By John Funk
The origin of Ohio’s hoped-for shale gas and oil bonanza is here, more than a thousand miles southwest of the Buckeye State.
This city is home to Chesapeake Energy Corp., along with other large, independent oil and natural gas producers who have pioneered shale gas development over the past decade in other states and now in Ohio.
What has happened in Chesapeake’s hometown and home state might give Ohioans some insight into what to expect as oil and gas development ramps up here.
In Oklahoma City, you can bear witness to the energy debate at full roar. On one side, proponents talk of true energy independence in which a steady supply of cheap energy ends the boom-and-bust years and guarantees a golden economy. On the other side, at least one experienced energy analyst predicts the latest boom will be over in a little more than a decade.
Which is it for Ohio?
Looking for answers in Oklahoma City means you must first understand how the Oklahoma companies operate.
Oklahoma City is the energy capital of an energy state. In the past its economy has alternately soared and flopped, but leaders are confident this time will be different.
Oil has been a leading industry in this state for at least three generations. It’s ingrained in the culture, a way of life for people who live and work there.
And now the industry is drawing a couple of thousand new residents each month to Oklahoma City.
“In some way, shape or form, nearly everybody in the state either works in oil and gas or knows somebody who works in oil and gas,” said Cody Bannister, vice president of the Independent Petroleum Association, a trade organization.
In Oklahoma City, men wear cowboy boots and hats with suits and jeans, a cattle stockyard conducts daily auctions, and people carry handguns openly or concealed, as long as they have a permit.
Wellheads and pump jacks are everywhere, so many that they appear to outnumber the trees.
The oil- and gas-producing equipment is in shopping center parking lots, along city streets and interstate highways, at the
Will Rogers Airport, even on the grounds of the state capitol building. Oklahomans seem unfazed by their existence.
Oklahoma City got a wake-up call in the early 1990s when it was passed over for Indianapolis as the location for United Air lines’ major maintenance facility.
So elected leaders asked voters to approve a five-year, 1-cent sales tax increase, which has been extended several times and generates hundreds of millions of dollars for development.
Now the largest city in thestate is well on its way to becoming a big metropolitan player.
It is rebuilding its downtown through a series of major construction projects financed withcash rather than debt. The reconstruction began even before the1995 bombing of the downtown Alfred P. Murrah Federal Building in which 168 people were killed.
Public development has attracted heavy private investment.
Gas and oil companies have built new headquarters or renovated older buildings. Downtown has gone from one hotel to 15. And United Airlines has added a direct flight to Cleveland.
Unlike in Ohio, where the drilling industry is still a target of environmental organizations, isolated citizens groups and evena few cities concerned about groundwater, Oklahoma’s oil and gas producers get little opposition from the public.
The technology used in shale development — horizontal drilling and hydraulic fracturing — is not an issue in Oklahoma either.
In fact, hydraulic fracturing has been used to stimulate water wells there, said Roy Williams, president of the Oklahoma City Chamber of Commerce.
Differences between Ohio and Oklahoma go well beyond concerns about technology.
Oklahoma Gov. Mary Fallin launched Oklahoma First, a comprehensive energy policy, in 2011. The plan not only addressed natural gas and oil, as Ohio Gov. John Kasich’s energy policy did, but it also embraced wind power, energy efficiency and reductions in carbon dioxide emissions.
The goal of Oklahoma’s plan is energy independence — using Oklahoma and U.S. energy sources before using imported fuel.
“Of course our biggest single energy resource here is natural gas,” Michael Ming, Oklahoma secretary of energy, said in an interview in his office tucked almost anonymously inside a downtown office building. “It’s the centerpiece [of the plan] but not the only piece.”
Wind is just another form of energy, he said. The public and government want it developed.
“We are the sixth-largest state in the U.S. now in installed [wind] capacity,” he said. “We have doubled our wind capacity in the last two years.”
Ohio’s lawmakers, on the other hand, have been trying to figure out a way to scrap the state’s policies on renewable energy and halt or end efficiency mandates, something FirstEnergy Corp. is also campaigning for.
Oil and gas companies, especially Chesapeake Energy and rival Devon Energy, are leading corporate citizens in Oklahoma City. They have created some of the well-paid jobs, including for those in engineering and financial real estate management, derrick and drill operators and oil field laborers.
Devon Energy’s new 50-story tower in the heart of the city is a source of pride and faith in the future. The company has leased mineral rights in Ohio but recently has been trying to sell them, saying it has better opportunities elsewhere.
Direct and indirect jobs in thes tate that supply the industry number nearly 40,000, according to the global economic consulting company IHS. But that estimate doesn’t seem to include nearly 30,000 other people who are self-employed in the industry.
try, as reported in an Oklahoma
City University study.
Energy “has been positive for
us,” State Treasurer Ken Miller
said. “And if you look at what the
state economy has done over the
last couple of years compared to
the U.S. economy, it is a tale of
two different economies.”
Oklahoma’s oil and gas indus
try accounts for about a third of
the state’s $150 billion-a-year
economy ‘” one that has soared
during times of high oil and gas
prices and crashed when prices
fell too low.
The economy crashed in the
1980s and again in the ‘90s, so
diversification has been a goal
for some time.
“We often have people talk
about how Oklahoma should di
versify its economy. We have and
we are and we will,” Miller said.
“But that is not going to
change the natural endowment
that this state is blessed with. It
is our anchor industry. It always
has been and it will continue to
be for the foreseeable future.”
Still, the state is pushing diver
sification. Dave Lopez, Okla
homa secretary of commerce and
tourism, said the state recently
went through a major data analy
sis to identify what its “wealth-
creating parts of the economy
The study identified five of
those areas: aerospace and de
fense, energy, agriculture and
bioscience, information and fin
ancial services, and transporta
tion and distribution. There are
six military bases, including Tin
ker Air Force Base, a major
driver of economic development.
Wind development is necessi
tating construction of new high-
voltage transmission lines, some
thing that is paying farmers roy
alties for right-of-way leases.
“In Oklahoma, we have found
a common understanding and a
common ground between agri
culture interest and the energy
industry at large,” Lopez said.
“It’s not an either/or.”
Work force that’s growing
While no state’s economy is re
cession-proof, Oklahoma has
The oil and gas industry’s
headquarters in Oklahoma City
is credited with creating a young
and growing work force of educa
ted professionals with skills that
other industries can also use.
Unemployment levels have
trended about 3 percentage
points below the national aver
age in the last five or six years,
said Eric Long, an economist for
the Oklahoma City Chamber of
The statewide unemployment
rate was 5.1 percent in January,
below the 7.9 percent national
average and below Ohio’s 6.7
percent rate. The Oklahoma City
metropolitan area’s unemploy
ment rate of 5.2 percent was well
below the Cleveland metro rate
of 8.2 percent.
And unlike Cleveland, which
has seen its population decline
since the 1950s, when it peaked
at about 1 million people, Okla
homa City’s population is grow
ing. It’s just under 600,000 ‘” or
about one and a half times the
number of the 394,000 people in Cleveland.
Roughly 2,000 new people a
month are added to Oklahoma
City’s metropolitan area popula
tion of about 1.3 million, Long
Underlying the optimism that
characterizes the area is the be
lief that the old days of boom and
bust at the hands of the oil and
gas industry are gone for good.
The boom may be tempered
from time to time by normal
business cycles, but the depres
sions that plagued the state in
earlier decades are not coming
back, say industry, state and in
They believe new drilling tech
nologies are a game-changer for
maintaining steady production,
arguing that previous price
spikes were caused by shortages,
which can now be avoided.
The experts point to three-di
mensional seismic underground
mapping, real-time information
from the well bore during drill
ing, the ability to drill horizon
tally, and more-precise hydraulic
fracturing as tools that increase
production and drive down
“The new technology has un
leashed an enormous opportu
nity for many energy-producing
states and for our country,” said
treasurer Miller. “It really did
used to be a pipe dream, no pun
intended, to be energy indepen
dent, but now because of the new
technology it is very much a pos
Some energy analysts disagree
with the belief that shale produc
tion has tapped a vast, 100-year
supply of gas and oil.
“That’s rubbish,” said Deborah
Rogers, a former investment
banker, Wall Street financial
consultant and adviser to the
U.S. Department of Interior and
Federal Reserve Bank of Dallas.
“You hear that everywhere.
That is the industry line across
the board ‘” that this is a game-
changer and a national treasure,”
Rogers said. “I think it is just a
PR exercise disproportionate to
the performance of the wells. It is
not based on the actual perform
ance of the 60,000 shale wells”
that have so far been drilled na
Rogers said it’s not possible to
keep up production levels in a
field of shale wells.
“You have to engage in contin
uous drilling just to stay at cur
rent production levels,” she said,
and that is a costly proposition.
She thinks the U.S. shale boom
will be over by 2024.
All that glitters isn’t gold
Oklahoma has been a major oil
and gas player for all of its 113
years as a state. But there have
been environmental conse
quences, prompting critics to say
that people in Oklahoma just
don’t know what they have lost
over decades of major drilling.
Or that they have been lulled into
complacency by the industry’s
State officials, including the
regulators, say that hydraulic
fracturing has never ruined
groundwater. But there have
been earthquakes, as there have
been in Ohio. In Youngstown, a
series of 12 quakes, ranging from
2.1 to 4.0 magnitude, occurred in
2011 and were linked to a new
injection well there.
The University of Oklahoma in
late March said a 5.7 magnitude
earthquake in the state in 2011
was potentially caused by injec
tion of wastewater from drilling
and hydraulic fracturing that be
gan in 1993.
The Oklahoma Geological Sur
vey earlier investigated whether
hydraulic fracturing itself caused
a series of 43 quakes, from 1.0 to
2.8 magnitude. The probe noted
there was a strong correlation be
tween the well fracturing and the
quakes but it concluded the seis
mic data were not clear enough
to say for certain.
“You do have disasters,” said
Patrice Douglas, chairwoman of
the Public Corporation Commis
sion, which regulates the indus
try and oversees the state’s
electric and gas utilities.
The commission’s three mem
bers are elected statewide rather
than appointed, as in Ohio, and
they have public meetings every
day to vote on issues in one of the
“We have had blowouts
throughout the years,” said
Douglas, referring to when drill
ing crews lose control of the pres
sure. “You have things that hap
pen along 100 years of oil and
gas development. When we see
something like that happen, we
really work to ensure that it
doesn’t happen a second time.”
Natural gas good for Amer
Natural gas not only makes
good business sense in Okla
homa City, but it also happens to
be patriotic ‘” the right thing to
do for America.
That’s the message of the Okla
homa Energy Resources Board, a
government agency funded en
tirely by voluntary contributions
from the oil and gas industry and
overseen by an industry board
appointed by elected officials.
The resources board not only
produces national advertising for
television, it also has a fully de
veloped educational mission in
classrooms from kindergarten to
college. In Ohio, an educational
arm of the Ohio Oil and Gas As
sociation is in the early stages of
such a program.
Chesapeake Energy is convert
ing all of its vehicles to run on
compressed natural gas.
Throughout Oklahoma City, CNG
is available at a price between 79
and 99 cents a gallon of gasoline
equivalent. Across the state are
hundreds of CNG stations. Cleve
land has two CNG stations, and
Ohio has 12.
In early March, Oklahoma
took delivery of its first 242 CNG
vehicles from Chrysler, the result
of a 22-state national initiative
organized by Gov. Fallin, a Re
publican, and Colorado Gov.
John Hickenlooper, a Democrat,
to buy CNG vehicles if carmakers
would make them.
Ohio Gov. John Kasich, a Re
publican, signed the agreement,
but Ohio has yet to take delivery
of a CNG vehicle, partly because
it still has only a few CNG sta
“We are exploring the possibil
ity of retrofitting two or three
snow plows either in northern
Ohio or central Ohio, or both,”
said Kasich spokesman Robert
A renaissance for Ohio?
Accelerating manufacturing is
Kasich’s primary hope for natu
Ohio has been a heavy manu
facturing state for decades, with
its cities’ historic melting pots of
immigrants seeking work in the
state’s heavy industries. And to
day the state is struggling to
move into high-tech manufactur
ing while hanging on to what’s
left of its older industries.
Gas and oil production have
had a place in Ohio’s develop
ment since the first well was
drilled in Trumbull County in
1859. There were intermittent
state oil booms in the 1880s and
More than 220,000 wells have
been drilled in Ohio, but the in
dustry has never been the state’s
economic mainstay. IHS Consult
ing said Ohio shale jobs num
bered about 18,000 in 2012, of
which 4,200 were directly in the
Whether the suspected mother
lode of shale oil and gas under
the rolling hills of eastern Ohio
will lead to an Ohio manufactur
ing and economic renaissance as
hoped is the real question.
Russell Evans, an economist
with Oklahoma City University,
said Ohio manufacturing logi
cally should get a boost from
“I would assume given a manu
facturing background, given the
existence of those facilities, given
a trained work force, that some
of that production [of parts and
components] would be readily
transferable” to Ohio, Evans said.
Rural Ohio counties, such as
Carroll and Harrison counties,
where Chesapeake has been drill
ing, have in fact seen a lot of new
spending, but few new jobs,
according to a recent Cleveland
State University study.
But the ongoing drilling could
stop the slow economic decline
in these rural Ohio counties,
Evans said, as it has in Okla