9.12.13 | “Fracking”—the process of hydraulically cracking underground rock strata to release oil and natural gas, is a hot topic on many levels. In the Dakotas, a new gold rush is underway, with once dying towns springing to life as workers flock to the natural gas fields. The rush has been both a boon and a strain on local economies as a flood of workers creates housing shortages and other changes. States farther east are pinning their hopes on natural gas as well, as the Marcellus Shale formation harbors untapped potential (and fears). While many are banking, quite literally, on this new industry to revive economies, there are still a lot of unknowns.
In a quarterly report released last month from the Energy Policy Center at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University, Ned Hill and Kelly Kinahan provide an initial assessment of the statewide economic impacts stemming from fracking in the Utica shale formation, which underlies a large chunk of Ohio.
The report is one of the first to move beyond mere projections and get down to actual results. As the Columbus Dispatch reported, “Many of those other reports were ‘absolutely wretched’ in their use of rosy assumptions, said James Newton, an independent economic analyst in Delaware.”
Dividing the Buckeye State’s 88 counties into “strong shale” (15) “moderate shale” (30), “weak shale” (37) and “non-shale” (6) categories, the paper finds “that strong shale counties are experiencing ongoing enhanced economic activity with job creation that, while slim, outpaces hiring in other areas of the state.”
For example, in 2012, strong shale counties’ sales receipts grew by 20 percent—much, more than the other counties—and “the growth in sales receipts correlates with the rapid increase in the number of wells permitted, drilled, and the increase in production in strong shale counties.” Much of this sales bump, the authors suspect, is being driven by “shaleionaires,” landowners profiting from leasing their former agricultural land for drilling purposes.
While sales numbers are up, new jobs are not marching in sync. The job growth from shale exploration is “muted,” the authors write, at less than 1 percent in strong and moderate shale counties. Employment data will probably change, however, as more Ohioans are trained for work that currently is (or at the time of the study, was) being done by out-of-state specialists, who are building out the Utica fields.
Moreover, the paper analyzes total employment rather than particular industry sectors “that are more likely to be more directly impacted by shale development.” Most importantly for Ohioans, what happens to future employment hinges on whether the fracked hydrocarbons are processed at home or exported to states like Louisiana or Texas.
As Hill told the Columbus Dispatch, “We are not going to see this field fully built out for another few years. It doesn’t mean we’ve missed the boat. It means the boat has not yet pulled up to the dock.”
By design, the paper restricts its analysis to “the more basic questions of: Has sales activity in the shale counties been growing faster than elsewhere in Ohio? Has employment growth in the shale counties been faster than elsewhere in Ohio? What is the status of horizontal well activity? How is shale exploration and development affecting gas prices?”
“It is beyond the scope of this report,” its authors note, “to analyze the complete economic impact of shale exploration and production and to address more complex issues such as consumer spending leakages and direct and indirect spending in the supply chain.”
Left out of the report is another impact, on the environment. Reports of earthquakes where none had been previously recorded or the poisoning of aquifers, wells and rivers, all give one pause, not to mention the consequences of pumping yet more hydrocarbons into the planet’s atmosphere. The price of natural gas, which has fallen considerably, will also dictate the market. As will our attention spans—remember ethanol? As Jim Lane writes in Biofuels Digest:
Six years ago, it was ethanol. Today, it’s cheap shale gas. Tomorrow, it will be something else. Inevitably the complications ensue, and the players get set, and the market gets locked in— and attention ultimately moves on to something else.
While that’s probably an overstatement, it will take smart planning, good science, and honest information if more than just the shale companies are to benefit.