Imagine a life without a strong, affordable and reliable energy source — one that powers your car, heats your water, cooks your food or provides feedstock for the essential plastic commodities that make everyday life convenient. Life would certainly be more primitive without the ease and comfort of oil and natural gas.
Kentucky is not short-stacked when it comes to its supply of natural resources. However, many people do not realize the significant impact that the oil and gas industry has had on the state economy
Typically, Texas, Oklahoma or Pennsylvania are the states that come to mind when discussing fossil-fuel extraction. Yet, nationwide, Kentucky falls within the Top 20 for oil and natural gas production.
Over half of Kentucky’s counties produce oil and/or natural gas — mostly located in the eastern and western corners of the state. Last year alone, oil and natural gas operators extracted around $400 million worth of products from nearly 30,000 wells. In fact, these same wells annually produce approximately 3 million barrels of oil and billions of cubic feet of natural gas, which is integrated back into global supplies.
This tremendous rate of return underscores the sector’s value and impact on Kentucky’s economy, especially when it relates to employment, local governments and individual landowners.
Each year, the industry employs thousands of workers with an average salary of $75,000. Oil and gas operators also pay tens of millions of dollars in severance taxes as well as lease royalties to numerous landowners; all of which infuses much-needed funding into many cash-strapped communities.
Critical investments like these continue to support and stimulate local economies while simultaneously protecting Kentucky’s vital natural resources and ecosystem.
In recent years, Kentucky’s oil and gas industry has led the charge of updating industry standards to improve environmental conservation efforts. Enhanced drilling technologies and strategic rig placement have significantly reduced the surface footprint of large-scale mechanical wells, which allows property owners to reclaim more greenspace for nature to take its course.
The industry has also built well-rounded coalitions that include Kentucky’s Energy and Environment Cabinet and the Kentucky Chamber of Commerce as well as conservationist groups like the Kentucky Resources Council to help protect Kentucky’s soil and groundwater. The coalition worked in tandem with regulators and lawmakers to modernize the safe disposal of drilling byproducts into landfills specifically regulated to handle the material.
As a result, modernization of the industry through innovative drilling practices, improved environmental protections and a growing demand for supply will help boost the sector’s potential for future economic growth.
Nonetheless, much of this success will depend on how the markets will react to various outside factors, including stifling rules and regulations at the federal level that have placed undue hardships on small, independent producers. Market volatility and geopolitical pressures from certain special-interest groups may also influence how operators react to future output trends.
Despite the unpredictability of some external dynamics, operators and producers continue to be very optimistic about future growth and investment opportunities in Kentucky. The industry will continue to embrace new technologies, diversify its workforce and develop sound, flexible strategies when choosing new drilling locations, all while safeguarding the environment.
Kentuckians will also continue to reap the benefits of an industry going strong since before the Depression Era. Lower fuel prices for consumers, job creation for thousands and the infusion of tax and royalty revenue into local communities have left an indelible mark on Kentucky’s versatile economy.
As the sector forges ahead, one thing is for certain: The state of Kentucky’s oil and natural gas industry is robust, steady and will continue to produce reliable energy for years to come.
Ryan Watts is executive director of the Kentucky Oil and Gas Association.