Each year, the Canadian-based Fraser Institute surveys petroleum industry executives and managers (623 of them for 2012) asking them their opinions on the barriers to investing in exploration and production in various geographies across the globe. That is, what makes them more likely or less likely to spend money drilling in a particular location?
The Global Petroleum Survey, as it’s called, tallies the survey responses and ranks each geography from most desirable place to invest, to least desirable. The rankings for this year are interesting and illustrative that politicians’ words and legislation have a direct bearing on where, and how much, drilling companies are willing to spend.
The barriers to spending in a given geography include: high tax rates, costly regulatory schemes, uncertainty over environmental regulations and the interpretation and administration of regulations governing the petroleum industry, and security threats.
Here’s how Pennsylvania, Ohio, West Virginia and New York fared in the survey:
- Of the 147 geographies evaluated this year, West Virginia was the best investment location in the Marcellus/Utica Shale according to the survey. In fact, WV came in at #10—very high indeed. Although WV was #6 in last year’s survey, so they’ve fallen four spots.
- Ohio was the next best Marcellus/Utica geography, coming in at #14. Last year Ohio was an astonishing #2—right at the top of the desirable place to drill list. Why did they fall 12 places in this year’s survey? Largely because of Gov. John Kasich’s plan to hike severance taxes on shale gas drilling in the state so he can “spread the wealth around” a little. That has drillers nervous, and when they’re nervous, they don’t risk their company’s money. Thanks Gov. Kasich!
- Pennsylvania is #34 in the list, up from #65 last year. When you dig into the numbers, you find that PA scored well in some areas (trade barriers are low), but high in others (cost to comply with regulations). So it’s a mixed bag for PA. Still, #34 in the list, and up 31 places ain’t bad.
- And then there’s New York. I heart NY! MDN’s home. And home of the never-ending debate over fracking. New York wasn’t even ranked on the list last year. But this year it’s on the list at #68, right below the country of Namibia. Even Bulgaria comes in higher than New York (#62), and Romania (#53). New York is so utterly dysfunctional when it comes to oil and gas drilling it’s a wonder it was ranked at all.
The entire 192 page report is embedded below. You can view the overall ranking chart starting on page 15. Other sections do a deep dive into the individual questions asked, and the aggregated answers. The report is full of interesting information on the psychology of drillers and how they think. Well worth spending some time with.
Why does this matter for landowners and others interested in Marcellus and Utica Shale drilling? Because it’s a good predictor of where oil and gas exploration companies are willing to spend their money. Each geography around the world is, in a sense, in competition with every other geography. This is a good score card for how they all stack up, and what a given geography needs to do in order to win more business.