Drilling bonanza benefits some, bypasses others in Noble County

Columbus Dispatch

Caldwell, Ohio

Farmers who struggled all their lives to pay the bills can see a future, almost within reach, of island vacations and college funds for the grandchildren.

The money would come from the oil and gas industry, which has put drilling rigs on some of the tallest hills and is digging the paths for pipelines.

“About everybody up here is going to benefit from the ruckus and the mess, so it’s not so hard to take,” said Wayne Miley, a farmer whose family has been on the same Noble County land for more than 200 years.

But the big money has not yet arrived. That will happen if, or when, the companies begin paying production royalties, which have the potential to be much more than residents receive in signing bonuses for mineral-rights leases and pipeline rights of way.

Even then, some parts of the region will see much less benefit than others. The county seat, Caldwell, is getting little of the income that is transforming the countryside. It has few retailers to generate sales tax, and, with no bars in the village limits, it doesn’t even get beer money from the hundreds of traveling oil contractors.

Last month, the state reported that energy companies produced 635,876 barrels of oil and 12.8 billion cubic feet of natural gas last year in the Utica shale, a rock formation that runs thousands of feet beneath eastern and central Ohio. The results showed that most of the activity is in a sweet spot that includes Carroll, Harrison, Columbiana and Noble counties. Some analysts said the numbers are failing to live up to lofty expectations, while others said there has not been enough drilling to draw broad conclusions.

Noble County, whose population of 14,579 makes it the third-smallest of Ohio’s 88 counties, is at the edge of Appalachia. The region’s hills and woods make for great views, but they are not ideal for raising crops or livestock. Many farmers commute to day jobs in larger cities.

The county is home to the Thorla- McKee oil well, dug in 1814, which the Ohio Historical Society says was the first such well in North America. For much of the 20th century, the coal industry was a key employer; it left behind a series of abandoned mines that government programs have worked to restore into natural areas.

“We’re a poverty-stricken area,” Miley said. Last year, he retired from his day job as a pipefitter, and the 60-year-old now is a full-time cattle farmer.

He and his wife, Martha, raised three children in their house, and they have eight grandchildren. They feel fortunate that all their children live in the area. Their two sons are farmers, and their daughter is a public-school teacher.

Just outside the main house is the much-smaller one-bedroom house where Wayne was raised; it’s used for storage.

The oil industry arrived two years ago when a man came to the door and offered $50 per acre per year to lease mineral rights, which was five times the going rate in that part of the county. With 400 acres to his name, Miley stood to make $20,000 per year. He had no idea that there might be shale oil and gas on his land. He signed.

He did it without a lawyer or an accountant, and he has watched that initial lease get resold several times at big markups, providing no benefit for him as the landowner.

“We’re just dumb farmers,” he said. “We’ve got no business setting up these contracts.”

Since he signed, the price for leases has risen to more than $6,000 per acre in some places. The typical royalty is 12.5 percent of energy income, but some of the owners who waited to sign have negotiated royalties of as much as 20 percent.

“These are complicated business transactions,” said Glenn Krassen, an energy attorney with Bricker & Eckler in Columbus, who represents landowners in lease deals. When he has workshops, he tells the audience: “Friends don’t let friends sign oil leases without a competent attorney.”

And yet, there was value for Miley in signing early. His land was among the first properties in the county to get a drilling rig. It went up last fall, on a hill that overlooks several farms. Once the drillers hit gas, they flared it out from the top of the rig for days, giving the residents the sight of a 50-foot-tall flame, so bright that one farmer said he could stroll across his property at night without needing a lantern.

Energy wealth can transform a community, as has happened in Pennsylvania with the development of the Marcellus shale. Some people become wealthy, but most don’t, which can lead to tension between neighbors, said Diane McLaughlin, a professor of rural sociology at Penn State University.

“Some of these farmers have been traditionally land-rich and money-poor, and this really shifts their position in the community,” she said. “It will be interesting to see how it plays out over the long term.”

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