The Importance of the Petroleum Industry to the Economy of the Western States

The Importance of the Petroleum Industry to the Economy of the Western States

The Importance of the Petroleum Industry to the Economy of the Western States José Alberro, Ph.D. Director, LECG April 2007 The conclusions and opinions expressed in this study are those of the author and do not necessarily reflect the opinions of LECG, LLC. ii

Table of Contents Executive Summary...ii I. Introduction...1 I.1. Overview... 1 I.2. Purpose of the Report... 1 II. Definition and Profile of the Petroleum Industry...2 II.1. Industry Segments... 2 II. 2. Data Sources... 3 II. 3. Overview and Methodology... 4 II. 4. Indicators Used... 7 III. Economic Importance of the Petroleum Industry...8 III. 1. Employment... 8 III. 2. Income... 10 III. 3. Industry Output... 11 III. 4. Taxes... 12 III. 5. State Differences... 13 APPENDIX 1: COMPARISON WITH OTHER DATA SOURCES...17 APPENDIX 2: FACT SHEETS FOR EACH STATE AND FOR THE WSPA AREA AS A WHOLE.... 20 i

Executive Summary The petroleum industry is a significant source of jobs, income and taxes in the six states that are members of WSPA. Its economic relevance, though, is larger than suggested by direct measures, because it interacts with many other sectors and thus has wider spillover effects than most industrial sectors. For example, while the operation of a refinery or of a petrochemical plant requires relatively few employees, it uses technical services from engineers, environmental consultants or transportation firms which are labor intensive. It consists of an upstream sector that produces oil and natural gas, two industrial sectors that transform them into liquid fuels and petrochemical products, three business sectors that transport and market those products and a number of supporting activities. Even though oil and gas production have been decreasing at about 3% per year for some years, the sector continues to grow as imported feedstock replaces the declining locally produced oil and gas. Our analysis finds that the petroleum industry accounts for over half a million jobs: 178,000 directly in companies in the seven economic sectors we considered for this study and 332,000 indirectly created in companies that supply them with inputs and produce goods and services consumed by those workers. 40% of the direct jobs - excluding gas station attendants - pay their employees an average of almost $100,000 per year in salary and benefits. In turn, gas stations attendants, earn about $38,000 per year, about equal to personal median income for the U.S. Furthermore, the 332,000 jobs indirectly created by the petroleum industry paid an average of about $48,500 a year, which is well above the U.S. personal median income. In addition to being a major source of employment and income, the petroleum industry is a major contributor to state output. According to our estimates, it accounts for nearly $173 billion in output, $111 billion directly and $62 billion ii

indirectly. The petroleum industry is also a major source of tax revenues for the states. We estimate that excise and sales taxes paid by individuals to businesses in the petroleum industry during normal operations amount to $6.3 billion per year. iii

I. Introduction I.1. Overview This report describes the economic importance of the petroleum industry in the six states that are members of the Western States Petroleum Association (WSPA): Arizona, California, Hawaii, Nevada, Oregon and Washington. Oil and gas production, and the industrial processing that ensues, are high-wage activities that pay their employees (excluding gas station attendants) an average of almost $100,000 per year in salary and benefits. In addition to these direct jobs, the industry creates additional indirect jobs in companies that produce the inputs they use, as well as the goods and services consumed by all those workers. In turn, the sale of all these goods and services generate taxes. The sum of all those effects is the economic impact of the petroleum industry on the economy of each of the states. I.2. Purpose of the Report Our objective in preparing this analysis is to assist interested parties in evaluating the economic importance of the petroleum industry. We prepared this report at the request of the Western States Petroleum Association (WSPA), and were compensated for doing so. We were given complete control of the report s contents. The views expressed in the report are the product of independent and objective analysis and do not necessarily reflect the views of either LECG or WSPA.

II. Definition and Profile of the Petroleum Industry II.1. Industry Segments In order to assess the economic impact of the petroleum industry, we first identify the various sectors that make it up. To do so, we used the North American Industry Classification System (NAICS) 1 widely used by U.S. government agencies (including the Department of Commerce and the U.S. Census Bureau) to provide comparability in statistics about business activity in all sectors of the economy. We consider that the petroleum industry is composed of the following ten sectors: 1. Oil and gas extraction; 2. Drilling of oil and gas wells; 3. Support activities for oil and gas operations; 4. Petroleum refineries; 5. Petroleum lubricating oil and grease manufacturing; 6. Petrochemical manufacturing; 7. Oil and gas field machinery and equipment; 8. Wholesale trade of petroleum products; 9. Pipeline transportation; and 10. Gasoline stations. To simplify, we have aggregated the first three sectors Drilling of oil and gas wells, Support activities for oil and gas operations and Oil and gas extraction to form a single oil and gas extraction sector, and combined Petroleum lubricating oil and grease manufacturing and Petroleum refineries into a new Petroleum Refining sector. The following table lists the specific NAICS codes included in this study. 1 NAICS is the industry cataloging system currently used in the U.S. and in the rest of North America. It determines an establishment s primary activity by reference to its production; in other words, it categorizes a productive establishment on the basis of its production processes. During 2003 and 2004, OSHA substituted the old Standard Industrial Classification (SIC) for the currently used NAICS. 2

Petroleum Industry by NAICS and IMPLAN Codes INDUSTRIAL SECTOR IMPLAN SECTOR NAICS Oil and gas extraction 19, 27, 28 211, 213111, 213112 Petroleum refineries 142, 145 32411, 324191 Petrochemical manufacturing 147 32511 Oil and gas field machinery and equipment 261 333132 Wholesale trade* 390 4247 Pipeline transportation 396 486 Gasoline stations 407 447 * Share of Petroleum Merchant Wholesalers Source: IMPLAN Data Guide and Bureau of Labor Statistics As shown in the table, the petroleum industry consists of an upstream sector that produces oil and natural gas, two sectors that transform those hydrocarbons into liquid fuels and petrochemical products, three business sectors that transport and market those products and a number of supporting activities. II. 2. Data Sources Except in the case of Wholesale Trade, we use data produced by the IMPLAN Group, Inc., which rely on the following federal government sources: US Bureau of Economic Analysis, US Bureau of Labor Statistics, US Census Bureau, US Department of Agriculture, and US Geological Survey. 3

In the case of Wholesale Trade of Petroleum Products, we have used the Bureau of Labor Statistics Quarterly Census of Employment and Wages and have apportioned the data provided by IMPLAN for the sector as a whole accordingly. The latest year for which data are available for all sectors and all states is 2004. While the Bureau of Economic Analysis has published data for three of the seven sectors for 2005 it has not done so for the remaining four and while the Bureau of Labor Statistics publishes employment data for 2006, the rest of the information is not available from this source. Appendix 1 compares the database used with other data sources. The database we used is not strictly comparable to data for 2000 or for previous years because there is no direct correspondence between the Standard Industrial Classification (SIC) used in the past and the North American Classification System (NAICS). Even sectors with similar sounding names are not comparable because recoding took place at the establishment level. Likewise, the multipliers used to estimate induced or indirect effects can be quite different from those used in earlier models because the current version uses the 1997 Input-Output Benchmark Study. II. 3. Overview and Methodology The contribution of an industry to an economy goes beyond the primary ( direct ) activities of the businesses that make up that industry. Each industry interacts with other secondary industries in generating products for sale or services for hire. In some cases, these secondary businesses may be direct suppliers; in others they may provide goods and services for those direct suppliers. Economists have developed methods to capture the interaction of an industry with the rest of the economy by quantifying the linkages between the industry being studied and other sectors of the economy. These models attempt to 4

determine how an expansion in one industry has ripple effects on other sectors of the economy by estimating the direct, the indirect, and the induced effects of economic activity: Direct impact is the employment, output, and income directly generated by the industry s activity (e.g., oil production or refining); Indirect effects are the result of the expansion of supplier industries whose products are used by the industry being studied as inputs (e.g., resins, metal heat treating or engineering services); Induced effects take into consideration the expansion of overall economic activity as a result of increased purchases of all products by households of all goods and services acquired by the workers considered in the previous paragraphs; and Regional effect. Part of the secondary effects - both indirect and induced - have an out of state dimension, part of which is actually captured by the other states in the region. There is hence an additional regional effect due to the fact that the region is more than just the sum of its six parts. One economic impact modeling system, in use by over 1,000 public and private institutions, is the IMPLAN model and data base. It has been customized by LECG, because for all its advantages in terms of consistency, details and thoroughness, the IMPLAN data base has some shortcomings that need to be addressed. As research carried out at the Colorado School of Mines indicates, the accuracy of some disaggregated data may be impaired by the need to have 5

balance. 2 Indeed, IMPLAN combines industry survey data collected periodically by the U.S. Bureau of Economic Analysis Input-Output benchmarks with other data to produce a balanced account format recommended by the United Nations. In this context, balanced accounts incorporate all goods and services transactions (including imports and exports) as well as all income flows, taxes, subsidies and expenditures by all economic agents (consumers, investors and the government). In a broad sense, it is an all-encompassing snapshot of the whole economy. State-wide data are obtained by disaggregating the balanced national accounts which may lead to inaccuracies. The data are NOT constructed from the bottom up (say from a zip code to a county to a state to the nation) because it is impossible to obtain sufficient information at the disaggregated level to insure that the accounts are balanced. They are constructed from the top down sometimes leading to errors at the disaggregated level. In the cases of Arizona, Nevada, Oregon and Washington, the IMPLAN output data for Oil and Gas Extraction do not coincide with those that can be calculated using the Department of Energy s data for both production and well-head prices. We have chosen the latter as they are supported by government data that are easily accessible. 3 As a result, adjustments have had to been made, making this report less comparable to previous results: Since no oil or natural gas is produced in the State of Washington, 4 we have corrected the database to reflect this fact. 2 Modeling the Colorado Oil and Gas Industry at the County Level: an Applied General Equilibrium Approach, Edward J. Balistreri and Lauren M. Davis, August 2006. 3 Doug Olson at IMPLAN indicated that, in the case of oil and natural gas production at the state level, it is better to use direct estimates instead of theirs. 4 http://tonto.eia.doe.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_a.htm; http://tonto.eia.doe.gov/dnav/ng/ng_prod_wells_s1_a.htm http://www.bea.gov/regional/gsp/action.cfm 6

For the states of Arizona, Nevada and Oregon we have calculated the value of the production of oil and natural gas using the Department of Energy s production and price estimates. 5 We have also adjusted Employment, Employee Compensation, Proprietor s Income, Other Property Income and Indirect Business Tax using data from the Department of Labor. 6 II. 4. Indicators Used We use six indicators to assess the economic importance of the petroleum industry in each state: The total number of jobs created, differentiating direct from indirect and induced employment; Total sales or Industry Output (in 2002 dollars); Value Added and its three components (in 2002 dollars) o o o Employee Compensation which includes wages and salaries as well as benefits and Proprietary Income. Proprietary income consists of payments received by self-employed individuals and private business owners as income. Property Income which consists of payment from interest, rents, royalties, dividends, and corporate profits; and Indirect Business Taxes which includes excise and sales taxes paid by individuals to businesses during normal operations. This component explicitly excludes taxes on profit or income. 5 In 2004, Oregon produced 595 MMcf.( http://tonto.eia.doe.gov/dnav/ng/ng_prod_wells_s1_a.htm). There are no primary oil refineries in Oregon (http://www.oregon.gov/energy/cons/industry/petro.shtml) 6 http://data.bls.gov/cgi-bin/dsrv. 7

III. Economic Importance of the Petroleum Industry The petroleum industry is a significant source of jobs, income and taxes in the six states that are members of WSPA: Arizona, California, Hawaii, Nevada, Oregon and Washington. Its economic importance is even larger than suggested by direct measures because it interacts with many other sectors and thus has important spillover effects. III. 1. Employment Based on our analysis, we estimate that the industry is responsible for a total of more than 510,000 jobs: 178,000 directly in companies in the seven previously mentioned industrial sectors and 332,000 jobs indirectly created in companies that supply them with inputs and produce goods and services consumed by those workers. Petroleum Industry Employment in the Western States 600,000 511,701 500,000 400,000 300,397 300,000 178,369 200,000 100,000 32,936 - Total Direct Indirect and Induced Regional Effect Total 8

The three major sources of total jobs (both direct and indirect) are Gasoline Stations (37% of the total), Petroleum Refineries (35%) and Oil and Gas Extraction (16%). All in all, the petroleum industry creates about 3.6 indirect jobs for every direct one (the multiplier is 11 in the case of refining and 20 in the case of petrochemicals). 7 For comparison purposes, in the economy as a whole, every direct job in an average industry typically creates about.5 jobs indirectly. While the operation of a refinery or of a petrochemical plant is capital intensive and requires relatively few employees, it uses technical services from engineers, environmental consultants or transportation firms which are labor intensive. Direct and Indirect jobs by Industrial Sector 200,000 180,000 160,000 Indirect and Induced Jobs 140,000 120,000 100,000 80,000 60,000 40,000 20,000 - Gasoline stations Petroleum refineries Direct Jobs Oil and gas extraction Wholesale trade* Pipeline transportation Petrochemical manufacturing Oil and gas field machinery and equipment 7 Again we exclude gas stations from this consideration. 9

III. 2. Income The petroleum industry is a high-wage industry and the many indirect jobs it creates are also well paying. Indeed, with the exception of gas stations attendants, the petroleum industry pays its employees almost $100,000 a year in salaries and benefits. In turn, gas stations attendants, earn about $38,000 a year, about the median income in the United States. Furthermore, the 332,000 jobs indirectly created by the petroleum industry paid about $48,500 a year, about a third above the U.S. median income. We estimate total income from labor and property (payments from interest, rents, royalties, dividends, and corporate profits) generated by the industry to be $43.6 billion, most of it coming from labor and most of it coming from indirect impacts, reflecting the dense network of inter-industry relations that characterizes this industry. Direct and Indirect Labor and Property Income. 18,000 16,000 14,000 12,000 10,000 8,000 Direct Indirect, Induced and Regional 6,000 4,000 2,000 - LABOR PROPERTY 10

The three most important sectors contributing to income generation are Gas Stations ($6.7 billion), Oil and Gas Extraction ($6.4 billion) and Refining ($4.2 billion). Labor and Property Income by Sector Gas Stations Oil and Gas Extraction Petroleum Refineries Wholesale trade LABOR PROPERTY Pipeline Transportation Petrochemical Manufacturing Machinery and Equipment - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 III. 3. Industry Output In addition to being a major source of employment and income, the petroleum industry is a major contributor to final output or total sales. According to our estimates, it accounts for nearly $173 billion in output, $111 billion directly and $62 billion indirectly. As can be seen in the figure below, Petroleum Refineries contribute the most to total output (69%), while Oil and Gas Extraction and Gas Stations contribute approximately the same amount: 12%. It is interesting to note that more than 60% of the value of production for refineries comes from imported foreign oil. Indeed, while the 30 refineries in the region have a refining capacity of more than 2.8 million barrels a day, oil production is only 674,000 and it is decreasing at about 3% per year. 11

Industry Output by Industry Sector Petrochemical Manufacturing 3% Pipeline Transportation 2% Gas Stations 12% Oil and Gas Extraction 12% Wholesale trade 2% Petroleum Refineries 69% III. 4. Excise and Sales Taxes The petroleum industry is also a major source of tax revenues for the state. We estimate that excise and sales taxes paid by individuals to businesses in the petroleum sector amounted to $6.3 billion per year. This estimate explicitly excludes taxes on profit and income which cannot be estimated with the IMPLAN model. As expected, of this total, roughly 56% is generated by Gas Stations with Oil and Gas Extraction contributing an additional 17%. 12

Excise and Sales Taxes paid by Industry Sector Gas Stations 56% Oil and Gas Extraction 20% Petroleum Refineries 8% Pipeline Transportation 7% Wholesale trade 9% III. 5. State Differences Below are comparisons of the six WSPA states and their relative share of economic activity within the region. SHARES OF EACH STATE INTO THE WSPA REGION S TOTALS ARIZONA CALIFORNIA HAWAII NEVADA OREGON WASHINGTON EMPLOYMENT 9.8% 65.1% 2.0% 5.0% 7.1% 10.9% LABOR INCOME 4.6% 81.0% 1.2% 2.6% 2.7% 7.9% PROPERTY INCOME 3.6% 85.8% 0.9% 1.9% 2.1% 5.7% TOTAL SALES 1.6% 84.6% 2.2% 1.1% 0.9% 9.7% INDIRECT TAXES 6.8% 76.0% 1.2% 3.7% 4.0% 8.3% 13

EMPLOYMENT NEVADA 5% OREGON 7% WASHINGTON 11% ARIZONA 10% HAWAII 2% CALIFORNIA 65% LABOR INCOME NEVADA 3% OREGON 3% WASHINGTON 8% ARIZONA 5% HAWAII 1% CALIFORNIA 80% 14

PROPERTY INCOME NEVADA 2% OREGON 2% WASHINGTON 6% ARIZONA 4% HAWAII 1% CALIFORNIA 85% TOTAL SALES OREGON 1% NEVADA 1% WASHINGTON 10% ARIZONA 2% HAWAII 2% CALIFORNIA 84% 15

INDIRECT TAXES NEVADA 4% OREGON 4% WASHINGTON 8% ARIZONA 7% HAWAII 1% CALIFORNIA 76% NET MULTIPLIERS IN EACH STATE ARIZONA CALIFORNIA HAWAII NEVADA OREGON WASHINGTON EMPLOYMENT 0.60 2.26 1.21 0.55 0.52 1.21 LABOR INCOME 0.72 1.46 1.14 0.64 0.70 1.08 PROPERTY INCOME 0.72 1.17 1.19 0.77 0.71 1.13 TOTAL SALES 0.63 0.55 0.30 0.49 0.64 0.38 INDIRECT TAXES 0.25 0.93 0.66 0.26 0.25 0.57 The details of the importance of the petroleum industry to the economy of each of the states is shown in the fact sheets for each of the six states and the WSPA area as a whole included in Appendix 2. 16

APPENDIX 1: SOURCES. COMPARISON WITH OTHER DATA Our employment results differ from those published by the Independent Petroleum Association of America (IPAA) and the American Petroleum Institute (API). 8 While we do not have access to the IPAA/API sources and methods, it should be noted that their study covers different time periods: the IPAA/API data were compiled in July 2005 using information for 2002 and 2003 while we rely on data released in late 2006 covering the 2004 year. While, the IPAA/API analysis does not cite its sources for the average number of employees, the following can be said about the state by state estimates; In the case of Arizona the IPAA/API s estimates for the Wholesale and Retails sector differ from ours by less than 7.5%; In the case of California, while total employment differs by only 12%, individual components can be significantly different. In the case of Oil and Gas Extraction, the difference may come from the fact that we have included in the sector both people who work in drilling and people who work in all the support activities. In the case of Transportation it would seem that the IPAA/API has included employees of natural gas local distribution companies while we have not; In the cases of Nevada and Oregon, total employment is comparable but some of the components may vary significantly. Once again, the fact that we cannot compare sources and methods hinders our ability to explain those differences. 8 The latest Oil and Gas in your State of the IPAA can be found at http://www.ipaa.org/. 17

We have conducted due diligence of IMPLAN s data, comparing them with the government s published sources: the US Department of Commerce Bureau of Economic Analysis BEA; and the US Department of Labor Bureau of Labor Statistics - BLS. A revision of BEA data indicates that in the case of three of our seven aggregate sectors 9, which account for almost 80% of direct employment, IMPLAN data coincide with those available from the BEA with a small margin of error - between 1.5 and 2.5%. The biggest differences between the IMPLAN and IPAA/API data occur in the Petroleum Refineries and Petrochemical Manufacturing sectors, for which the BEA does not provide disaggregated information. Those data are difficult to reconcile as witnessed by the fact that IPAA/API estimated that, in 2003, there were 28,600 persons employed in refining in California while the same analysis estimated that, in 2001, that number was half as many. We approached the Bureau of Economic Analysis (BEA) to obtain employment data at the 6-digit level to compare with IPAA/API data and were told they do not have that level of detail but that the US Department of Labor Bureau of Labor Statistics (BLS) may help. We then contacted the BLS who recommended that we use their Quarterly Census of Employment and Wages (QCEW). In the case of the states of California and Washington, QCEW and IMPLAN data differ by less than 3% and there are no reliable data for the other states. 9 Oil and Gas Extraction, Pipeline Transportation and Gasoline Stations 18

About the Author Dr. Jose Alberro is a director with LECG. He specializes in merger and antitrust matters before the Mexican Federal Competition Commission, as well as strategy, regulatory, and performance improvements in the energy sector (electricity and hydrocarbons), and manufacturing. Prior to joining LECG, Dr. Alberro was vice president at Charles River Associates and head of its Mexico City office. Dr. Alberro has also had a distinguished career as a public official in the Mexican government. He was chief of staff to the Secretary of Commerce and Industrial Policy in 1995; director general of PEMEX Gas and Petrochemicals (PGPB), one of the 10 largest companies in Mexico, between 1992 and 1994; and PEMEX's chief representative in the NAFTA negotiations between 1990 and 1992. While he held these positions, Dr. Alberro participated in drafting legal and regulatory frameworks for the Mexican natural gas, LPG, and electricity industries. During his tenure at PGPB, operating profits increased threefold through aggressive corporate restructuring and strategic refocusing. Dr. Alberro is a former consultant to the United Nations, has been an arbitrator at the World Bank's International Centre for Settlement of Investment Disputes, and has taught economics at universities in the United States, Mexico and the United Kingdom. He is a member of the Mexican Academy for Scientific Research. Dr. Alberro holds a Ph.D. in Economics from the University of Chicago. He is a French and Spanish native speaker, and is fluent in English. 19

APPENDIX 2: FACT SHEETS FOR EACH STATE AND FOR THE WSPA AREA AS A WHOLE. 20

ARIZONA A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction 14 Oil and Gas Extraction 0 Employment (Employees) Petroleum Refineries - Petroleum Refineries - Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 1,245 Wholesale trade 68 Pipeline Transportation 299 Pipeline Transportation 26 Gas Stations 15,334 Gas Stations 419 Total Direct 16,892 Total Direct 513 Indirect and Induced Effects 10,181 Indirect and Induced Effects 371 Total In State 27,073 Total In State 884 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction 7 Oil and Gas Extraction 0 Petroleum Refineries - Petroleum Refineries - Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 170 Wholesale trade 27 Pipeline Transportation 194 Pipeline Transportation 3 Gas Stations 1,345 Gas Stations 263 Total Direct 1,716 Total Direct 293 Indirect and Induced Effects 1,075 Indirect and Induced Effects 212 Total In State 2,791 Total In State 506 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction 0 Petroleum Refineries - Petrochemical Manufacturing - Machinery and Equipment - NOTE: Wholesale trade 28 Proprietary income consists of payments received by selfemployed individuals and private business owners as Pipeline Transportation 9 Gas Stations 196 income. Total Direct 233 Property Income consists of payment from interest, rents, Indirect and Induced Effects 57 royalties, dividends, and corporate profits. Total In State 290 1

CALIFORNIA A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction 29,075 Oil and Gas Extraction 2,552 Employment (Employees) Petroleum Refineries 13,497 Petroleum Refineries 2,511 Petrochemical Manufacturing 636 Petrochemical Manufacturing 61 Machinery and Equipment 1,871 Machinery and Equipment 125 Wholesale trade 7,590 Wholesale trade 442 Pipeline Transportation 2,252 Pipeline Transportation 633 Gas Stations 56,791 Gas Stations 2,762 Total Direct 111,711 Total Direct 9,085 Indirect and Induced Effects 252,321 Indirect and Induced Effects 13,291 Total In State 364,032 Total In State 22,376 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction 11,902 Oil and Gas Extraction 3,726 Petroleum Refineries 64,811 Petroleum Refineries 1,134 Petrochemical Manufacturing 3,184 Petrochemical Manufacturing 167 Machinery and Equipment 489 Machinery and Equipment - Wholesale trade 1,102 Wholesale trade 173 Pipeline Transportation 2,273 Pipeline Transportation 68 Gas Stations 8,848 Gas Stations 1,730 Total Direct 92,609 Total Direct 6,998 Indirect and Induced Effects 50,514 Indirect and Induced Effects 8,178 Total In State 143,123 Total In State 15,176 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction 652 Petroleum Refineries 243 Petrochemical Manufacturing 15 Machinery and Equipment 3 NOTE: Wholesale trade 183 Proprietary income consists of payments received by selfemployed Pipeline Transportation 213 individuals and private business owners as Gas Stations 1,285 income. Total Direct 2,594 Property Income consists of payment from interest, rents, Indirect and Induced Effects 2,411 royalties, dividends, and corporate profits. Total In State 5,005 2

HAWAII A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction - Oil and Gas Extraction - Employment (Employees) Petroleum Refineries 435 Petroleum Refineries 59 Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 386 Wholesale trade 15 Pipeline Transportation - Pipeline Transportation - Gas Stations 2,645 Gas Stations 62 Total Direct 3,466 Total Direct 137 Indirect and Induced Effects 4,199 Indirect and Induced Effects 156 Total In State 7,665 Total In State 293 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction - Oil and Gas Extraction - Petroleum Refineries 2,142 Petroleum Refineries 28 Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 38 Wholesale trade 6 Pipeline Transportation - Pipeline Transportation - Gas Stations 200 Gas Stations 39 Total Direct 2,380 Total Direct 73 Indirect and Induced Effects 721 Indirect and Induced Effects 87 Total In State 3,102 Total In State 160 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction - Petroleum Refineries 6 Petrochemical Manufacturing - Machinery and Equipment - NOTE: Wholesale trade 6 Proprietary income consists of payments received by selfemployed individuals and private business owners as Pipeline Transportation - Gas Stations 29 income. Total Direct 41 Property Income consists of payment from interest, rents, Indirect and Induced Effects 27 royalties, dividends, and corporate profits. Total In State 69 3

NEVADA A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction 24 Oil and Gas Extraction 1 Employment (Employees) Petroleum Refineries 77 Petroleum Refineries 8 Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 457 Wholesale trade 24 Pipeline Transportation 43 Pipeline Transportation 36 Gas Stations 8,007 Gas Stations 218 Total Direct 8,608 Total Direct 287 Indirect and Induced Effects 4,741 Indirect and Induced Effects 184 Total In State 13,349 Total In State 471 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction 19 Oil and Gas Extraction 1 Petroleum Refineries 365 Petroleum Refineries 3 Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 60 Wholesale trade 9 Pipeline Transportation 88 Pipeline Transportation 4 Gas Stations 700 Gas Stations 137 Total Direct 1,232 Total Direct 155 Indirect and Induced Effects 609 Indirect and Induced Effects 119 Total In State 1,841 Total In State 273 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction 0 Petroleum Refineries 1 Petrochemical Manufacturing - Machinery and Equipment - NOTE: Wholesale trade 10 Proprietary income consists of payments received by selfemployed Pipeline Transportation 12 individuals and private business owners as Gas Stations 102 income. Total Direct 125 Property Income consists of payment from interest, rents, Indirect and Induced Effects 33 royalties, dividends, and corporate profits. Total In State 158 4

OREGON A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction 4 Oil and Gas Extraction 0 Employment (Employees) Petroleum Refineries - Petroleum Refineries - Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 1,112 Wholesale trade 62 Pipeline Transportation 111 Pipeline Transportation 14 Gas Stations 10,884 Gas Stations 227 Total Direct 12,111 Total Direct 303 Indirect and Induced Effects 6,350 Indirect and Induced Effects 213 Total In State 18,461 Total In State 516 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction 3 Oil and Gas Extraction 0 Petroleum Refineries - Petroleum Refineries - Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 154 Wholesale trade 24 Pipeline Transportation 81 Pipeline Transportation 2 Gas Stations 730 Gas Stations 143 Total Direct 967 Total Direct 169 Indirect and Induced Effects 616 Indirect and Induced Effects 120 Total In State 1,584 Total In State 288 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction 0 Petroleum Refineries 0 Petrochemical Manufacturing - Machinery and Equipment - NOTE: Wholesale trade 26 Proprietary income consists of payments received by selfemployed individuals and private business owners as Pipeline Transportation 5 Gas Stations 106 income. Total Direct 137 Property Income consists of payment from interest, rents, Indirect and Induced Effects 34 royalties, dividends, and corporate profits. Total In State 171 5

WASHINGTON Employment (Employees) A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction - Oil and Gas Extraction - Petroleum Refineries 1,838 Petroleum Refineries 334 Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 1,789 Wholesale trade 99 Pipeline Transportation 157 Pipeline Transportation 17 Gas Stations 14,957 Gas Stations 437 Total Direct 18,741 Total Direct 888 Indirect and Induced Effects 22,604 Indirect and Induced Effects 956 Total In State 41,345 Total In State 1,844 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction - Oil and Gas Extraction - Petroleum Refineries 8,850 Petroleum Refineries 150 Petrochemical Manufacturing - Petrochemical Manufacturing - Machinery and Equipment - Machinery and Equipment - Wholesale trade 247 Wholesale trade 39 Pipeline Transportation 109 Pipeline Transportation 2 Gas Stations 1,403 Gas Stations 275 Total Direct 10,609 Total Direct 465 Indirect and Induced Effects 3,997 Indirect and Induced Effects 526 Total In State 14,606 Total In State 991 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction - Petroleum Refineries 32 Petrochemical Manufacturing - Machinery and Equipment - NOTE: Wholesale trade 41 Proprietary income consists of payments received by selfemployed individuals and private business owners as Pipeline Transportation 6 Gas Stations 204 income. Total Direct 283 Property Income consists of payment from interest, rents, Indirect and Induced Effects 160 royalties, dividends, and corporate profits. Total In State 443 6

WSPA REGION Employment (Employees) A Profile of the Petroleum Sector Estimates for 2004 Employee Compensation and Proprietary Income (Millions dollars) Oil and Gas Extraction 35,876 Oil and Gas Extraction 2,553 Petroleum Refineries 15,926 Petroleum Refineries 2,912 Petrochemical Manufacturing 636 Petrochemical Manufacturing 61 Machinery and Equipment 1,871 Machinery and Equipment 125 Wholesale trade 12,579 Wholesale trade 710 Pipeline Transportation 2,863 Pipeline Transportation 726 Gas Stations 108,617 Gas Stations 4,126 Total Direct 178,369 Total Direct 11,213 Indirect and Induced Effects 300,397 Indirect and Induced Effects 15,171 Regional Effect 32,936 Regional Effect 1,057 Total 511,701 Total 27,440 Total Sales (Millions dollars) Property Income (Millions dollars) Oil and Gas Extraction 13,394 Oil and Gas Extraction 3,900 Petroleum Refineries 76,292 Petroleum Refineries 1,312 Petrochemical Manufacturing 3,187 Petrochemical Manufacturing 167 Machinery and Equipment 489 Machinery and Equipment - Wholesale trade 1,773 Wholesale trade 278 Pipeline Transportation 2,746 Pipeline Transportation 78 Gas Stations 13,225 Gas Stations 2,587 Total Direct 111,105 Total Direct 8,322 Indirect and Induced Effects 57,532 Indirect and Induced Effects 9,241 Regional Effect 4,411 Regional Effect 1,313 Total 173,048 Total 18,876 Excise and Sales Taxes (Millions dollars) Oil and Gas Extraction 676 NOTE: Proprietary income consists of payments received by selfemployed individuals and private business owners as income. Property Income consists of payment from interest, rents, royalties, dividends, and corporate profits. Petroleum Refineries 283 Petrochemical Manufacturing 15 Machinery and Equipment 3 Wholesale trade 295 Pipeline Transportation 244 Gas Stations 1,922 Total Direct 3,437 Indirect and Induced Effects 2,723 Regional Effect 174 Total 6,334 7