Ohio – Dotting the 'I' in Investment

Mark Green
Posted April 16, 2014

The story of the impact of oil and natural gas production story in Ohio is old – and new. Old in the sense the state was one of the country’s earliest producers of oil and natural gas. But also new, because development of the Utica Shale play in the past few years is responsible for an oil and natural gas resurgence, one that parallels what’s happening in the country as a whole.   Thanks to shale development through advanced hydraulic fracturing and horizontal drilling the state is seeing job creation, investment and economic growth.

An energy group reported earlier this month that oil and natural gas investments totaled nearly $13 billion last year and that the state has seen another $6 billion in investments since last fall. Columbus Business First quotes Matt Warnock of the law firm Bricker & Eckler’s energy and public utilities group, which issued the report:

“The biggest thing is infrastructure. Everyone keeps talking about how that's what we need, and now you're starting to see it. More and more pipeline projects, process facility projects. We're starting to see larger natural gas-fired power plant projects.”

Investment in state energy projects means state energy jobs. Ohio ranked ninth in the country in energy employment – direct and supported jobs – in a PwC study based on 2011 figures, the last year for which comprehensive data is available. Let’s look at the specific numbers for Ohio:

• 255,100 jobs supported, accounting for 3.9 percent of the state’s total employment. That includes 77,000 direct industry jobs.

• $12.7 billion in labor income – wages, salaries and benefits, as well as proprietors’ income from jobs directly or indirectly supported by industry through operational spending, dividend payments and capital investments.

• $28.4 billion in value added – additional value created at a particular stage of production, including employee compensation, proprietors’ income, income to capital owners from property and indirect business taxes that are borne by consumers rather than producers.

These are numbers that figure to improve. An IHS study found that unconventional energy development through fracking supports 38,000 jobs and that total will soar to 143,000 by 2020 and 266,000 by 2035. IHS:

Ohio’s unconventional oil and gas industry has much potential. While Utica’s development is in the early stages, leasing and exploration activity have ramped up in recent years. Recent well test results have been highly encouraging. Furthermore, the extent of the play is vast, covering as much as one-half of the state’s land area.

The IHS analysis points to broader economic growth in Ohio – and specifically, new manufacturing – stemming from oil and natural gas activity:

This oil and gas activity not only directly creates jobs and income but it also creates work for auxiliary industries, including manufacturing. Recent developments include Vallourec & Mannesmann Holdings building a new steel plant in Youngstown to supply steel tubes used in drilling for oil and gas formations; U.S. Steel Corp expanding and upgrading its plant in Lorain; and Timken Co. upgrading its Canton plant to accommodate additional business related to drilling. Ohio, with its large industrial base and proximity to promising reserves, is poised to gain further by producing the heavy metal and machinery required to perform unconventional drilling.

Safe and responsible energy development is boosting America as well as the places we live. In Ohio, growth is real – providing new opportunities in the oil and natural gas industry, but also in the state’s manufacturing sector, once thought to be in permanent decline. That’s a good-news story that can get better with leadership and sound energy policies that increase access to reserves while fostering new investments.