conditions. On the supply side, differences in natural gas production, storage levels

, and transportation costs will also affect price. Gas prices can be further affected , differentially, at the regional level, based on supply/demand characteristics in specific regional markets. Limitations on transportation and storage infrastructure, which could effectively limit the flow of gas into a speci fic region despite rising demand, can lead to increased prices in that region than observed in other regions. Similarly, increased production in a region, such as is now occurring in the Mid

- Atlantic region as a result of increased gas production from shal e formations, can lead to relative price declines.

Over a longer period, natural gas prices can exhibit structural cyclicality . To illustrate, low production of natural gas means low supply and high prices which leads to an increased incentive for drillin g. As drilling and production increase so does supply leading to falling prices, which may a gain lead to lower production.

Large

- volume consumers of natural gas, mainly industrial consumers and electricity generators, generally have the ability to switch between oil and natural gas. When the price of gas is low relative to oil, these

consumers could switch to gas, increasing demand for natural gas and increasing gas prices. Alternatively, when gas prices are high, demand could shift in the opposite directi on causing a relative
decrease in nat ural gas prices (U.S. DOE, 2011b ).

3.6.2 Concentration in the OGE Industry
As previously discussed, the degree of concentration in national and regional markets can indicate potential for market power, which may provide poten tial for firms to affect prices

– but subject overall to
the broad market factors described above . Within the overall OGE sector, merger and acquisition (M&A) activity in the Exploration & Production (E&P) segment increased since the first quarter of 2009, reaching a peak in the fourth quarter of 2012 ( Deloitte, 2013 ). During this period, low prices for natural gas created a financial strain on small and midsized producers, resulting in increased consolidations in this industry segment. Increased acquisitio n and consolidation also occurred as larger oil OGE companies acquired the companies and/or production assets of smaller shale oil and gas producers, as the business potential of shale oil and gas has become increasingly obvious. Major acquisitions by some of the larger companies occurred in the Eagle Ford and Marcellus Shale during 2011 due to increasing confidence in
the long

- term potential for production of natural gas and oil from shale formations . Financial buyers also were making deals involving shale oil and gas plays. Deals by midstream businesses remained relatively constant with most transactions involving gas gathering and processing plays in North America (Deloitte, 2011). However, during the first half of 2013, M&A activity in the E&P segment dr opped, declining 43 percent from the previous year. Analysts assess this decline in M&A as indicative of a transition from acquisitions to development of North American UOG plays. In 2013, despite a drop in overall M&A activity, international buyers contin u ed to purchase U.S. properties, showing interest especially in Gulf of
Mexico assets ( Deloitte, 2013 ).



## 4 Financial Performance and Condition of the OGE Industry Sector
and UOG Activity

As part of this profile of the OGE sector, EPA reviewed the financial performance and condition of the sector over the past few years; the Agency also reviewed information on the financial outlook for the sector. In performing this review, EPA looked at both the general OGE sector and a component that is more specifically fo cused on UOG activities. These reviews show that both the overall OGE sector andFebruary 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 29

the component more specifically involved in UOG activity have experienced substantial growth and generally strong financial performance over the past few years, and that their financial outlook is strong going forward. As described in earlier sections, domestic OGE activity and its contribution to the U.S. economy accelerated significantly in the latter part of the last 10 years, with much of this growth occurring in UOG activi ty. To an important degree, the financial strength of the OGE sector and its generally positive outlook result from the opportunities in UOG exploration, development, and production.

Overall economic conditions affect d emand for OGE products and consequen tly, financial performance of
OGE firms

. Financial performance of OGE firms is also affected by prices for OGE products; therefore, the volatility of oil and natural gas prices tends to create a higher level of risk for OGE firms compared to firms in many other industries . Low oil or natural gas prices can decrease revenue, operating results and profitability

, which in turn can reduce cash flow and ability to obtain financial capital. Declining product prices can also reduce the quantity and value of a firm ’ s oil and gas reserves, thus requiring asset write

downs, which can weaken a firm ’ s balance sheet and increase the cost of financial capital.

The business model of an oil and gas producer requires that it produce from

– i.e., deplete

– its principal
busi ness asset, its oil and gas reserves. Accordingly, to remain a viable enterprise, the firm must continually replenish these reserves either by exploring for and developing new resources or by acquiring production resources from other firms. Weakness of fin ancial performance and condition, whether due to falling cash flow, a deteriorating balance sheet, or other factors, can increase the difficulty and cost of obtaining capital for developing or acquiring new reserves.

The following metrics were selected fo r assess ing the financial performance of UOG firms and the overall OGE industry:

 Revenue  Operating margin
 Net profit margin  Return on total capital
 Total c apital spending.

Data from the Value Line Investment Analyzer ® (Value Line) and firms ’ 10k SEC fili ngs and annual
reports was used to compile data and calculate the se selected performance metrics over the past 10 years (2003

- 2012) for selected public reporting firms in the OGE industry.

These metrics were developed for two broad sets of firms:

1. UOG Firm s. These are firms reported by Value Line as operating in the Natural Gas Diversified
and Petroleum Production OGE industry sub

- sectors and that were confirmed to have U.S. exploration and production operations in U.S. shale gas , tight gas , and/or tight oi l plays. EPA
based this determination on research of Value Line profiles, company websites and SEC filings, Oil and Gas Journal articles, Reuters, newspaper articles and http://oilshalegas.com/

. 13

2. Other OGE Firms. Fi rms reported by Value Line as operating in the Petroleum Integrated OGE industry sub

- sector with U.S. exploration and production operations

, regardless of whether they have any operations or interests in UOG plays , and firms in the Natural Gas Diversified and
Petroleum Production sub

- sectors for which UOG operations could not be confirmed

. 14

13 If a company was found to have production in an unconventional play, they were added to the UOG firms set. If no information could be found indicating that a firm had unconventional production, then it was cons idered an Other OGE firm. The results of this search may not be definitive.

14 Petroleum integrated companies were not included in the UOG Firms set

– even though a number of these large firms are known to have UOG operations

– because their business model differs from that of other OGE firms. These firms, such asDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 30 The objective in developing the UOG f irm dataset was to identify firms for which UOG activity is likely to be a substantial part of their business compared to the broad er industry. Looking at this subset of firms, compared to firms in the broader OGE industry, would thus give better insight into levels of, and trends in, financial performance and condition metrics for UOG E&P firms. In fact, the rise in development of

un conventional plays, in particular shale plays, was spearheaded by smaller companies

, from independent

start

- ups to established independent and mid

- size companies, like Devon Energy and Chesapeake Energy (Crooks, 2013). These smaller companies acquired dril ling rights in the “ sweet spots ” of the shale gas and oil plays before the industry ’ s larger firms made a serious entrance into the market. On the other hand, larger companies, such as the international, integrated majors like Royal Dutch Shell and ExxonMo bil, entered the market later and, in some cases, appear to have paid higher prices and bought less productive

assets (“US: Failing in Shale,” 2013). In addition, smaller companies are likely leading innovation in shale production, giving them another com petitive edge over the larger firms ( “ US: Failing in Shale, ” 2013). These relatively smaller firms have a clear difference in overall business structure and operations from other conventional E&P firms as well as the larger firms whose entrance into unconv entional production is markedly different. Therefore, the Other OGE firms dataset is intended to capture firms
with U.S. exploration and production operations

, which in many cases are known to include UOG operations

, but for which UOG exploration and produ ction is likely to be a less important element of their overall business in terms of contribution to production and revenue, and allocation of capital. As described below, for some of the metrics

– for example, total capital spending

– the financial profil e over time is strikingly different for the two firm sets, particularly during the mid to late 2000s

. T his
difference can be attributed

– if not largely, at least in part

– to the substantial increase in activity that occurred in UOG exploration and produc tion in the latter part of the decade, compared to general oil and gas exploration and production activity in the country.

To develop the financial

- indicator metrics reported below, EPA assembled data for the firms for the 10

- year period of 2003 through 20 1 2 from the source s listed above

. In developing data for this analysis, EPA
first sorted firms according to their business activities, as described above: UOG f irm s and Other OGE firms . Second, because EPA wanted this analysis to cover a period of 10 years

, the Agency excluded
firms that did not have 10 years of data for a t least one of the metric s

. Overall, 4 7 firms are in the final UOG firms set and 1 9 firms are in the final Other OGE firms set ; however , the number of firms used in the calculation for a g iven metric may be less than these totals because 10 years of data were sometimes not available for all of the metrics for a given firm. Three of the five metrics

– operating margin, net profit margin, and return on total capital

– are reported as percenta ge values and were used directly for this analysis. The revenue and total capital spending metrics are reported in Value Line and financial reports as absolute values and thus display a wide range of values across firms of varying sizes. For these metrics,

EPA developed an index for each firm , using 2003 values as the base year, and used these scale

normalized index values for the analyses presented below.

The following sections present charts and summary discussions for each financial performance/conditio n metric. EPA include d two charts for each metric. The first chart presents the median values of each metric
for the UOG firms and Other OGE firms . This chart provides insight into whether and how the profile of performance and change over time differs bet ween the UOG firms and Other OGE firms . This understanding is important for assessing the momentum and financial performance/condition in UOG extraction and production compared to the overall OGE industry. The second chart, which is for the UOG firms only

, presents the median, 10 th percentile and 90 th percentile values

, and the revenue

- weighted

Exxon Mobil, tend to be relatively larger firms that have business in all stages of oil and gas extraction process from exploration and production to retail operations. In addition, the contributi on of UOG activity to these firms’ overall business tends not to be as great as that for some of the smaller E&P firms, some of which have focused substantially on UOG activity in recent years.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 31 average of values. This information provides the basis for examining the profile of change over time and

year

- to

- year values across firms within the UOG f irm set.



### 4.1 R evenue Index

The r evenue i ndex provides a direct indicator of the overall scale of activity and, on a year

- to

- year basis, the change in activity level for each firm. As described above, because revenue is a dollar

- valued metric compared to the percentage v alues for margin and return on assets metrics, EPA converted the revenue metric to an index for each firm, by dividing the data series for each firm by the first year revenue value. This yields a r evenue i ndex over time for each firm with the 200 3 value eq ual to one. As described above,
to form the index series for each group of firms

- UOG firms and Other OGE firms

- EPA then weighted each firm’s index value by revenue and summed the revenue

- weighted values to yield the multi

- firm
index series.

As shown in Figure 4

- 1

, OGE

- industry revenue (as represented by the indexes for both UOG firms and Other OGE firms ) rose significantly between 2000 and 2008 before declin ing in 2009 at the time of recent
recession

. Beginning in 20 1 0, revenue rebounded for both firm sets , though not enough to reach the index
level of 2008. The steep increases in revenue before and after the recession coincide with the shale gas
boom

. Reflecting the effect of the shale gas boom, revenue for UOG firms rose more steeply than revenue
for Other OGE firms

, both before and after the recession

- induced decline in 2009

. In addition, while
revenue for Other OGE firms decline d in 2012, revenue continued to rise for the UOG firms

. As shown in Figure 4

- 2 , within UOG firms, t he 90 th percentile revenue index grew at a much higher rate , especially
between 2007 and 2008

, compared to Other OGE firms

. The 10 th percentile value experienced much slower growth , with a slight de crease in 2006

. Figure 4

- 1 : Revenue Index (Median) for UOG Firms and Other OGE Firms (200 3 =1)

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual ReportsDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 32 Figure 4

- 2 : Revenue Index for UOG Firms (200 3 =1)

Sources: Value Line 2003

- 201 2; Company 10k SEC Filings and Annual Reports



### 4.2 Operating Margin

For this analysis, and as reported by Value Line, o perating m argin is defined as earnings befo re depreciation, depletion, amortization, interest and income tax divided by revenue. This metric indicates a firm ’ s profitability on a ‘ pure ’ operations basis before accounting for non

- cash charges such as depreciation, depletion, and amortization , or tax and financial structure factors.

As shown in Figure 4

- 3

, the operating margin for UOG firms was higher than that of Other OGE firms for the entire period of analysis

, likely due to structural differences in the b usiness models of the typically smaller, non

- integrated E&P firms comprising the UOG firms set, and the typically larger, vertically integrated firms in the Other OGE firms set. Accordingly, what is more s ignificant in this comparison are
the differences i n the profile of change over time in the margin values for the two groups of firms. The

UOG firms ’ operating margin declined slightly over the reporting period , while operating margin for the
Other OGE firms increased substantially. The higher rate of incr ease in operating margin for Other OGE firms may reflect increasing prices for oil and refined products, relative to natural gas during much of the decade. Overall, the operating margin performance of the UOG firms set does not appear to have declined

or c hanged in an unfavorable way in comparison to the Other OGE firms set. In Figure 4

- 4 , b oth the average and 10 th percentile operating margins show an overall increase throughout the period of analysis

, while the med ian and 90 th percentile show a decline

.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 33 Figure 4

- 3 : Operating Margin (Median) for UOG Firms and Other OGE Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual Reports

Figure 4

- 4 : Operating Margin for UOG Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual Reports



### 4.3 Net Profit Margin

Net Profit Margin differs from operating margin by including non

- cash charges, an d interest and taxes. As defined in Value Line, net profit margin excludes nonrecurring gains and losses , and is calculated as net profit divided by revenue . This metric thus provides an alternative profit measure that reflects the tax
circumstances and fi nancial structure of the firm, as well as including an ongoing charge based on previous outlays for E&P activity (depletion) and other property, plant, and equipment (depreciation).

As shown in Figure 4

- 5

, the UOG firms had a higher net profit margin than Other OGE firms throughout the analysis period , except in 2009. Again, this difference in net income margin is due to differences in
the business models of the two firm sets: what is more important in this informa tion are the profiles of change in net profit margin over time. Net profit margin for UOG firms increased until 2008 before declining steeply in 2009. Net profit margin for Other OGE firms followed a similar path but the net profit decline began earlier fo r th ese firms, in 2008, and was, overall, less severe. This difference likelyDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 34 result s from UOG firms ’ business areas being more affected by price swings, while the largely integrated Other OGE firms have a business presence in all three major segments of O GE

– production, refining,
and distribution and sales

– allowing for greater stability.

Figure 4

- 6 provides the median, 10 th percentile and 90 th percentile , and revenue

- weighted average for net profit margin of UOG firms . Over the period of analysis, median and average n et p rofit m argin decreased by about 5 percent, largely due to a decline following the economic downturn in 2009

. The net profit margin for the 90 th percentile declined overall during the analysis per iod as well but fared better with a much less severe decline in 2009. On the other hand, t he net profit margin for the 10 th percentile exhibited
the greatest amount of volatility, experiencing declining and negative net profit margins for most of the
latte r half of the decade , indicating a lack of profitability for those firms.

Figure 4

- 5 : Net Profit Margin (Median) for UOG Firms and Other OGE Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings a nd Annual Reports

Figure 4

- 6 : Net Profit Margin for UOG Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual ReportsDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 35 

### 4.4 Return on Total Capital

For this analysis, r eturn on t otal c apit al is defined as the ratio of operating in come ( i.e., income on a pre

tax and pre

- interest basis) to capital invested, and indicates the fundamental financial performance of a firm in generating income from its business assets

. Like the o perating m argin me tric ( Section 0 ), r eturn

on t otal c apital provides a relatively ‘ pure ’ look at business performance without considering the effects
of financial structure or tax conditions. If individual firms are unable to maintai n a return on total capital that equals/exceeds the cost of capital needed by lenders and equity investors for providing financial capital to the firms, then they will be constrained in their a bility to invest in new assets, which for th e OGE industry is n e w oil and gas producing assets, and to maintain or grow their business. Such considerations are particularly important because of the required depletion of the primary business

asset (i.e., oil and gas reserves) in the ordinary course of business.

UOG fi rms and Other OGE firms had similar trends in returns on total capital throughout the period ( Figure 4

- 7

)

. However, the return on total capital for Other OGE firms was higher than that for the UOG firms throughout the period and year

- to

- year fluctuations were more pronounced for UOG firms

. Both UOG firms and Other OGE firms experienced modest declines in return on total capital over the analysis period. Overall, there is no evidence that the UOG firms are operating in some way that is impaired or disadvantaged from a business performance standpoint relative to the Other OGE firms and, accordingly,
the overall OGE industry.

As shown in Figure 4

- 8

, UOG firms experienced a mode st decline in return on total capital between 200 3
and 201 2

. While all firms experienced fluctuations in return on total capital, o nce again, firms in the 10 th
percentile were more adversely affected by the recent recession , experiencing a much large r decl ine.

Figure 4

- 7 : Return on Total Capital (Median) for UOG Firms and Other OGE Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual ReportsDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 36 Figure 4

- 8 : Return on Total Capital for UOG Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual Reports



### 4.5 Long

- Term Debt to Total Assets

Long

- t erm d ebt to t otal a ssets describes the overall financial structure of a firm in ter ms of relative reliance on debt and equity in financing the firm ’ s total assets. A high ratio of l ong

- t erm d ebt to t otal

a ssets can expose a firm to a greater degree of operating financial risk as fluctuat ions in financial performance ( e.g. , operating inco me) will be magnified in their impact on net income due to the income leverage effect associated with high er debt levels. A high ratio can also indicate that a firm is more likely to experience difficulty in meeting its fixed payment obligations in the fac e of fluctuating operating financial performance. All else equa l, firms with a higher ratio may experience more difficulty or incur higher costs in acquiring new, or renewing existing, financial capital, whether as debt or equity. As reported by Value Line

, l ong

- t erm d ebt to t otal a ssets is all repayment liabilities extending for at least one year divided by the balance sheet value for all current and long

- term assets

.
As shown in Figure 4

- 10

, o ver all

, while the med ian value of the debt to total assets ratio for UOG firms increased by 5.2 percentage points

, the ratio for Other OGE firms decline d by 9.1 percentage points. The debt to total assets ratio is consistently higher for UOG firms than Other OGE firms , but is not unusually high for firms in the natural resource industries. In general, there is no evidence of systematic
deterioration in the debt to total assets measure for UOG firms or Other OGE firms

. Figure 4

- 10 shows an overall increase in the long term debt to total assets measure for UOG firms from 200 3 to 201 2

. While the average and median values remained within about 10 percent, the 90 th percentile values saw major fluctuations, with a steep rise in 2008 and again in 2012.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 37 Figure 4

- 9 : Long

- Term Debt to Total Assets (Median) for UOG Firms and Other OGE Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual Reports

Figure 4

- 10 : Long

- Term Debt to Total Assets for UOG Firms

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual Reports



### 4.6 Total Capital Spending Index

The t otal c apital s

pending index represents annual outlays for plant and equipment, including, for the oil and gas E&P segments, outlays for exploration, development, and production. This metric is important
for the UOG firms set as it may indicate the extent to which firms are investing in UOG exploration and production. EPA d eveloped the t otal c apital s pending index by multiplying capital spending per share by average shares outstanding for each reporting year, indexing the year

- by

- year dollar

- valued series to the first year ’ s spending value, weighting the resulting index valu es by revenue, and aggregating over the firms in each analysis set. An increasing level of outlays indicates a favorable assessment by individual firms/industry of the opportunities to which capital resources are being assigned. Increasing outlays also
ind icate that the relevant firms have access to the financial capital for undertaking these outlays.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 38 Figure 4

- 11 reports the median index values of the t otal c apital s pending i ndex for UOG firms and Other OGE firms

. Both sets of firms had almost identical patterns of change through 2005. However, from 2006 to 2008, the rate of growth in the total capital spending index for UOG firms i s much higher than that for Other OGE firms

. Outlays for both sets of firms declined in 2009, though more so for UOG firms than for Other OGE firms . The divergence and substantial increase in UOG firms ’ outlays beginning in 2006 coincides with the period in which shale gas development began strong growth. At least in part, the divergence i n the outlay patterns for the two sets of firms reflects this substantial increase in exploration and production activity for shale gas. After the decline in 2009, both sets of firms rebounded in 2010

, but by 2011

, UOG firms were again showing a much highe r rate of growth. This strong growth in total capital outlays for the UOG firms set confirms the assessment by these firms of the favorable outlook for unconventional oil and gas exploration and production, and the likelihood that unconventional oil and

ga s

- related activity will continue vigorously for the foreseeable future.

Figure 4

- 12 provides the median, 10 th percentile and 90 th percentile , and average for total capital spending
index for UOG firms

. F rom 200 3 t o 201 2

, total capital outlays increased by a substantial multiple for the median and average index values, and even more so for the 90 th percentile index value . All of these index lines show a similar pattern of increase, which suggests that UOG firms are investing heavily, almost assuredly, in exploration and production assets. The 10 th percentile index value showed a much smaller increase in the index value for the period, ending in 2012 with a value of 1.50.

Figure 4

- 11 : Total Capital Spending Index (Median) for UOG Firms and Other OGE firms (200 3 =1)

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual ReportsDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 39 Figure 4

- 12 : Total Capital Spen ding Index for UOG Firms (200 3 =1)

Source s : Value Line 200 3

- 201 2 ; Company 10k SEC Filings and Annual Reports



### 4.7 Summary

The preceding reviews of financial performance and condition metrics for UOG firms and Other OGE firms indicate no deterioration in fi nancial performance and condition for UOG firms over the previous decade and suggest that UOG firms are well

- positioned for continued investment in UOG exploration and development. The strong growth in revenue and total capital outlays by the UOG firms dur ing the latter part of the last decade

– which coincides with the growth in UOG exploration and production activity

– underscores the economic opportunity provided by the emerging UOG resource and the industry ’ s commitment to investing in and producing UOG for the foreseeable future.



## 5 Outlook for UOG Exploration and Production Activity

OGE is a relatively volatile industry that is substantially affected by overall economic growth and OGE product prices. Over the past decade, metrics of economic/financial pe rformance for the OGE industry, and in particular, for firms specifically associated with UOG exploration and production, have fluctuated with general economic conditions. However, overall the industry shows considerable financial vitality and appears in s ufficient financial condition to support continued UOG exploration and production.

The achievements in UOG exploration and production during the past decade have led to the emergence of shale and tight oil and gas as important contributors to the nation ’ s energy supply portfolio. Beginning from only a few percentage points of total supply share in 2000, by 2009, tight gas was already the leading source of natural gas production in the United States, representing 14 percent of total domestic gas production. In that same year, shale gas became the third largest source for natural gas production andDraft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 40 by 2011 outpaced tight gas to become the number one source of U.S. production (U.S. DOE, 2013b)

. Likewise, b etween 2000 and 2012, tight oil production, in terms of barrels per day, grew by more than
seven times (U.S. DOE, 2014b). According to EIA, in 2012, tight oil and shale gas accounted for 29 percent of total U.S. crude oil production and 40 percent of total U.S. natural gas production , respectively (U.S. DOE, 2 013 g ). While many factors will affect further UOG development

, and forecasts inevitably
involve considerable uncertainty, th e s e trend s are expected to continue, with EIA forecasting that by 2040, shale gas will account for 50 percent of U.S. natural gas pr oduction, with tight gas as the second leading source at 22 percent . Production of tight oil is also expected to grow for the foreseeable future, though potentially tapering off as higher productivity fields are depleted and replaced by lower productivity resources. According to EIA, by 2040, tight oil will account for 33 percent of total U.S. oil production (U.S. DOE, 2013b ; U.S. DOE, 2013a ).

Other factors considered in this profile support the expectation of continued growth of UOG exploration and produc tion . In particular, the overall increase in OGE capacity and production coupled with the substantial increase in revenue and capital outlays over the last few years by firms identified as being substantially involved in UOG exploration and production are important factors indicating continued development of UOG resources. These increases in revenue and capital outlays coincide with the growth in shale and tight oil and gas exploration and production activity. They indicate the industry ’ s favorable

assessme nt of the economic potential of the UOG resources, and support an expectation of continued growth in development and production. Other financial measures considered in this profile also underscore the economic opportunity provided by the emerging UOG resou rce, and the industry ’ s commitment to investing in and producing shale and tight oil and gas for the foreseeable future.

Growth in UOG activities will likely be regionalized as OGE firms continue to develop current UOG
basins ( see Table 5

- 1 for shale formations and Table 5

- 2 for other tight oil/gas formations )

. In the near future, UOG activities will likely continue to emphasize tight oil, as companies focus on liquids

- rich plays b ecause of the continued gap between natural gas and oil prices (CHK, 2013; APC, 2013). As
advances in UOG E&P technology continue , depending on growth in demand, OGE firms may begin to develop other parts of basins as UOG extraction outside of the current plays becomes economically viable. This may expand the areas in which UOG activities occur, but UOG will still be concentrated in those areas with substantial resource potential . For shale gas and tight gas, this will include Texas, the Gulf Coast, central South (e.g., Oklahoma and Arkansas), upper Midwest (Michigan, Indiana), the Mid

Atlantic (New York, Pennsylvania), and parts of Appalachia (West Virginia, Kentucky). For tight oil

, production will likely continue to be predominate in regions like Texas, t he Mid

- Atlantic , parts of Appalachia, the Midwest (Ohio), the Rocky Mountains (e.g., Colorado and Utah), central South (e.g., Oklahoma), and possibly California.

Further UOG development will likely strain the capacity of current infrastructure and require construction of additional pipelines, gathering lines and processing plants to support the increased production

. Resolving these infrastructure issues is a key to future production of oil and natural gas from shale and tight sands formations, as lack of tr ansportation capacity may constrain production from certain fields. Therefore, going forward

, OGE firms will likely increase their infrastructure investments. According to IHS, while in 2012, total upstream capital expenditures for UOG were over $87 billio n, with nearly $6 billion dedicated to gathering systems

, these expenditures will exceed $5 trillion between 2012 and 2035

as UOG extraction and production continues to grow and mature (IHS, 2012).Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 41 Table 5

- 1 : Shale Formation Potential as of January 1, 201 2

EIA Basin UOG Formation

Name Resource

Type Oil EUR

(MMbls per well) Gas EUR

(Bcf per well) Oil TRR

(MMbls) Gas

TRR (Bcf) New Well

Potential

Appalachian Devonian Shale gas 0.00 0 0.058 0 20,800 358,600

Mar cellus Shale gas 0.00 0 1.317 0 118,900 90,300

Utica Shale gas 0.00 0 0.33 0 0 37,400 113,500

Shale oil 0.063 0.057 1,000 900 15,900

Illinois New Albany Shale gas 0.00 0 1.721 0 41,700 24,200 Michigan Antrim Shale gas 0.00 0 0.157 0 15,300 97,500

Black
Warrior Floyd

Neal/Conasauga Shale gas 0.00 0 1.52 0 0 4,300 2,800

TX

- LA

- MS
Salt Haynesville

Bossier Shale gas 0.00 0 3.455 0 70,900 20,500

Western
Gulf Eagle Ford Shale gas 0.177 1.549 6,100 53,400 34,500

Shale oil 0.101 0.212 3,300 6,900 32,500

Pears all Shale gas 0.00 0 1.09 0 0 7,800 7,200

Tuscaloosa Shale oil 0.092 0.019 2,900 600 31,600

Woodbine Shale oil 0.108 0.054 600 300 5,600

Anadarko Cana Woodford Shale gas 0.014 1.232 100 8,900 7,200

Shale oil 0.038 0.415 100 1,100 2,700

Arkoma Caney Shale gas 0.00 0 0.33 0 0 1,100 3,300

Fayetteville Shale gas 0.00 0 1.284 0 29,800 23,200

Woodford Shale gas 0.00 0 1.422 0 6,700 4,700

Black
Warrior Chattanooga Shale gas 0.00 0 0.97 0 0 1,600 1,600

Barnett Shale Gas Shale gas 0.00 0 0.377 0 20,300 53,900

Permian Wolfcamp Shale oil 0.068 0.217 3,400 10,900 50,200

Barnett

- Woodford Shale gas 0.00 0 1.513 0 15,800 10,400

Avalon/ Bone Spring Shale oil 0.08 0 0.00 0 2,000 0 25,000

Denver Niobrara Shale oil 0.011 0.073 400 2,700 37,000

Greater
Green River Hill iard

- Baxter

Mancos Shale gas 0.00 0 0.293 0 10,500 35,800

Montana
Thrust Belt All tight oil plays Shale oil 0.113 0.075 600 400 5,300

Powder
River All tight oil plays Shale oil 0.035 0.04 0 2,100 2,400 60,000

San Juan Lewis Shale gas 0.00 0 2.2 00 0 9,800 4 ,500

Uinta

Piceance Mancos Shale gas 0.00 0 0.88 0 0 10,900 12,400

Williston Gammon Shale gas 0.00 0 0.44 0 0 3,400 7,700

Bakken Shale oil 0.142 0.096 9,300 6,300 65,500

Columbia Basin Centered Shale gas 0.00 0 1.4 00 0 12,200 8,700

San Joaquin/Los Angeles Monterey/Santos Shale oil 0.502 0.502 600 600 1,200

Source: U.S. EPA, 2015Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 42 Table 5

- 2 : Other Tight Formation Potential as of January 1, 201 2

EIA Basin UOG Formation

Name Resource

Type Oil EUR

(MMbls

per w ell) Gas EUR

(Bcf per well) Oil TRR

(MMbls) Gas

TRR (Bcf) New Well

Potential

Appalachian Clinton

- Medina Tight gas 0.003 0.060 500 11,700 195,000

Tuscarora Tight gas 0.000 2.172 0 4,400 2,000 Michigan Berea Sand Tight gas 0.000 0.143 0 8,100 56,600

TX

- LA

- MS
Salt Cotton Valley Tight gas 0.009 1.472 900 152,700 103,700

Western
Gulf Olmos Tight gas 0.005 1.093 100 23,600 21,600

Vicksburg Tight gas 0.000 1.473 0 3,900 2,600

Wilcox Lobo Tight gas 0.000 1.404 0 10,100 7,200

Austin Chalk Tight oil 0.086 0.048 7,600 4,300 88,800

Buda Tight oil 0.108 0.070 3,700 2,400 34,300

Anadarko Cleveland Tight gas 0.036 0.394 100 1,100 2,800

Granite Wash Tight gas 0.046 0.948 600 12,300 13,000

Red Fork Tight gas 0.000 0.593 0 1,000 1,700

Permian Abo Tight gas 0.101 0.182 1,000 1,800 9,900

Canyon Tight gas 0.002 0.209 100 10,900 52,200 Spraberry Tight oil 0.108 0.113 8,100 8,500 75,200

Denver Muddy Tight gas 0.000 0.182 0 11,500 63,200

Greater
Green River All Tight Oil Plays Tight oil 0.135 0.015 900 100 6,700

North
Central
Montana Bowdoin

Greenhorn Tight gas 0.000 0.151 0 300 2,000

Paradox Fractured Interbed Tight oil 0.543 0.434 1,000 800 1,800

San Juan Dakota Tight gas 0.000 0.416 0 6,100 14,700

Mesaverde Tight gas 0.000 0.464 0 5,800 12,500

Pict ured Cliffs Tight gas 0.000 0.397 0 200 500

SW Wyoming Fort Union

- Fox

Hills Tight gas 0.000 1.047 0 15,800 15,100

Frontier Tight gas 0.009 0.273 200 6,200 22,700

Lance Tight gas 0.016 1.012 300 18,700 18,500

Lewis Tight gas 0.000 0.248 0 7,700 31,00 0 All Tight Oil Plays Tight oil 0.165 0.015 1,100 100 6,700

Uinta

Piceance Iles

- Mesaverde Tight gas 0.000 0.502 0 17,100 34,100

Wasatch

Mesaverde Tight gas 0.023 0.463 400 8,200 17,700

Williams Fork Tight gas 0.000 0.456 0 7,600 16,700 All Tight O il Plays Tight oil 0.056 0.111 100 200 1,800

Williston Judith River

- Eagle Tight gas 0.000 0.158 0 1,000 6,300

Wind River Mesaverde/Frontier

Shallow Tight gas 0.000 0.768 0 4,400 5,700

Source: U.S. EPA, 2015Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 43 

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Gas/Shale_Gas_Primer_2009.pdf

. DCN SGE00 010

. Gulfport Energy Corp (GPOR). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00855.

Gulfport Energy Corp (GPOR). 2005. Form 10

- K For the Fiscal Year Ended December 31, 2004. DCN
SGE00856.

Harvest Natural Resources, Inc. (HNR). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.
DCN SGE00857

. Harvest Natural Resources, Inc. (HNR). 2010. Form 10

- K For the Fis cal Year Ended December 31, 2009.
DCN SGE00858

. Hess Corporation (HES). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00859.

Houston American Energy Co r p (HUSA). 2013. Form 10

- K For the Fiscal Year Ended December 31,

2012. DCN SGE0086 0

. Houston American Energy C o r p (HUSA). 2011. Form 10

- K For the Fiscal Year Ended December 31,

2010. DCN SGE00861

.
Houston American Energy C o r p (HUSA). 2009. Form 10

- K For the Fiscal Year Ended December 31,

2008. DCN SGE00862

. Houston American Energy C o r p (HUSA). 2007. Form 10

- K For the Fiscal Year Ended December 31,

2006. DCN SGE00863

. IHS. 2012. America’s New Energy Future: The Unconventional Oil and Gas Revolution and the US Economy. Volume 1: National Economic Contributions. October 2012. Available elec tronically

at: http://www.energyxxi.org/sites/default/files/pdf/americas_new_energy_future

unconventional_oil_and_gas.pdf

. DCN SGE008 64

. Mcrae, Gregory S. and Carolyn Ruppel. 2011. The Future of Natural Gas. Massachusetts Institute of Technology. Available electronically at: http:// web.mit.edu/mitei/research/studies/documents/natural

- gas

- 2011/NaturalGas_Report.pdf

. DCN SGE00547

. Mexco Energy Corporation (MXC). 201 3 . Form 10

- K For the Fiscal Year Ended March 31, 201 3

. DCN
SGE00865.

Murphy Oil Corporation (MUR). 2013. Form 10

- K For th e Fiscal Year Ended December 31, 2012. DCN
SGE00866

. Natural Gas Supply Association (NGSA). Undated. “ Marketing. ” NaturalGas.org

. n. d. Web. 11 February 2014. Available electronically at: http://na turalgas.org/naturalgas/marketing/

. DCN
SGE00867.

Newfield Exploration Company (NFX). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.

DCN SGE00868

. Noble Energy, Inc. (NBL). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE 00869.

Occidental Petroleum Corporation (OXY). 2013. Form 10

- K For the Fiscal Year Ended December 31,

2012. DCN SGE00870

.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 47 Panhandle Oil and Gas Inc. (PHX). 2012. Annual Report 2012. DCN SGE00871

. Penn Virginia Corporation (PVA). 2013. Form 10

- K For the Fis cal Year Ended December 31, 2012. DCN
SGE00872.

PetroQuest Energy, Inc. (PQ). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00873.

Phillips, David. 2010. “ Chesapeake energy ’ s shift to oil won ’ t work without higher natural gas prices. ” BNET: The CBS Interactive Business Network. April 15, 2010. Available electronically at: http://www.bnet.com/blog/sec

- filin gs/chesapeake

- energys

- shift

- to

- oil

- wont

- work

- without

- higher

natural

- gas

- prices/348

. DCN SGE00875

. Pioneer Natural Resources Company (PXD). 2013. Form 10

- K For the Fiscal Year Ended December 31,
2012. DCN SGE00874

. PrimeEnergy Corporation (PNRG). 2013. For m 10

- K For the Fiscal Year Ended December 31, 2012.

DCN SGE00876

. Pyramid Oil Company (PDO). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00877.

Questar (STR). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN SGE00878

. Quicksilver Resources Inc. (KWK). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.
DCN SGE00879.

Range Resources Corporation (RRC). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.

DCN SGE00881

. Ratner, Michael, Paul W. Parfomak, Ian F. Fergusson, and Linda Luther. 2013. “U.S. Natural Gas Exports: New Opportunities, Uncertain Outcomes.” Congressional Research Service. September 17, 2013. Available electronically at: https:/ /www.fas.org/sgp/crs/misc/R42074.pdf

. DCN
SGE00880.

Royale Energy Inc. (ROYL). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00882.

Royale Energy Inc. (ROYL). 2012. Form 10

- K For the Fiscal Year Ended December 31, 201 1

. DCN
S GE00883.

SM Energy Company (SM). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00884.

Smith, Grant. 2013. “ U.S. to Be Top Oil Producer by 2015 on Shale, IEA Says

. ” Bloomberg . November 12, 2013. Available electronically at: http://www.bloomberg.com/news/2013

- 11

- 12/u

- s

- nears

energy

- independence

- by

- 2035

- on

- shale

- boom

- iea

- says.html

. DCN SGE00885

. Southwestern Energy Company (S WN). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.

DCN SGE00886.

Stone Energy Corporation (SGY). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00887

. Swift Energy Company (SFY). 2013. “ Investor Relations: Financials. An nual Highlights. ” Swift Energy Company . Web. Accessed January 10, 2014. Available online at: http://www.swiftenergy.com/menus/IR

- Annual

- Highlights.htm

. DCN SGE00888

.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 48 Talisman Energy (TLM). 2012. 2012 Annual Report. DCN SGE00889

. Tengasco, Inc. (TGC). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00890.

Texas Vanguard Oil Company (TVOC). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.
DCN SGE00891

.
Ul tra Petroleum Corp. (UPL). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00892

. Ultra Petroleum Corp. (UPL). 2007. Form 10

- K For the Fiscal Year Ended December 31, 2006. DCN
SGE00893.

Unit Corporation (UNT). 2013. Form 10

- K For the Fi scal Year Ended December 31, 2012. DCN
SGE00894.

U nited States Bureau of Economic Analysis (U.S. BEA). 2014. Table 1.1.9 Implicit Price Deflators for Gross Domestic Product. January 30, 2014. Available electronically at: http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=3&isuri=1&910=x&91
1=0&903=13&904=1929&905=2013&906=a

. DCN SGE00896.

U nited States Burea u of Economic Analysis (U.S. BEA). 2013. Current Dollar and “ Real ” Gross Domestic Product. December 20, 2013. Accessed January 10, 2014. Available electronically at: http://www.bea.gov/national/xls/ gdplev.xls

. DCN SGE00897

. U.S. Department of Commerce (U.S. DOC). 2000

- 20 11 . U.S. Bureau of the Census. Statistics of U.S.
Businesses (SUSB). Available at: http://www.census.gov/econ/susb/in troduction.html

. DCN
SGE00898.

U nited States Department of Commerce (U.S. DOC). 1997, 2002, and 2007. U.S. Bureau of the Census.
Economic Census

. DCN SGE00899

. U.S. Department of Commerce (U.S. DOC). Undated

. “ Statistics of U.S. Businesses: Definitions. ” Census.gov . Web. Available at: http://www.census.gov/econ/susb/definitions.html

. DCN SGE00900

. United States Department of Energy ( U.S. DOE ). 201 4a . United States Energy Information
Administr ation (EIA). AEO2014 Early Release Overview. Available electronically at: http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2014).pdf

. DCN SGE00901

. United States Department of Energy ( U .S. DOE ). 201 4 b . United States Energy Information Administration (EIA). AEO2014 Early Release Overview. Figure 1. U.S. liquid fuels supply by

source, 1970

- 2040 (million barrels per day) . December 16, 2013. Available electronically at: http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2014).pdf

. DCN SGE00902

. United States Department of Energy ( U.S. DOE ). 201 4 c . United States Energy Information Administration (EIA). AEO2014 Early Release O verview. Figure 4. U.S. natural gas imports and exports, 2012

- 2040 (trillion cubic feet) . December 16, 2013. Accessed January 22, 2014. Available electronically at: http://www.eia.gov/ forecasts/aeo/er/pdf/0383er(2014).pdf

. DCN
SGE00903.

United States Department of Energy (U.S. DOE). 201 4 d . United States Energy Information Administration (EIA). Cushing, OK WTI Spot Price FOB (Dollars per Barrel) : Annual. January 3, 2014. Accessed Januar y 8, 2013. Accessed January 22, 2014. Available electronically at: http://tonto.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RWTC&f =A

. DCN SGE00904

.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 49 United States Depart ment of Energy (U.S. DOE). 201 4 e . United States Energy Information Administration (EIA). Europe Brent Spot Price FOB (Dollars per Barrel) : Annual. January 15,
2014. Accessed January 16, 2014 . Available electronically at: http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RBRTE&f=A

. DCN SGE00905

. United States Department of Energy (U.S. DOE). 201 4 f . United States Energy Information Administration (EIA). Natural Gas Con sumption by End Use (Million Cubic Feet). January 7

, 201 4 . Accessed January 1 4, 201 4 . Available electronically at: http://www.eia.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm

. DCN SGE00906.

Unit ed States Department of Energy (U.S. DOE). 201 4 g . United States Energy Information Administration (EIA). Natural Gas Consumption (Million Cubic Feet) : Annual

. January 7 , 201 4

. Accessed January 10 , 201 4 . Available electronically at: http://www.eia.gov/dnav/ng/ng_cons_sum_a_epg0_vc0_mmcf_a.htm

. DCN SGE00907

. United States Department of Energy (U.S. DOE). 201 4 h . United States Energy Information Administration (EIA). Natural Gas Gross Withdrawals and Production (Volumes in Million Cubic Feet) . January 7, 2014. Accessed January 23, 2014. Available electronically at: http://www.eia.gov/dnav/ng/ng_prod_sum_a_epg0_v gm_mmcf_a.htm

. DCN SGE00908

. United States Department of Energy (U.S. DOE). 201 4 i . United States Energy Information Administration (EIA). “ U.S. crude oil production growth contributes to global oil price stability
in 2013

. ” January 9, 2014. Available elec tronically at: http://www.eia.gov/todayinenergy/detail.cfm?id=14531#

. DCN SGE00909.

United States Department of Energy (U.S. DOE). 201 4 j . United States Energy Information Administration ( EIA). U.S. Natural Gas Exports and Re

- Exports by Country (Volumes in Million Cubic Feet, Prices in Dollars per Thousand Cubic Feet) . January 7, 2014. Accessed January 9, 2014. Available electronically at: http://www.eia.gov/dnav/ng/ng_move_expc_s1_m.htm

. DCN
SGE00910.

United States Department of Energy (U.S. DOE). 201 4 k . United States Energy Information Administration (EIA). U.S. Natural Gas Imports by Country (Volumes in Million Cubic Feet,

P rices in Dollars per Thousand Cubic Feet). January 7, 2014. Accessed January 9, 2014. Available electronically at: http://www.eia.gov/dnav/ng/ng_move_impc_s1_m.htm

. DCN
SGE00911.

United State s Department of Energy (U.S. DOE). 201 4 l . United States Energy Information Administration (EIA). U.S. Natural Gas Wellhead Price (Dollars per Thousand Cubic Feet): Annual January 8, 2014. January 7, 2014. Accessed January 8 , 2014 . Available electronically at: http://tonto.eia.gov/dnav/ng/hist/n9190us3a.htm

. DCN SGE00912

. United States Department of Energy ( U.S. D O E ). 201 3 a . United States Energy Information Administration (EIA). Annual Energy Ou tlook 2013 with Projections to 2040. April 2013. Available electronically at: http://www.eia.gov/forecasts/archive/aeo13/index.cfm

. DCN
SGE00913.

United States Department of Energy ( U.S. DOE ). 201 3 b . United States Energy Information Administration (EIA). Annual Energy Outlook 2013 with Projections to 2040. Figure 91. Natural gas production by source, 1990

- 2040 (trillion cubic feet). April 2013. Accessed January 10, 2014.
Available electron ically at: http://www.eia.gov/forecasts/aeo/MT_naturalgas.cfm . DCN
SGE00914

.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 50 United States Department of Energy (U.S. DOE). 2013 c . United States Energy Information
Adminis tration (EIA). Annual Energy Outlook 2013 with Projections to 2040. Figure 93. Consumption of petroleum and other liquids by sector, 1990

- 2040 (million barrels per day). April 2013. Accessed January 13, 2015. Available electronically at: http://www.eia.gov /forecasts/archive/aeo13/source_oil_all.cfm#pet_oliq . DCN SGE01088

. United States Department of Energy (U.S. DOE). 201 3 d . United States Energy Information Administration (EIA). Crude Oil Production (Volumes in Thousand Barrels ) . September 27,

2013. Accesse d January 9, 2014. Available electronically at: http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_a.htm

. DCN SGE00915

. United States Department of Energy (U.S. DOE). 201 3 e . United St ates Energy Information Administration (EIA). Exports. September 27, 2014. Accessed January 21, 2014. Available electronically at: http://www.eia.gov/dnav/pet/pet_move_exp_dc_NUS

- Z00_mbbl_a.htm

. DCN
SGE00916.

United States Department of Energy (U.S. DOE). 201 3 f . United States Energy Information Administration (EIA). Product Supplied for Total Crude Oil and Petroleum Products. September 27, 2013. Accessed January 16, 2014. Availa ble electronically at: http://www.eia.gov/dnav/pet/pet_cons_psup_a_ep00_vpp_mbbl_a.htm

. DCN SGE00917

. United States Department of Energy (U.S. DOE). 201 3 g . United States Energy Information Administration (EIA). “ Shale oil and shale gas resources are globally abundant

. ” June 10, 2013. Available electronically at: http://www.eia.gov/todayinenergy/detail.cfm?id=116 11

. DCN
SGE00918.

United States Department of Energy (U.S. DOE). 201 3 h . United States Energy Information Administration (EIA). U.S. Imports by Country of Origin

. September 2 7, 2014. Accessed January

21 , 2014. Available electronically at: http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_ep00_im0_mbbl_a.htm

. DCN
SGE00919.

United States Department of Energy (U.S. DOE). 201 1 a

. Energy Information Administration (EIA).

Annua l En ergy Outlook 2011 with Projections to 2035. April 2011. Available electronically at: http://www.eia.gov/forecasts/aeo/pdf/0383(2011).pdf

. DCN SGE00920

. United States Department of Ener gy (U.S. DOE). 2011 b . Energy Information Administration (EIA). Natural Gas Explained: Factors Affecting Natural Gas Prices. June 13, 2011. Accessed September 26, 2011. Available electronically at: http://www.eia.gov/energyexplained/index.cfm?page=natural_gas_factors_affecting_prices

. DCN
SGE00921

. United States Department of Energy (U.S. DOE). July 2008. Energy Information Administration (EIA).
Additions t o Capacity on the U.S. Natural Gas Pipeline Network: 2007. Available electronically

at: http://www.eia.gov/pub/oil_gas/natural_gas/feature_artic les/2008/ngpipelinenet/ngpipelinenet.pd

f

. DCN SGE00922

. United States Department of Energy (U.S. DOE). Undated. “How to Obtain Authorization to Import and/or Export Natural Gas and LNG.” Energy.gov. Web. Accessed February 18, 2014. Available
electronicall y at: http://energy.gov/fe/services/natural

- gas

- regulation/how

- obtain

- authorization

import

- andor

- export

- natural

- ga s

- and

- lng#LNG

. DCN SGE00923

.Draft

– Do No t Cite, Quote, or Release During Review

February 18 , 201 5 Abt Associates | Profile of the Oil and Gas Extraction Sector | pg 51 U nited S tates Department of Labor (U.S. DOL). 201 3 a . United States Bureau of Labor Statistics (BLS). Employment Projection Program. Employment by industry, occupation, and percent distribution,

20 12 and projected 20 22 : 211100 Oil and Gas Extraction. December 19, 2013 . Accessed January 22, 2014 . Available at: http://www.bls.gov/emp/ep_table_109.htm

. DCN SGE00924

. United States Department of Labor (U.S. DOL). 201 3b . United S tates Bureau of Labor Statistics (BLS). Employment Projection Program. Table 2.7 Employment and O utput by I ndustry. December 19

, 201 3 . Accessed January 22, 2014 . Available at: http://www.bls.gov/emp/ep _table_207.htm

. DCN
SGE00925

.

U nited States Environmental Protection Agency (U.S. EPA). 2015. Technical Development Document for Proposed Pretreatment Standards for the Onshore Subcategory of the Oil and Gas Extraction Category. Office of Water Engineerin g and Analysis Division.

“ US: Failing in Shale. ” The Economist . November 20, 2013. Available electronically at: www.eiu.com/industry/article/921249876/us

- failing

- i n

- shale/2013

- 11

- 20#

. DCN SGE00926

. Vaalco Energy Inc. (EGY). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012. DCN
SGE00895.

Whiting Petroleum Corporation (WLL). 2013. Form 10

- K For the Fiscal Year Ended December 31, 2012.
DCN SGE00927

.
Woodsid e Petroleum Limited (WOPEY). 2012. 2012 Annual Report: A Year of Delivery. DCN
SGE00928

.