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A new lease



Published: Sun, November 4, 2012 @ 12:00 a.m.

Shale industry provides apartments, motels and hotels with ...

By Jamison Cocklin

jcocklin@vindy.com

YOUNGSTOWN

Palmantier’s Motel sits on a rural patch of land just off a stretch of the Lincoln Highway running through southeast Minerva in Stark County, but the village itself is situated on the county lines of Carroll and Columbiana counties, too.

The motel has only nine apartment-sized rooms. It’s owned and operated by the Sonntag family, who bought the motel at auction in August 2010. At the time, Rainie Sonntag was working for the local school system and her son moved in temporarily to get the business up and running.

Shortly after the purchase, she quit her job. These days, owning and operating the motel is a full-time affair.

At the time the Sonntags bought the motel, activity across Ohio’s Utica Shale formation was about to take off.

Today, of those nine apartment-sized rooms, she keeps between six and seven available for the oil and gas industry — when they’re not already booked, that is.

“If you call me two or three weeks in advance, for a one- or two-night stay, it’s going to be tough to get in here,” Sonntag said. “Thanks to the oil fields, we’ve been able to make many improvements to our place, and it just continues to get better. Without the industry, I would have been desperately searching for ways to market my business.”

The fortunes of Palmantier’s Motel are far from rare in a pocket of Ohio that has developed as a high-volume beltway for oil and gas permitting and drilling. In Columbiana, Harrison and Carroll counties, 258 sites have been permitted and 97 oil and gas wells have been drilled.

The three-county area, along with Jefferson County, leads the state in oil and gas activity, according to figures from the Ohio Department of Natural Resources.

It’s estimated that for each well, more than 400 employees will be required to fulfill each phase of development, from exploration to production.

For now, Ohio’s shale formations mostly remain in a state of exploration, which means drilling operations will only grow as production ramps up in the state, but already the activity in rural pockets of eastern Ohio is leading to a drop in vacancy rates at hotels in urban areas such as Canton and Youngstown.

“A lot of these workers will come in for short-term stays for four, six or eight weeks, and a lot of people don’t want to rent out houses or duplex apartments for those periods,” said Dan Coen, a partner at the Utica Shale Housing Group, which works in three states to provide temporary housing for oil and gas workers.

“Hotels get booked up quickly, and they have a certain number of rooms dedicated to long-term stays,” Coen said. “If they overload the hotel with oil workers, it hurts the other side of the business.”

No hard statistics are available on shale-related occupancy rates at the region’s hotels, but sources generally agree that cities such as Canton and Youngstown have enough infrastructure to support an influx of oil and gas employees seeking extended stays.

Even if housing issues are not at a tipping point just yet, however, problems in places such as North Dakota and Texas have provided an early warning and a chance to prepare the region for the marked increase in operations expected to occur around 2014.

In North Dakota, where small communities such as Watford City, population 1,923, have been inundated with oil-field workers, temporary housing units known as “man camps,” subdivisions filled with cabins, mobile homes and recreational vehicles, have cropped up in recent years.

In parts of Texas, city populations have swelled by as much as 8 percent and hotels have been constructed within throwing distance of one another.

“It’s been a major issue in other parts of the country, to the point where companies are starting up to establish these man camps,” said Peter MacKenzie, vice president of operations at the Ohio Oil and Gas Association. “But I don’t see it as an organizational problem in Youngstown or anywhere else in Northeast Ohio. There’s an abundance of housing, especially in some of these college towns.”

Still, area hotels already have noticed an uptick in business since the beginning of the year.

At the Boardman Holiday Inn, staff members are regularly negotiating with companies such as BP and Chesapeake, which are renting rooms at group rates for varying periods of time.

“I can say without a doubt that our business has improved as a direct result of the shale boom,” said Nancy Sullivan, the hotel’s director of sales and marketing. “People are being turned away at this hotel and others because of it. That certainly doesn’t mean we’re sold out all the time, but with more of these workers coming in, there will be a need for more hotels in the future.”

Coen said high-occupancy rates and a dearth of housing in parts of southeast Ohio leaves oil and gas workers traveling north to points in Cleveland, Canton and Youngstown in search of a room or somewhere else to stay.

In Austintown, at the Hillbrook Apartments, leasing supervisor Tamara Johnson said the 408-unit complex is offering three-, six- and 12-month leases with a greater focus on attracting oil and gas companies.

“We’ve always offered short-term leases, but this is a great growth opportunity for the area,” Johnson said. “All they need to do is bring a toothbrush in most cases. We offer fully furnished suites with almost everything included, all the utilities, linens, towels and even silverware.”

Johnson said Hillbrook is positioned almost at the center of Trumbull and Columbiana counties, and subcontractors, surveyors and other shale-related professions have slowly started to cease on the short-term leases, but the complex plans to grow those tenants in the next year.

Dan Alfaro, a spokesman for industry-outreach group Energy In-Depth, said his organization has heard from local Realtors who have managed to sell more houses to those anticipating sustained oil and gas operations across Ohio in the coming years.

“It’s a good problem for all the wrong reasons,” he said. “Northeast Ohio has an abundance of housing, high rates of foreclosure and blight in some areas. These workers are helping to fill those houses up and become a part of those communities.”

Alfaro, like others, said the industry will continue to grow throughout Ohio in the near future.

“We’re still in the very early stages of this,” Alfaro said. “But if down the line there’s an abundance of resources being developed, and the worst thing to come is we have to build new houses and hotels, that’s a good thing because it creates jobs.”


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