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Sales-tax revenue up in strong drilling counties; job growth still slow


Published: Fri, January 10, 2014 @ 6:00 a.m.

By MARC KOVAC

news@vindy.com

COLUMBUS

Shale-oil drilling is increasingly focusing on eight counties in eastern Ohio, including Columbiana, and those areas are seeing some of the biggest gains in sales-tax receipts.

But those same counties aren’t seeing substantial increases in their work force levels yet, as the industry awaits further exploration and infrastructure to accommodate oil and gas being produced via horizontal hydraulic fracturing.

Those are some of the conclusions reached in the latest “Ohio Utica Shale Gas Monitor,” a new study released today by the Maxine Goodman Levin College of Urban Affairs at Cleveland State University.

The report reviewed sales-tax receipts, employment statistics, well permits and other data to determine the impact of horizontal hydraulic fracturing in eastern Ohio.

“We’re still another year, 18 months out” from bigger economic impacts, said Ned Hill, dean of the college and one of the authors of the report.

The report identifies eight counties in eastern Ohio as “strong” in terms of shale activity: Columbiana, Carroll, Jefferson, Harrison, Guernsey, Belmont, Noble and Monroe.

Five others are labeled as “moderate,” including Mahoning, Trumbull, Portage, Stark and Tuscarawas.

More than two dozen counties are categorized as “weak,” including Ashland, Wayne, Holmes, Medina, Washington and Muskingum counties. The remainder of the state is outside of the shale formation.

The report noted that employment in counties with the strongest fracking activity is “relatively flat,” though Hill said hiring is taking place in metro areas such as Canton, Akron and Youngstown, where related services are basing their operations.

“Through the second quarter of 2013, employment growth among the residents of shale country has again stagnated and even declined a bit,” according to the report. “Employment among residents in the strong shale counties has decreased by 0.8 percent or by about 4,300 persons employed. Employment in moderate counties has increased slightly, by 0.5 percent in [the first quarter] and 0.4 percent in [the second quarter]. Employment in weak counties decreased slightly in 2013, and in nonshale counties it has increased.”

Counties with increased drilling and production are seeing economic benefits, though, with double-digit increases in sales-tax receipts.

According to the report, “Increased sales reflect spending by land and mineral-rights owners as well as spending of out-of-state workers because hotel and lodging bills are subject to the sales and use tax in Ohio, as are restaurant meals. Robust increases in sales in the moderate shale counties reflect their locations: the Akron, Canton and Youngstown-Warren metropolitan areas border the group of strong shale counties and are located in moderately strong shale counties. These metropolitan areas have larger populations and stronger retailing presence than do the much more rural strong shale counties.”

Fracking activities will have a larger economic impact once related infrastructure and processing facilities are created, particularly a “cracking” facility to process natural gas liquids.

“We’re seeing true impact through spending,” Hill said.

According to the report, “The excitement over the Utica Shale in Ohio is based on the limited presence of oil in the formation and the much more extensive presence of [natural-gas liquids]. However, the degree to which the presence of NGLs changes the midterm economic landscape of Ohio depends in no small part on where the NGLs are processed. This is especially so for ethane, a critical building block of industrial plastics. Large benefits will be reaped if ethane is ‘cracked’ into its commercially valuable components in or close to Ohio. Potential benefits will be reduced if it is barged or piped to Louisiana or Texas.”


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