10 Years Later: No Gusher of Jobs

Second in a two-part series. You can read part one HERE

YOUNGSTOWN, Ohio – One by one, the plants shut down in quick succession.  Companies that relocated to the Mahoning Valley to support shale exploration – an industry many projected would be the next economic boom for the region – closed their doors as the promise of big oil and gas returns faded.

Texas-based Exterran Energy Solutions, a fabricator of high-end oil and gas components, opened a new plant to great fanfare in 2013 with a $13.2 million investment at Salt Springs Road Business Park in Youngstown, only to close three years later and taking with it more than 75 jobs.

Other companies and jobs related to the oil and gas supply chain followed. Legacy Management Solutions, a Texas-based oil field equipment supplier that opened a fabrication division in Brookfield Township in 2015, shut its doors in early 2019, eliminating about 100 jobs. 

Texas-based Weatherford LP, another oil field supplier, drastically downsized its operations at Performance Place Park in Youngstown about three years ago. According to Dun & Bradstreet, 250 were employed at the location shortly after it opened. Today it employs fewer than 10.

Almost as quickly as they arrived, large oil and gas exploration companies abandoned the northern Utica.  BP Exploration sold all of its assets in Trumbull County after spending tens of millions of dollars to secure lease agreements.  Halcon Energy Resources did the same, blaming the poor performance of its wells in Trumbull County. 

The plant that Exterran built now houses Youngstown Phoenix Extrusions Dies.

Projections delivered a decade ago by an industry-funded study envisioned the oil and gas business creating more than 200,000 jobs in Ohio by 2015.

The report was touted by then-Gov. John Kasich as the basis to move full-speed ahead on developing shale resources across the state, which would draw billions of dollars in new investment, he projected.

Initially, investments poured in. 

Led by Chesapeake Energy Corp., big exploration companies that specialized in hydraulic fracturing and horizontal drilling descended on eastern Ohio, gobbling up leases and initiating drilling programs to extract natural gas or oil from the relatively thin strata of shale 6,000 feet beneath the ground.

Between 2011 and 2020, it’s estimated that more than $90 billion in drilling programs, leasehold agreements, pipeline construction, processing stations, refueling stations, natural-gas power plants, and other shale-related operations had taken root across the state, according to JobsOhio, the state’s private economic development arm.

“These last 10 years of shale development have had a dramatic and positive effect on Ohio’s economy, workforce and energy portfolio,” the Ohio Oil and Gas Association said in a statement.“While the last decade has been exciting and challenging, we know that there is more development, growth and build-out ahead of us to fully realize the Utica and its benefits. Continued use of essential natural gas is both powering our lives and businesses and it is also leading to an overall cleaner environment.”

But the picture isn’t as bright when it comes to new jobs and overall impact to local economies, say researchers who have challenged the economic viability and benefits of the oil and gas industry in Ohio, West Virginia, and Pennsylvania.

“In Ohio, it’s had either no net impact or perhaps a negative impact,” says Sean O’Leary, senior researcher with the Ohio River Valley Institute, a think tank established a year ago that conducts policy research to tackle economic challenges in Appalachia. 

This year, the organization produced two reports showing that shale development across 22 major gas-producing counties in Ohio, Pennsylvania and northern West Virginia between 2008 and 2019 has not delivered the promises hyped by the oil and gas industry a decade ago.

In Ohio, the report focused on seven counties where natural gas and oil production is strongest: Carroll, Jefferson, Harrison, Belmont, Noble, Guernsey and Monroe. “These counties produced more than 95% of gas coming out of Ohio and actually suffered a net loss in employment,” O’Leary says.

According to the think tank’s first report, issued in February, the seven Ohio counties ranked best among those in West Virginia and Pennsylvania in terms of gross domestic product growth when compared to the state and nation. They also, however, were among the worst- performing in terms of personal income, jobs and population.

Collectively, these counties experienced an 8.4% decline in jobs – a loss of 6,777 positions – between 2008 and 2019, the report shows.  Statewide, jobs grew at a rate of 3.9%.

O’Leary says this demonstrates that substantial GDP growth failed to translate into job creation across Ohio’s most productive oil and gas counties. 

For example, in Harrison County, GDP expanded more than 267% between 2008 and 2019, according to the report, but job growth inched upward just 3.2%. The disparity in Monroe County was even more glaring. During that same period, GDP in that county skyrocketed 264%. But the number of jobs plummeted by 24% and personal income decreased by 7.9%

“We also looked around to other economies in the state that did not experience the natural gas boom, such as Mahoning and Trumbull counties,’ O’Leary says. “We saw a spike in GDP but roughly the same amount of jobs.  You don’t see major differences in employment growth compared to gas-producing counties.”

Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, says the Ohio River Valley Institute’s analysis is far too narrow in scope and doesn’t address the totality of the industry’s economic impact across Ohio.

“Demand is up. We’re seeing more activity and hopefully we’re on the tail end of COVID,” he says. 

The latest data from the Ohio Department of Job and Family Services estimates the oil and gas industry supported 12,947 direct jobs in core industries such as pipeline construction, drilling, rig operation and natural gas transfers during the third quarter of 2019, according to data. That’s an increase of 5,655 jobs since the third quarter of 2011, according to JFS.  

Some 30 ancillary industries that support shale development in Ohio – such as freight trucking, fossil fuel electric power generation, machinery rental and leasing, and industrial machinery wholesalers – employed 195,376 during the third quarter of 2019, compared to 174,001 during the same period in 2011, data show. That’s an increase of 21,375 jobs over the decade, according to data. 

Combined new-job creation over the decade for core business and ancillary categories tangent to the shale development industry stands at 27,030 positions.

These numbers are intended as a barometer, the Ohio Department of Job and Family Services says, since the agency provides no concrete data on just how many jobs, especially among ancillary businesses, are involved in the oil and gas industry. 

“While the vast majority of shale-related employment can be found in these industries, not all business establishments in these industries are involved in shale activity,” the state agency reported in its “Ohio Shale: Quarterly Economic Trends for Ohio Oil and Gas Industry,” released in April 2020. “For those that are, not all of their products and services and, therefore, their employment are necessarily linked to shale-related economic activity. This is particularly true for the ancillary industries.”

Weatherford still maintains its site in Youngstown but with a skeleton staff.

According to a report prepared for the American Petroleum Institute by PricewaterhouseCoopers, the oil and gas industry directly and indirectly supports 375,000 jobs in Ohio. This report cited a multiplier effect of 3.8 jobs generated for each one created in the oil and gas industry. Nationally, the industry supported 11.3 million jobs in the United States and generated $892.7 billion in labor income, the Pricewaterhouse report stated. 

“It also provides $24.7 billion in labor income and contributes $58.8 billion to Ohio’s gross domestic product,” Guy Coviello, president and CEO of the Youngstown/Warren Regional Chamber, recently noted in an op-ed piece, citing the American Petroleum Institute study.  The state also collected more than $2.3 billion in motor fuels and severance taxes during 2019, he says, citing data from the U.S. Census Bureau.

“The report shows that the industry has widespread economic impact throughout all sectors of the economy,” Coviello said.

Still, researchers say the job numbers are woefully short of the optimistic 200,000 positions first touted by industry proponents in 2011.

 “The oil and gas industry is very capital intensive,” says Amanda Weinstein, a professor of economics at the University of Akron who has studied shale development and participated in the Ohio River Valley Institute’s research. “When you picture it, you picture a big drilling rig and equipment. What you’re not picturing is a lot of people.”

Realistic projections were more along the line of 20,000 new jobs created as a result of shale development, not the 200,000 touted by the industry, Weinstein says. And, her research suggests that the multiplier effect on jobs is much lower than what the industry has proclaimed. She concludes it’s closer to 1.3 jobs generated for each job in oil and gas.

“We’ll still have the jobs. But the industry didn’t have the impact that people initially said it was going to have,” she says.

Instead, Weinstein says the early hype around the Utica-Point Pleasant formation artificially raised expectations among communities that were convinced the industry would be a game-changer for the entire state.

“The way they couched it is that the industry was going to come in and save Ohio,” she says. “That didn’t happen and I think it let a lot of communities down.”

For some landowners, the arrival of the oil and gas industry has helped to transform their lives, depending on how their leases are negotiated, Weinstein says. “For some farmers, this has been a huge boom,” she says. “They can pay off loans and it can be a big deal for a lot of people.”

Still, communities with a heavy oil and gas presence don’t often share in the prosperity, Weinstein says.

Many of the profits are shipped out of the state to corporate headquarters or investors, while these companies enjoy low-tax rates in Ohio when compared to major oil and gas producing states such as Texas, she says. 

In Ohio, companies pay a severance tax of 10 cents per barrel on oil and 2.5 cents per 1,000 cubic feet on natural gas. In Texas, the gas severance tax is equivalent to 7.5% of its market value, while oil is taxed at a rate of 4.6% of its market value.

“If you’re not also investing in the community, then you’re leaving that community worse off,” Weinstein says.  “How we get that investment is through taxes. If we spend those taxes on improving schools and improving workforce development, you could potentially get a community that’s better off, even when drilling leaves.”

Pictured at top: An industry-funded study estimated more than 200,000 jobs would be created in Ohio by 2015.

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