By Karl Henkel
The Utica Shale is expected to bring economic prosperity to Ohio in coming years.
But a new study, along with economic data from nearby states, reveals that shale drilling may not be the savior to Ohio’s economic woes.
Pennsylvania and West Virginia — years ahead of Ohio in the so-called drilling boom — have shown only negligible employment increases in recent years.
In fact, the unemployment rates of all three states have mirrored one another since 2007, when West Virginia and Pennsylvania boasted near 4 percent jobless rates and Ohio checked in at about 5.5 percent.
Since then, the states have faltered because of what some refer to as the worst recession since the Great Depression.
As it stands now, all three states still have unemployment rates near 8 percent. That comes despite claims that Marcellus Shale drilling in Pennsylvania created 48,000 jobs between 2007 and 2010.
The reason? Overestimation and miscalculation, according to a new study by Mark Partridge, chairman of the C. William Swank Program in Rural-Urban Policy at The Ohio State University.
Ohio actually should expect 20,000 jobs, one-tenth of the 200,000 state jobs estimate in an industry-backed study in September.
In a separate study by IHS Global Insight, an economic forecaster, shale employment could grow from 600,000 to 870,000 nationwide by 2015.
“We need to be realistic,” he told The Vindicator. “It’s not going to solve all of our problems.”
Locally, experts say it is difficult to predict anticipated growth.
“I saw the 200,000 figure, and I can’t validate it or dispute it,” said Bert Cene, executive director at the Mahoning and Columbiana Training Association, which is preparing workers for jobs in the field. “We’re learning about the industry as we go.”
A recent study by Kleinhenz & Associates, prepared for the Ohio Oil and Gas Energy Education Program, claims that drilling will create 200,000 jobs in Ohio by 2015.
“It was a big, long discussion on whether or not we should even do the projection,” said Rhonda Reda, executive director of the OOGEEP.
Reda said the group decided to go with the 200,000 jobs number, based on proprietary five-year business plans of industry companies, to inform the state and the industry so neither would get behind “in job training.”
The study group, the Economic Impact Study Project Committee, consisted of 13 members, many with ties to oil and gas.
The Ohio Oil & Gas Association previously honored three of those members with its annual Oilfield Patriot Award, given to those who have promoted the oil and natural-gas industry.
Another committee member, John W. Straker, president of the Oxford Oil Co., contributed $121,450 to Ohio Republicans supportive of drilling and the Independent Petroleum Association of America Wildcatters Fund, a political action committee supporting the oil and gas industry, according to campaign finance records from Federal Elections Commission.
Reda said the study was not political and needed the input from industry officials.
“I’m not going to go to a group of nurses and ask them to analyze this,” she said.
Partridge’s report said the OOGEEP report “double counted economic effects,” included “unrealistic assumptions” and used “out-of-date” economic methodologies.
ANOTHER BIG NUMBER
Partridge said Ohio’s speculated job-growth figures mirrored a similar Pennsylvania study and subsequent employment statistics.
The Marcellus Shale Coalition claims Pennsylvania added nearly 50,000 shale-related jobs between late 2007 and 2010.
But according to the Keystone Research Center, a Pennsylvania nonprofit group, the state added a net of 5,669 shale jobs, accounting for 10 percent of all new jobs in 2010.
“Our experience in Pennsylvania has been that there’s a lot of cheerleading going on and not a lot of analysis,” said Stephen Herzenberg, executive director of Keystone.
The cheerleading has worked, at least when it comes to public perception.
Eight in 10 respondents in a recent Deloitte LLP study link gas exploration with job creation and economic revival.
But Partridge said the economic success is miscalculated.
“They add up all of the jobs,” Partridge said. “That’s not necessarily the number of people working permanently.”
The Pennsylvania Budget and Policy Center denounced overestimated jobs numbers and said the state expects the industry to employ about 12,400 by 2016.
“By comparison, Walmart employed 48,800 people in Pennsylvania as of January 2010,” the report read.
Partridge expects similar, modest results in Ohio.
IS OHIO DIFFERENT?
The Utica Shale — predominant in Ohio — is expected to be more oil-rich than the Marcellus, found largely in Pennsylvania.
Ohio also has the infrastructure and geology to support industries that Pennsylvania cannot, experts say, including brine injection wells, one form of fracking wastewater disposal.
Ohio is home to about 185 injection wells — Pennsylvania has eight — and Tom Tomastik of the Ohio Department of Natural Resources says he has received more permit applications in 2011 than he has in any other year during the past quarter-century.
Injection wells create jobs trucking jobs, to transport the brine water, and on-site jobs to monitor and filter the water.
Ohio regulates another form of brine disposal: wastewater treatment plants. Pennsylvania banned those plants after a regulations nightmare in which drillers disposed of untreated brine directly into lakes and streams.
If Patriot Water Treatment LLC in Warren, the state’s lone wastewater treatment plant, is allowed to move forward with its expansion plans — without regulatory interruption — it is prepared to create as many as 600 direct jobs, said Andrew Blocksom, company president.
Injection wells, wastewater treatment plants and drilling sites require state environmental inspections, necessitating more state inspectors, said Tom Tugend, head of the Division of Oil and Gas management. Ohio currently has about 30 inspectors.
“There are definitely jobs,” said George Zeller, a Cleveland-based economist, noting the approximately 500 jobs created by V&M Star and VAM USA LLC in Youngstown.
“The question is, how far does it go?”