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*UPDATE* Hydraulic Fracturing and Water Use: Get the Facts
Given that large portions of our nation are facing serious drought conditions, there are justifiable concerns about our water supply. Some groups interested in blocking oil and gas development have preyed on these concerns, claiming hydraulic fracturing uses extraordinarily large volumes of water and, by extension, will cause water shortages all across the country. Unfortunately for the public, the whole truth about industries’ water usage – who uses water, how much they use, and where they use it – is not commonly discussed, which is exactly what opponents of development want.

**Cross Post from EnergyInDepth.com**

UPDATE (5:00 pm ET, 12/19/2012): A recent post by Hart Energy takes another look at hydraulic fracturing and water use in response to a  report by Accenture Consulting on the role of water in shale developments across the globe.  Author of the report Melissa Stark notes that “the perception of fracing as a water hog is likely to prompt changes for the shale industry and cost operators.” Yet as we’ve asked before, does hydraulic fracturing really require that much? As Hart Energy highlights, almost all industries—be it energy and manufacturing or agriculture and irrigation—require the use of water. Take Coca-Cola for instance: the company used 81.6 billion gallons of water to produce 34.3 gallons of beverages in 2009.  That’s over 2,000 hydraulic fracturing jobs. And as Accenture’s report highlights, water use in many areas isn’t quite deserving of the negative hype. In Pennsylvania, “state annual consumption totals about 3.6 trillion gallons. The shale gas industry uses less than 0.2% of that for hydraulic fracturing.” Meanwhile, advances in industry are promoting the use of less water and in many cases 100 percent reuse.  Good news for the environment, good news for American energy.

—Original post, October 8, 2012—

Given that large portions of our nation are facing serious drought conditions, there are justifiable concerns about our water supply. Some groups interested in blocking oil and gas development have preyed on these concerns, claiming hydraulic fracturing uses extraordinarily large volumes of water and, by extension, will cause water shortages all across the country. Unfortunately for the public, the whole truth about industries’ water usage – who uses water, how much they use, and where they use it – is not commonly discussed, which is exactly what opponents of development want.

To fully understand this issue, it’s important to analyze real-world data relating to water consumption.

For example, let’s look at Pennsylvania: Power plants in the state use 6.43 billion gallons of water every day. As a state well-known for its farms, the Commonwealth also uses 86.1 million gallons per day for agriculture and irrigation, and private water wells use 152 million gallons per day.

A hydraulic fracturing job, by comparison, only requires about four million gallons of water, spread out over several days.

Here are a few other contextual examples:

Gee, hydraulic fracturing doesn’t seem to have the large water-use-impact it is often prescribed, does it?

Still, water is water and certain regions are more susceptible to shortages than others. From water withdrawal limits to recycling standards, the use of water is strongly regulated throughout numerous industries. Many river basin commissions and authorities overseeing water withdrawals set protective limits in low flow periods to ensure enough passby flow to support wildlife and other water uses. And when our nation is in a period of drought it is of even greater importance that these types of regulations and guidelines are properly carried out.

But how does the practice of hydraulic fracturing factor in to water use in these states?

Let’s look at Colorado, certainly no stranger to oil and gas development, and where water scarcity is of constant concern:

In Texas, a state well known for oil and natural gas development, the use of water for production is minimal – which is good, because large portions of the state are dealing with drought or near-drought conditions.

Similarly, Oklahoma has found energy development plays a relatively minor role in its overall water usage:

In the Northeast, development of the Marcellus shale has brought countless benefits to communities, including jobs, revenues and clean-burning energy. And compared to the state’s rich agricultural business, water demand is comparatively low:

All energy sources require water, and natural gas development is no different. But how do natural gas and hydraulic fracturing stack up to other energy sources?

As Tisha Schuller, president of the Colorado Oil and Gas Association, noted in the New York Times this September, “This is an important use of our water — to produce energy, which is the foundation of all we do.” Schuller continued: “Think about the big users of water — agriculture, industrial development. All these things require energy.”

As technological advancement continues, industry is reducing the use of freshwater sources, enhancing recycling efforts and decreasing the natural gas industries footprint on America’s precious water resources. Along the way, the development of natural gas from shale has created immense benefits across the nation while providing an affordable and clean burning fuel for American consumers.

So yes, hydraulic fracturing uses water. And when opponents present the total volume used – millions of gallons – without any context, it can sound frighteningly large. But the public should be made aware of facts like relative use and total demand, because when the whole story is told, water needed for hydraulic fracturing sounds a lot less scary. That might not make great fundraising emails for groups opposed to oil and gas development, but it’s the truth.

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Top 12 Utica Investments For 2012
In 2012, Utica Shale development brought Ohio significant investments from companies looking to make our state its home. With the year winding down, it seemed fitting to recap some of the bigger announcements that happened over the past year. Giving a look to what we've seen here in the past 12 months, we can expect 2013 to bring even more exciting news for eastern Ohio.

In 2012, Utica Shale development brought Ohio significant investments from companies looking to make our state its home.  With the year winding down, it seemed fitting to recap some of the bigger announcements that happened over the past year.  Giving a look to what we’ve seen here in the past 12 months, we can expect 2013 to bring even more exciting news for eastern Ohio.

V&M Star Produces First Tubular Pipe For Shale Development 

Steel has seen a resurgence in Ohio thanks to shale development.  US Steel, Timken and V&M Star all have been seeing an increase in business thank to shale development.  In November, V&M Star announced they produced their first tubular steel pipes to be used in oil and gas development.  The state-of-the-art mill cost $350 million and will create new 350 jobs.  The new mill will have initial production capacity of 350,000 tons of seamless pipe per year.

MarkWest Investing $500 Million in Harrison and Noble Counties
In the spring of last year, MarkWest energy announced plans to build two processing plants in Ohio to process the liquids rich gas coming from the Utica Shale development.  MarkWest decided to make their base of operations in Cadiz, Ohio located in Harrison County.  Their second plant will be built in Noble County

BP Buys $330 Million in Leases in Trumbull County to Develop Utica Shale
Late spring BP purchased leasing rights to 84,000 acres in Trumbull County this following a leasing deal with the Associated Landowners of the Ohio Valley (ALOV).  Thanks to this agreement, BP has now purchased office and warehouse space in the Youngstown Commerce Park and plans to develop their first well in April 2013.

Gulfport Develops Not One But Three of the Top Producing Wells in the State
Announcement of Gulfport Energy’s Wagner Well sent encouraging new across the oilfield not only in Ohio but across the United States.  With production results exceeding the previous top well in the state, the Buell Well, many wondered if Gulfport could repeat their success.  Gulfport did not once but twice with the Shugert 1-1H and Shugert 1-12H, besting the Wagner Well.  Thanks to these exciting results, Gulfport just recently announced that it acquired approximately 37,000 acres for around $372 million.

Halliburton Breaks Ground In Muskingum County
Halliburton broke ground at the Eastpointe Business Park in April.  The new facility, when finished, will host a 135,000 square foot facility that will provide over 300 jobs to Ohio residents.  The 178 acre facility will house a full-service center supporting eight or more of Halliburton’s business lines that will be used in the ongoing development of the Utica Shale.  The site is expected to be completed by early 2013 and Halliburton has already hired over 100 Ohio residents since April.

Compressed Natural Gas Creating Significant Savings Across Ohio
With the tremendous savings created by the exploration of shale in both Ohio and Pennsylvania, companies in Ohio have now made the switch to CNG to run their fleets and busses.  Thanks to inexpensive clean burning fuel bus systems like COTA in Columbus, Smith Dairy in Orrville and the City of Hamilton have all switched to CNG to power their fleets.

NiSource and Hilcorp to Spend up to $1.5 Billion in Processing Network
The partnership is planning to build a pipeline infrastructure from Columbiana through Mahoning County.  In addition to the infrastructure, they pan to build cryogenic natural gas liquids processing plant handling up to 200 million cubic feet of natural gas per day.

Jefferson County Attracting Business and Attention in the Utica
2012 was a busy year for Jefferson County.  There was a Congressional Hearing on Hydraulic Fracturing held at Eastern Gateway Community College.  Governor Kasich held his 2012 State of the State Address at the Wells Academy in Steubenville.  During that time Jefferson County also added over 11 new companies associated with shale development have now made Jefferson County their home including a major shale developer.  These 11 companies are providing or are projected to provide over 500 jobs in the county.

Business Parks Across Ohio Filling Up Thanks to Utica Shale Development
Business Parks in Eastern Ohio are running out of space thanks to companies moving in to make Ohio their home.  Business parks in Jefferson, Columbiana, Stark, Mahoning and Muskingum Counties have all seen new businesses moving into their facilities thanks to Utica Shale development.

Chesapeake Spends Over $3 Billion in the Utica Shale
Since the beginning of Utica Shale development, there has only been one true leader.  That leader has been Chesapeake Energy, the first company to invest and develop a well in the Utica.  Since then the company has invested $3.3 billion in Ohio providing energy, revenue and jobs for the state.  The company is now building their Ohio headquarters in Louisville and employs 550 fulltime staff.
 
Hess Invests Over A $1 Billion to Develop Utica Shale
Over the past year, Hess has opened a field office in Jefferson County in preparation for their development of the Utica Shale.  During that time Hess has acquired Marquette Exploration for $770 million and invested $500 million on a joint venture with Consol Energy to develop resources in the liquids rich portion of the Utica play.

M3 Midstream Investing $900 Million In Processing Plants in Columbiana and Harrison Counties
M3 Midstream is in the process of building natural gas gathering and compressing  facilities at Kensington, plus processing, natural gas liquids fractionation, loading and terminal facilities at Scio in Harrison County.  These two facilities will remove natural gas liquids by using a state of the art cryogenic processing facility.  The project is slated for completion by the second quarter of next year.

In a year’s time, Ohio has doubled its rig count from 12 to 24, and had billions of dollars invested in developing our resources, providing affordable reliable natural gas as well as creating numerous jobs for Ohio residents.  These investments have now put eastern Ohio back on the map as an economic powerhouse.  As we look forward to 2013, it is good to know that Utica Shale development will be paramount to lifting Ohio back from stagnation to promise.

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Akron Beacon Journal: Chesapeake Energy’s Ohio development anniversary

Canton Industrial Park Begins to See Growth from Shale
One good way to gauge the positive impact shale development is having on Ohio’s economy is observing the growth and investment in its industrial parks. EID has reported on the incredible gains of the Wellsville Intermodal Park and several Mahoning Valley industrial parks thanks to the development of the Utica Shale. Now, Mills Business Park in Canton is beginning to experience some of these same benefits.

One good way to gauge the positive impact shale development is having on Ohio’s economy is observing the growth and investment in its industrial parks.  EID has reported on the incredible gains of the Wellsville Intermodal Park and several Mahoning Valley industrial parks thanks to the development of the Utica Shale. Now, Mills Business Park in Canton is beginning to experience some of these same benefits.

Ten years ago, the Canton Regional Chamber of Commerce developed the park’s concept with developer Robert DeHoff.  The idea came about after the city realized there wasn’t enough room for new and expanding businesses within the city.  After ten years, the Mills park is certainly beginning to grow.  Currently, the park has contracts with Medline Industries and Old Dominion Freight Line.  Two more companies are expected to make Mills Business Park their home in 2013, joining  GE Oil & Gas.

While it is good sign that companies are moving in, the park hasn’t reached the potential its developers expected.  However, shale is providing hope for the park’s future, a fact noted by Joseph Halter, president of Solmet Technology and chairman of the chamber’s economic development committee when the Mills project was being spearheaded:

You have to look at these things long-term. We all knew this was not going to be something that happened overnight. I don’t think it’s even half occupied at this point. With the coming of the Utica Shale, certainly that has the potential to attract a lot (of businesses).— Joseph Halter (Mills Business Park vision takes shape, 12/23/12)

Enter GE Oil and Gas, a company vested in the interest of Ohio’s oil and natural gas resources. They are expected to use their facility for piping and parts used in the field.  As shale development continues to grow across eastern Ohio, it is very likely Mills will be a hub for oil and gas related industries just as Wellsville Intermodal Park and industrial parks throughout the Mahoning Valley.

For example, Wellsville Intermodal Park in Columbiana County only has a few acres left for development because so many shale-related companies have moved in.  They’ve also been able to make improvements to the park including a 60-ton overhead river crane, bulk cargo handling, and access to railroad and highway.

Castlo Industrial Park in Struthers will have all of their leasable space occupied by spring thanks to shale.  Using a $3.5 million Ohio Job Ready Sites grant, they are preparing 60 acres for future development. The Ohio Commerce Center in Lordstown also received a Job Ready Sites grant to the tune of $2 million for rail upgrades to service the shale industry.

Industrial parks attracting more businesses and in some cases, expanding to create more room, clearly show the potential future economic benefit shale development can bring on Ohio.  Without these vast resources – and the expanding development of these resources – many of these facilities could still be years from reaching the potential developers had in mind.

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UPDATE: Cracking the Nut on OSU’s Jobs Report
It has been just over a year since the release of the Partridge-Weinstein report, and over fifteen months since the Ohio Oil and Gas Energy Education Program released their Economic Impact Study – conducted by Kleinhenz and Associates – which the Partridge report attempted to refute. Jump forward to last week, and we can get an idea of just how off the mark the OSU report was in its low assessment of what kind of economic benefit Ohio would experience thanks to its development of the Utica Shale.

Update (12/27/12): It has been just over a year since the release of the Partridge-Weinstein report, and over fifteen months since the Ohio Oil and Gas Energy Education Program released their Economic Impact Study – conducted by Kleinhenz and Associates – which the Partridge report attempted to refute.

The Ohio State researchers’ prediction of 20,000 jobs – a number well below the 204,000 plus projected by OOGEEP – is broken down below, and EIDOhio.org was also fortunate to publish analysis of the study from expert economists Timothy Considine, Ph.D - Professor of Economics, Univ. of Wyoming, and Jack Kleinhenz, Ph.D - Principal and Chief Economist, Kleinhenz & Associates.

Jump forward to last week, and we can get an idea of just how off the mark the OSU report was in its low assessment of what kind of economic benefit Ohio would experience thanks to its development of the Utica Shale.

As the Columbus Dispatch and numerous outlets reported, a recent study conducted by IHS Cera for the U.S. Chamber of Commerce’s Institute for 21st Century Energy shows Ohio is already seeing these benefits in the form of both jobs and investment. The report highlights the creation and support of nearly 39,000 jobs to date – a figure surpassing the Partridge projections by good margin. And, it’s important to highlight these numbers are coming out while we remain in the early stages of this development.

With these early indicators, it is easy to see why there is so much excitement of what’s to come, something the Chamber’s report provides more insight on. Echoing the OOGEEP impact study, the report projects the creation and support of 267,000 jobs in the coming years as a direct result of the oil and natural gas industry’s continued development of Ohio’s natural resources. That’s over a quarter of a million jobs – or enough to cut the number of currently unemployed Ohioans by over two-thirds.

- Original post from 12/20/11- 

EID breaks down report from Ohio State researchers predicting “only” 20,000 new jobs from Utica Shale development

British historian Thomas Carlyle is credited with coining the phrase “the dismal science” to describe the study of economics. But though he devised that expression in the 19th century in reference to the work of Thomas Malthus, it may be an appropriate way to describe the report released last week by two researchers from Ohio State.

Authored by OSU professor Mark Partridge and graduate student Amanda Weinstein, the report seeks to attack a study prepared by the respected, Cleveland-based firm of Kleinhenz and Associates, released by OOGEEP in September, which found that responsible Utica development could produce and support more than 200,000 jobs in Ohio over the next four years. An interesting fact – and one unmentioned in the Partridge paper – is that a representative from Ohio State actually sat on the project committee for the OOGEEP report.

At its core, Partridge and Weinstein argue that the Kleinhenz’s estimate of 200,000 new jobs is too optimistic – suggesting instead that a more reasonable forecast is a scenario in which Utica development in Ohio nets only 20,000 new jobs by 2015.

Of course, with the state’s unemployment rate currently at nine percent, 20,000 new jobs is certainly nothing to sneeze at – not when those jobs carry average wages of $76,036, according to one analysis by the state of Pennsylvania. As a spokesman for Gov. Kasich put it in the Columbus Dispatch last week: “Whether it’s 20,000 jobs or 200,000, that’s tens of thousands of families living in a part of the state that’s starving for good economic news who would say, ‘Sounds good, sign me up.’  ”

Still, the question of whether Ohioans can expect 200,000 new jobs from the Utica or only 20,000 is an important one – and so is the matter of how Partridge and Weinstein arrive at figures so far below the ones produced by independent researchers not only in Ohio, but in similar studies released in other shale-producing states all across the country.

The answer, as it usual is, can be found in the methodology. Although you might expect to find lots of equations and algorithms and funny Greek letters in a macroeconomics modeling forecast, in the Ohio State report, the researchers arrive at their numbers in much simpler fashion.

First, Partridge and Weinstein argue that only 10,000 new jobs were created in Pennsylvania during the first four years of Marcellus activity, and then assume the same will hold true for Ohio. Next, to account for “indirect” jobs, they simply multiply that number by two. The researchers describe as “reasonable” their decision to use this multiplier – and indeed, it appears to fall roughly in line with the one used by Considine, et al. in their assessment of Marcellus jobs released this year. So if the problem with Partridge isn’t the multiplier, then where, exactly, are the discrepancies?

The chart included on page 12 of the OSU paper provides a straightforward answer to this question. As it turns out, the researchers only include a few basic employment categories in their analysis of the new jobs expected to be created from responsible resource development in Ohio – while leaving out many others (all of them relevant to the Utica) that any other reasonable, objective analysis would have incorporated.

To Partridge, only jobs related to the drilling of new wells, construction of new pads, geophysical surveying of new areas, and the manufacture of new pipe “count” as jobs that can be ascribed to the industry. Jobs in other sectors of the economy – from retail, to trade, to insurance, to manufacturing, to legal work and environmental consulting – simply don’t make the cut in this analysis.

The problems with the paper don’t end there. Importantly, it also fails to account for the downstream impact from billions of dollars in taxes, rents and royalties that Utica development is expected to produce for state and local governments and local mineral-owners. In Pennsylvania, Marcellus exploration resulted in the delivery of more than $2.06 billion to landowners in 2010, and another $1.085 billion to state and local governments, according to researchers from Penn State. Unfortunately, and remarkably, none of those revenues have the effect of creating a single job in the Partridge paper. They may as well just have been buried in the backyard.

Although the OSU paper is 35 pages in length, the calculations involved in arriving at its 20,000-job estimate are explained in just two pages. The rest of the study is best described as an extended op-ed, with the researchers laying out their views on the costs and benefits associated with producing natural gas (but strangely, not oil) from the Utica, citing various studies, news reports, and even scenes from Gasland before concluding – spoiler alert — that more research needs to be done before fully committing to shale development in Ohio.

Having identified the core weaknesses with the quantitative figures produced by Partridge and Weinstein (cited as “P / W” below), below we take a closer look at some of the other, more qualitative statements and conclusions found in the paper:

P / W: “[W]ith these assumptions, we assume that from 2004-2010, there was a gain of about 10,000 direct and indirect jobs in the natural gas industry in Pennsylvania.” (p. 12)

Facts:

Partridge and Weinstein employ two interesting tricks here to manufacture inexplicably low numbers for Marcellus employment in Pennsylvania.

P / W: “As the number of wells drilled dramatically increased, so did natural gas production in Pennsylvania, especially in the northeast region.” (p. 10)

Facts:

While it’s certainly true that the volume of natural gas produced in Pennsylvania has increased dramatically over the past six years, those increases have been realized even while fewer wells were being drilled across the state.

P / W: “In 2010, tourism employed approximately 400,000 people in Pennsylvania whereas the natural gas industry employed closer to 26,000.” (p. 5)

Facts:

P / W: “Overall, there are no clear employment effects for heavily drilled counties. We are not saying there are no drilling employment effects, but that they are not large enough to be detected …” (p. 15)

Facts:

P / W: “Thus, [natural gas’s] effects on ‘energy security’ are rather limited in the foreseeable future as increased electrical demand and the growing reliance on US natural gas will primarily be at the expense of US coal.” (p. 5)

Facts:

Here, the OSU researchers appear to be arguing that, just because the vast majority of natural gas from shale is expected to be used domestically in the United States, the energy security benefits of the energy source will be limited in a global and/or geopolitical context.

P / W: “Innovations in hydraulic fracturing are the reasons natural gas extraction has recently been developing in the Marcellus shale regions in Pennsylvania and Ohio and now expanding to the Utica shale regions in Ohio.” (p. 7)

P / W: “Horizontal wells and hydraulic fracturing in conjunction with advances in micro-seismic technology aiding both exploration and the drilling process have allowed the energy industry to extract natural gas at greater depths.” (p. 7)

Facts:

P / W: “Figure 3 on the next page shows that most natural gas is still used to supply electricity.” (p. 5)

Facts:

P / W: “In the 1980s, the Barnett shale in Texas became the first natural gas producing shale. More than a decade of production from the Barnett shale in Texas has helped improve the hydraulic fracturing process, leading the way for it to be used in other areas such as the Marcellus shale in Pennsylvania and the Utica Shale in Ohio.” (p. 7)

Facts:

Actually, America’s “first natural gas-producing shale” well was developed in the state of New York, not Texas. In 1825, not “the 1980s.”

P / W: “In 2005, hydraulic fracturing methods were exempted from the Safe Drinking Water Act and Clean Water Act.” (p. 5)

P / W: “Representatives of the natural gas industry have made similar claims that hydraulic fracturing has never contaminated drinking water sources. These claims were used to exempt the natural gas industry from the Clean Water Act and the Safe Drinking Water Act when Congress enacted the 2005 Energy Policy Act.” (p. 22)

Facts:

This claim is false. Hydraulic fracturing has never in its nearly 65-year history been regulated under the Safe Drinking Water Act, and it is in no way exempt from the Clean Water Act. It has, however, been aggressively regulated by the states, which have compiled an impressive record of enforcement and oversight over the past six decades.

P / W: “There may be other toxic chemicals in the hydraulic fracturing fluid mix though energy companies have continually refused to disclose these chemicals for proprietary reasons.” (p. 23)

Facts:

P / W: “Impact analysis is usually based on an old input-output technology that is typically not used today by economists to estimate actual economic effects.” (p. 11)

Facts:

Partridge and Weinstein may not personally approve of input-output analysis, but the committee that awards the Nobel Prize in economics disagrees.

P / W: “One other issue is that proponents of natural gas expansion in Ohio often claim that lower natural gas prices will provide a major stimulus to overall employment, especially in manufacturing. While we will not assess whether natural gas prices are a sufficient share of a typical firm‘s cost structure to make a tangible difference, we do note that there are reasons to be skeptical of those claims (though we hope we are wrong).” (p. 13)

Facts:

According to a report issued last week by the National Association of Manufacturers (and authored by researchers at PricewaterhouseCoopers):

P / W: “During the October 2007-October 2011 period … the entire state of North Dakota added about 39,000 jobs. It is highly unlikely that this is all due to energy as high commodity prices (for example) have supported North Dakota‘s relatively large farm economy.” (p. 13)

Facts:

Once again, the actual numbers for the Bakken are quite a bit higher than Partridge and Weinstein suggest.

READ MORE

Shale and HF: A 50 State Jobs Plan
When we talk about shale development, states like Maine and Connecticut aren’t normally a part of the conversation. But this week, a new report shows that the benefits of shale development extend all across the nation – even in states without any actual shale resources to speak of.

**Cross posted from EnergyinDepth.org**

When we talk about shale development, states like Maine and Connecticut aren’t normally a part of the conversation. But this week, a new report shows that the benefits of shale development extend all across the nation – even in states without any actual shale resources to speak of.

The second stage of a study co-sponsored by the U.S. Chamber’s Institute for 21st Century Energy takes an in-depth look at the state-by-state economic contributions of shale development. Here are some of the key findings:

Certainly some welcomed news for the American economy, and even better news for state coffers. Producing states have seen a surge in employment with tens or even hundreds of thousands of new jobs coming online. In Texas, shale development has created over 575,000 jobs to date, which is expected to grow to nearly 930,000 in 2020. Close behind is Pennsylvania with 102,600 jobs, California with 96,500, Louisiana with 78,900 and Colorado with 77,600.  And by 2020 those numbers all nearly double. No wonder USA TODAY found that “of all the places that America’s new jobs are, the emerging energy business, directly or indirectly, might be responsible for more of them than almost anything else.”

And as for revenues, production is generating billions of dollars for state’s, allowing for new (and much needed) investment in schools, hospitals, roadways and more. In California, 2012 production generated  nearly $3 billion in taxes for state and federal coffers, which is roughly the equivalent of 10 percent of the state’s deficit. Colorado also saw $3 billion brought into the state, Louisiana $2.5 billion, and North Dakota a whopping $6.8 billion – with expected growth to $13 billion in 2020.

Even non-producing states are seeing major benefits as a result of shale development. As the report highlights, “less well-known are the economic benefits that accrue to non-producing states that lack oil and gas resources but nonetheless host firms that sell goods and services that are critical to the lengthy supply chain supporting unconventional oil and gas development.”  Some of the biggest winners are New York with 44,400 jobs, Illinois with 38,600, Michigan with 37,800, Missouri  37,700, and Florida 36,500. Even Connecticut is seeing growth with 8,300 jobs in the state already supported by production, and an estimated 14,100 by 2035. And with many of those states having shale deposits of their own, it’s only a matter of time before even more job opportunities find their way to areas in desperate need of them.

From new public revenues to jobs for American workers, shale development is truly reinvigorating the American economy – even where we don’t expect it.  Make sure to check out the Chamber’s rollover map to see how shale may be bringing these benefits to your state today.

Read more:

ISSUE ALERT: Shale Putting America Back In Motion (10/24)

ISSUE ALERT: Development of Shale has Saved Consumers $250 Billion Since ’09 (5/29)

EID-ILLINOIS: Hydraulic Fracturing Could Create 47,000 New Illinois Jobs (12/13)

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Merry Christmas and Happy Holidays from Energy in Depth – Ohio
From all of us here at Energy in Depth - Ohio, we wish you and yours a very Merry Christmas and Happy Holidays.

All of us here at Energy in Depth – Ohio wish you and yours a very Merry Christmas and Happy Holidays.

Whether you are traveling from the North Pole or North Canton, we wish you safe travels! As we enjoy our time with friends and family over the holiday season, let us all remember what we have to be grateful for today, and what we look forward to in the new year.

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Regional Chamber Helps Local Companies with API Certification
This month, Eric Planey and Sarah Boyarko of the Youngstown/Warren Regional Chamber visited Houston for three days to meet with representatives of energy companies and trade associations. From the meetings, they learned they can help local companies be a part of the oil and gas supply chain in Ohio by facilitating American Petroleum Institute (API) certification. The Chamber is working with a Houston consulting firm to hopefully schedule a three-day course to help local manufacturer’s get an API certification. Once the companies complete the course, API representatives come to the company’s facility to approve the certification.

This month, Eric Planey and Sarah Boyarko of the Youngstown/Warren Regional Chamber visited Houston, TX, for three days to meet with representatives of energy companies and trade associations.  From the meetings, they learned they can help local companies be a part of the oil and gas supply chain in Ohio by facilitating American Petroleum Institute (API) certification.

Once you’re an API-certified company, it makes the opportunities in the oil and gas industry that much better—Eric Planey, Vice President of International Business Attraction, Youngstown/Warren Regional Chamber (Regional Chamber to Facilitate API Certification, 12/17/12)

The Chamber is working with a Houston consulting firm to hopefully schedule a three-day course to help local manufacturer’s get an API certification.  Once the companies complete the course, API representatives come to the company’s facility to approve the certification.  EID sat down with Rebecca Heimlich of API for the Sunday Shale Show in November to learn more about the organization.

The Chamber is working with the Ohio Shale Coalition, part of the Ohio Chamber of Commerce, to get the course scheduled as soon as March.  This way, local companies and manufacturers can begin the process of entering the supply chain during the early stages of the shale play.  Planey and Boyarko held 13 meetings in Houston in which they learned the benefits using local companies in the supply chain:

They want to see the chamber and Ohio agencies assist with local companies becoming certified in areas such as API standards so they can use local supply chains. Not only is it good community practice to use local supply chains, it reduces overall costs—Eric Planey, Vice President of International Business Attraction, Youngstown/Warren Regional Chamber (Regional Chamber to Facilitate API Certification, 12/17/12)

During the trip, Planey and Boyarko met with many different sectors surrounding the oil and gas industry.  Since Ohio is in the very early stages of the shale play, Texas is a good gauge of what is to come.  Just this week, the U.S. Chamber released a study on job creation from shale plays around the nation and reported 576,000 jobs have already been created in Texas from the industry.  The Youngstown Business Journal reported on the Chamber’s itinerary in Houston:

It is encouraging to know organizations like the Youngstown/Warren Regional Chamber are being proactive regarding the Utica Shale.  They have recognized the incredible opportunities coming to Ohioans through job creation, revenue and investment, and are working to make the Mahoning Valley a national epicenter for shale development and its suppliers.

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Update: Gulfport Touts Utica’s Prolific Potential
In Gulfport’s third quarter earnings call yesterday, executives from the company continued to tout the outstanding production they have seen coming out of the Utica Shale. Due to these strong numbers they have reported throughout this year, Gulfport is looking to make the Utica Shale their primary focus area. As their primary focus area, Gulfport will be planning to invest $215-$225 million in Ohio to develop 50 wells over the next year

UPDATE (12/20/2012, 07:00 am ET): It seems Gulfport Energy’s CEO Jim Palm is backing up his claims about the Utica’s prolific potential by acquiring additional acreage.  Thanks to the tremendous results of Gulfport Energy’s first 10 wells, they have now procured an additional 37,000 acres. The company paid an approximate $372 million for the additional acreage to Windsor Ohio, a subsidiary of Wexford Capital.

The newly acquired additional acreage now gives Gulfport a total of 137,000 acres to develop in the liquids-rich portion of the Utica Shale.  Gulfport is extremely excited about the Utica Shale, and with 3 of the top producing wells in the Utica Shale; it would be hard not to be.

—Original post from November 8th, 2012—

In Gulfport Energy’s third quarter earnings call yesterday, executives from the company continued to tout the outstanding production they have seen coming out of the Utica Shale.   Due to the strong numbers they have reported throughout this year, Gulfport is looking to make the Utica Shale their primary focus area.  In result, Gulfport will be planning to invest $215-$225 million in Ohio to develop 50 wells over the next year.  These wells will be developed in Gulfport’s core area of Harrison, Belmont and Guernsey counties.

Thanks to wells like their Boy Scout, Wagner and Shugert wells, Jim Palm, CEO of Gulfport Energy, sees this play being one of the most prolific shale plays Gulfport has been a part of, rivaling the Eagle Ford.

“We believe that our position in the Utica could be as good as the best part of the Eagle Ford based upon the overall productivity and economics.”- Jim Palm, CEO of Gulfport Energy

In the early exploration of their initial 10 wells, Gulfport performed a myriad of tests while collecting extensive geological data, including full open-hole log suites and a full core from the Utica and Point Pleasant interval.  Their findings concluded their original assumptions about the Utica being a prolific play in the United States.

“It’s becoming increasingly apparent that the Utica is a prolific shale play and we are very pleased to have captured a significant position within its core.” Jim Palm, CEO of Gulfport Energy

In an unexpected announcement, Gulfport also released initial production rates for yet another well.  The BK Stephens 1-16H located in Moorefield, which is near Piedmont in Harrison County, was drilled to a total vertical depth of 8,225 feet, with a 5,276-foot horizontal lateral.  The well was completed using a 19 stage hybrid hydraulic fracture.  The well tested at a peak rate of 1,224 barrels per day of condensate and 6.9 million cubic feet per day of gas on a 32/64 inch choke.

The gas being produced is 1,207 BTU rich gas, making it liquids rich. Assuming full ethane recovery, this composition would produce 110 barrels of natural gas liquids per million cubic feet of gas resulting in a gas shrink rate of 11% and a total rate of 3,007 barrels of oil equivalent per day.

This is Gulfport’s sixth well that has come on line this year.  All six wells have put out significant initial production numbers echoing their assertion that their Utica holding will be as significant as the best part of the Eagle Ford.

Even though Gulfport has six strong wells ready for production, they are still waiting for midstream infrastructure to be put into place.  To date, none of their six wells have been put into full production.   Gulfport is working with MarkWest to remedy the issue of the lack of gathering lines to get these wells in production.  MarkWest is currently working on infrastructure in Harrison, Noble, Guernsey and Belmont counties to help get these wells on line as soon as possible.

Looking to 2013, Gulfport plans to heavily develop the Utica Shale. Currently Gulport has 2 rigs running in the Utica, but in 2013 they plan to add a rig every two to three months until they have 6 rigs running in the Utica by the end of 2013.

Gulfport and Chesapeake continue to put up strong numbers within the core areas of the Utica.  These numbers will continue to grow as methods are tweaked and refined.  As it stands these areas will be one of the most significant shale plays in the United States helping to create jobs and opportunity in a portion of the state that needed it the most.

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Ohio’s New Energy Promise
This week the United States Chamber of Commerce, through its Institute for 21st Century Energy, released part two of a three-part series studying the topic of shale benefits state by state in a study called America's New Energy Future. The comprehensive study was completed in conjunction with the American Petroleum Institute, American Chemistry Council, America's Natural Gas Alliance and the Natural Gas Supply Association.

This week the United States Chamber of Commerce, through its Institute for 21st Century Energy, released part two of a three-part series studying the topic of shale benefits state by state in a study called America’s New Energy Future. The comprehensive study was completed in conjunction with the American Petroleum Institute, American Chemistry Council, America’s Natural Gas Alliance and the Natural Gas Supply Association.

Some of the key highlights of the study show us that in Ohio more than 38,830 jobs have been created, including direct, indirect and induced categories.  Also, 143,595 new jobs will be created by the year 2020. By the year 2035, the number will climb to 266,624.

Karen Harbert who serves as President and CEO of the Energy Institute at the U.S. Chamber explained the importance of shale development in Ohio:

Shale energy is a game changer for American and for Ohio, the latest installment of this study allows us to quantify just how significant the impact on Ohio’s economy will be. It provides all the more reason to strongly support responsible shale energy development (U.S. Chamber’s Energy Institute Co-sponsors Study on Shale Benefits by State, 12/19/12)

IHS, a leading global energy research firm, looked at three main components of job creation in order to gain the full scope of job creation in the state.

Direct: Contributions of unconventional oil and gas energy development are those required to explore, produce, transport and deliver products to downstream elements or activities that provide critical on site equipment and services.

Indirect: Contributions are activities in outside industries that supply materials and services to the developers of unconventional oil and gas and to their tier of suppliers.

Induced: Contributions are the economic effects from workers spending their wages on salaries on consumer goods and household items.

The report also showed remarkable increase in tax revenue both at the local and state level. In 2012 over $911 million was paid to state and local government in Ohio and is estimated to grow to $4.5 billion a year by the year 2020. The total paid in taxes by this industry from the year 2012 to the year 2035 will be a staggering $120 billion to both local and state government.

According to Linda Woggon who serves as both executive vice president of the Ohio Chamber of Commerce and the executive director of the Ohio Shale Coalition Utica Shale development is already having a positive effect on local communities here in Ohio and will provide significant revenue in the future for our state.

Ohio is already seeing a significant boost to our economy from shale energy, and this new study shows that much more is to come,” said Linda Woggon, executive vice president of the Ohio Chamber of Commerce and executive director of the Ohio Shale Coalition. “The billions of dollars in new state and local government revenue will help support schools, infrastructure and other needs for our state, while the hundreds of thousands of new jobs will provide an economic boost for our families. (Shale expected to bring jobs, 12/20/12)

Unions throughout Ohio are also recognizing the significant impact shale development is having on our state.  In a recent interview, Butch Taylor, Business Manager, for Local 396 Plumbers and Pipefitters, said he has seen tremendous growth throughout their local, going from 40 percent unemployment among members to 100 percent employment, with a 12 percent growth in membership.

Due to the growth, Local 396 has now increased the number of times per year they take applications due to the influx of work they are receiving.

We’ve put 108 new members in the last two years. It’s really growing. And about 13 new contractors through that time period so it’s really growing and growing fast. Applications for the apprenticeship program will be taken on the third Wednesday of each month through April.  – Marty Loney, Local 396 (Shale Industry Leads to Growth of Pipefitters Union, 12/19/12)

During this holiday season, it is great to know that over 38,000 Ohioans are now working thanks to Utica Shale development.   As noted in the study this number will continue to increase providing more good paying jobs for our residents throughout Ohio, helping to lead our state back to prominence.

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*UPDATE* Hydraulic Fracturing and Water Use: Get the Facts

Monday, December 31st, 2012

**Cross Post from EnergyInDepth.com**

UPDATE (5:00 pm ET, 12/19/2012): A recent post by Hart Energy takes another look at hydraulic fracturing and water use in response to a  report by Accenture Consulting on the role of water in shale developments across the globe.  Author of the report Melissa Stark notes that “the perception of fracing as a water hog is likely to prompt changes for the shale industry and cost operators.” Yet as we’ve asked before, does hydraulic fracturing really require that much? As Hart Energy highlights, almost all industries—be it energy and manufacturing or agriculture and irrigation—require the use of water. Take Coca-Cola for instance: the company used 81.6 billion gallons of water to produce 34.3 gallons of beverages in 2009.  That’s over 2,000 hydraulic fracturing jobs. And as Accenture’s report highlights, water use in many areas isn’t quite deserving of the negative hype. In Pennsylvania, “state annual consumption totals about 3.6 trillion gallons. The shale gas industry uses less than 0.2% of that for hydraulic fracturing.” Meanwhile, advances in industry are promoting the use of less water and in many cases 100 percent reuse.  Good news for the environment, good news for American energy.

—Original post, October 8, 2012—

Given that large portions of our nation are facing serious drought conditions, there are justifiable concerns about our water supply. Some groups interested in blocking oil and gas development have preyed on these concerns, claiming hydraulic fracturing uses extraordinarily large volumes of water and, by extension, will cause water shortages all across the country. Unfortunately for the public, the whole truth about industries’ water usage – who uses water, how much they use, and where they use it – is not commonly discussed, which is exactly what opponents of development want.

To fully understand this issue, it’s important to analyze real-world data relating to water consumption.

For example, let’s look at Pennsylvania: Power plants in the state use 6.43 billion gallons of water every day. As a state well-known for its farms, the Commonwealth also uses 86.1 million gallons per day for agriculture and irrigation, and private water wells use 152 million gallons per day.

A hydraulic fracturing job, by comparison, only requires about four million gallons of water, spread out over several days.

Here are a few other contextual examples:

Gee, hydraulic fracturing doesn’t seem to have the large water-use-impact it is often prescribed, does it?

Still, water is water and certain regions are more susceptible to shortages than others. From water withdrawal limits to recycling standards, the use of water is strongly regulated throughout numerous industries. Many river basin commissions and authorities overseeing water withdrawals set protective limits in low flow periods to ensure enough passby flow to support wildlife and other water uses. And when our nation is in a period of drought it is of even greater importance that these types of regulations and guidelines are properly carried out.

But how does the practice of hydraulic fracturing factor in to water use in these states?

Let’s look at Colorado, certainly no stranger to oil and gas development, and where water scarcity is of constant concern:

In Texas, a state well known for oil and natural gas development, the use of water for production is minimal – which is good, because large portions of the state are dealing with drought or near-drought conditions.

Similarly, Oklahoma has found energy development plays a relatively minor role in its overall water usage:

In the Northeast, development of the Marcellus shale has brought countless benefits to communities, including jobs, revenues and clean-burning energy. And compared to the state’s rich agricultural business, water demand is comparatively low:

All energy sources require water, and natural gas development is no different. But how do natural gas and hydraulic fracturing stack up to other energy sources?

As Tisha Schuller, president of the Colorado Oil and Gas Association, noted in the New York Times this September, “This is an important use of our water — to produce energy, which is the foundation of all we do.” Schuller continued: “Think about the big users of water — agriculture, industrial development. All these things require energy.”

As technological advancement continues, industry is reducing the use of freshwater sources, enhancing recycling efforts and decreasing the natural gas industries footprint on America’s precious water resources. Along the way, the development of natural gas from shale has created immense benefits across the nation while providing an affordable and clean burning fuel for American consumers.

So yes, hydraulic fracturing uses water. And when opponents present the total volume used – millions of gallons – without any context, it can sound frighteningly large. But the public should be made aware of facts like relative use and total demand, because when the whole story is told, water needed for hydraulic fracturing sounds a lot less scary. That might not make great fundraising emails for groups opposed to oil and gas development, but it’s the truth.

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Top 12 Utica Investments For 2012

Saturday, December 29th, 2012

In 2012, Utica Shale development brought Ohio significant investments from companies looking to make our state its home.  With the year winding down, it seemed fitting to recap some of the bigger announcements that happened over the past year.  Giving a look to what we’ve seen here in the past 12 months, we can expect 2013 to bring even more exciting news for eastern Ohio.

V&M Star Produces First Tubular Pipe For Shale Development 

Steel has seen a resurgence in Ohio thanks to shale development.  US Steel, Timken and V&M Star all have been seeing an increase in business thank to shale development.  In November, V&M Star announced they produced their first tubular steel pipes to be used in oil and gas development.  The state-of-the-art mill cost $350 million and will create new 350 jobs.  The new mill will have initial production capacity of 350,000 tons of seamless pipe per year.

MarkWest Investing $500 Million in Harrison and Noble Counties
In the spring of last year, MarkWest energy announced plans to build two processing plants in Ohio to process the liquids rich gas coming from the Utica Shale development.  MarkWest decided to make their base of operations in Cadiz, Ohio located in Harrison County.  Their second plant will be built in Noble County

BP Buys $330 Million in Leases in Trumbull County to Develop Utica Shale
Late spring BP purchased leasing rights to 84,000 acres in Trumbull County this following a leasing deal with the Associated Landowners of the Ohio Valley (ALOV).  Thanks to this agreement, BP has now purchased office and warehouse space in the Youngstown Commerce Park and plans to develop their first well in April 2013.

Gulfport Develops Not One But Three of the Top Producing Wells in the State
Announcement of Gulfport Energy’s Wagner Well sent encouraging new across the oilfield not only in Ohio but across the United States.  With production results exceeding the previous top well in the state, the Buell Well, many wondered if Gulfport could repeat their success.  Gulfport did not once but twice with the Shugert 1-1H and Shugert 1-12H, besting the Wagner Well.  Thanks to these exciting results, Gulfport just recently announced that it acquired approximately 37,000 acres for around $372 million.

Halliburton Breaks Ground In Muskingum County
Halliburton broke ground at the Eastpointe Business Park in April.  The new facility, when finished, will host a 135,000 square foot facility that will provide over 300 jobs to Ohio residents.  The 178 acre facility will house a full-service center supporting eight or more of Halliburton’s business lines that will be used in the ongoing development of the Utica Shale.  The site is expected to be completed by early 2013 and Halliburton has already hired over 100 Ohio residents since April.

Compressed Natural Gas Creating Significant Savings Across Ohio
With the tremendous savings created by the exploration of shale in both Ohio and Pennsylvania, companies in Ohio have now made the switch to CNG to run their fleets and busses.  Thanks to inexpensive clean burning fuel bus systems like COTA in Columbus, Smith Dairy in Orrville and the City of Hamilton have all switched to CNG to power their fleets.

NiSource and Hilcorp to Spend up to $1.5 Billion in Processing Network
The partnership is planning to build a pipeline infrastructure from Columbiana through Mahoning County.  In addition to the infrastructure, they pan to build cryogenic natural gas liquids processing plant handling up to 200 million cubic feet of natural gas per day.

Jefferson County Attracting Business and Attention in the Utica
2012 was a busy year for Jefferson County.  There was a Congressional Hearing on Hydraulic Fracturing held at Eastern Gateway Community College.  Governor Kasich held his 2012 State of the State Address at the Wells Academy in Steubenville.  During that time Jefferson County also added over 11 new companies associated with shale development have now made Jefferson County their home including a major shale developer.  These 11 companies are providing or are projected to provide over 500 jobs in the county.

Business Parks Across Ohio Filling Up Thanks to Utica Shale Development
Business Parks in Eastern Ohio are running out of space thanks to companies moving in to make Ohio their home.  Business parks in Jefferson, Columbiana, Stark, Mahoning and Muskingum Counties have all seen new businesses moving into their facilities thanks to Utica Shale development.

Chesapeake Spends Over $3 Billion in the Utica Shale
Since the beginning of Utica Shale development, there has only been one true leader.  That leader has been Chesapeake Energy, the first company to invest and develop a well in the Utica.  Since then the company has invested $3.3 billion in Ohio providing energy, revenue and jobs for the state.  The company is now building their Ohio headquarters in Louisville and employs 550 fulltime staff.
 
Hess Invests Over A $1 Billion to Develop Utica Shale
Over the past year, Hess has opened a field office in Jefferson County in preparation for their development of the Utica Shale.  During that time Hess has acquired Marquette Exploration for $770 million and invested $500 million on a joint venture with Consol Energy to develop resources in the liquids rich portion of the Utica play.

M3 Midstream Investing $900 Million In Processing Plants in Columbiana and Harrison Counties
M3 Midstream is in the process of building natural gas gathering and compressing  facilities at Kensington, plus processing, natural gas liquids fractionation, loading and terminal facilities at Scio in Harrison County.  These two facilities will remove natural gas liquids by using a state of the art cryogenic processing facility.  The project is slated for completion by the second quarter of next year.

In a year’s time, Ohio has doubled its rig count from 12 to 24, and had billions of dollars invested in developing our resources, providing affordable reliable natural gas as well as creating numerous jobs for Ohio residents.  These investments have now put eastern Ohio back on the map as an economic powerhouse.  As we look forward to 2013, it is good to know that Utica Shale development will be paramount to lifting Ohio back from stagnation to promise.

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Akron Beacon Journal: Chesapeake Energy’s Ohio development anniversary

Friday, December 28th, 2012

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Canton Industrial Park Begins to See Growth from Shale

Friday, December 28th, 2012

One good way to gauge the positive impact shale development is having on Ohio’s economy is observing the growth and investment in its industrial parks.  EID has reported on the incredible gains of the Wellsville Intermodal Park and several Mahoning Valley industrial parks thanks to the development of the Utica Shale. Now, Mills Business Park in Canton is beginning to experience some of these same benefits.

Ten years ago, the Canton Regional Chamber of Commerce developed the park’s concept with developer Robert DeHoff.  The idea came about after the city realized there wasn’t enough room for new and expanding businesses within the city.  After ten years, the Mills park is certainly beginning to grow.  Currently, the park has contracts with Medline Industries and Old Dominion Freight Line.  Two more companies are expected to make Mills Business Park their home in 2013, joining  GE Oil & Gas.

While it is good sign that companies are moving in, the park hasn’t reached the potential its developers expected.  However, shale is providing hope for the park’s future, a fact noted by Joseph Halter, president of Solmet Technology and chairman of the chamber’s economic development committee when the Mills project was being spearheaded:

You have to look at these things long-term. We all knew this was not going to be something that happened overnight. I don’t think it’s even half occupied at this point. With the coming of the Utica Shale, certainly that has the potential to attract a lot (of businesses).— Joseph Halter (Mills Business Park vision takes shape, 12/23/12)

Enter GE Oil and Gas, a company vested in the interest of Ohio’s oil and natural gas resources. They are expected to use their facility for piping and parts used in the field.  As shale development continues to grow across eastern Ohio, it is very likely Mills will be a hub for oil and gas related industries just as Wellsville Intermodal Park and industrial parks throughout the Mahoning Valley.

For example, Wellsville Intermodal Park in Columbiana County only has a few acres left for development because so many shale-related companies have moved in.  They’ve also been able to make improvements to the park including a 60-ton overhead river crane, bulk cargo handling, and access to railroad and highway.

Castlo Industrial Park in Struthers will have all of their leasable space occupied by spring thanks to shale.  Using a $3.5 million Ohio Job Ready Sites grant, they are preparing 60 acres for future development. The Ohio Commerce Center in Lordstown also received a Job Ready Sites grant to the tune of $2 million for rail upgrades to service the shale industry.

Industrial parks attracting more businesses and in some cases, expanding to create more room, clearly show the potential future economic benefit shale development can bring on Ohio.  Without these vast resources – and the expanding development of these resources – many of these facilities could still be years from reaching the potential developers had in mind.

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UPDATE: Cracking the Nut on OSU’s Jobs Report

Thursday, December 27th, 2012

Update (12/27/12): It has been just over a year since the release of the Partridge-Weinstein report, and over fifteen months since the Ohio Oil and Gas Energy Education Program released their Economic Impact Study – conducted by Kleinhenz and Associates – which the Partridge report attempted to refute.

The Ohio State researchers’ prediction of 20,000 jobs – a number well below the 204,000 plus projected by OOGEEP – is broken down below, and EIDOhio.org was also fortunate to publish analysis of the study from expert economists Timothy Considine, Ph.D - Professor of Economics, Univ. of Wyoming, and Jack Kleinhenz, Ph.D - Principal and Chief Economist, Kleinhenz & Associates.

Jump forward to last week, and we can get an idea of just how off the mark the OSU report was in its low assessment of what kind of economic benefit Ohio would experience thanks to its development of the Utica Shale.

As the Columbus Dispatch and numerous outlets reported, a recent study conducted by IHS Cera for the U.S. Chamber of Commerce’s Institute for 21st Century Energy shows Ohio is already seeing these benefits in the form of both jobs and investment. The report highlights the creation and support of nearly 39,000 jobs to date – a figure surpassing the Partridge projections by good margin. And, it’s important to highlight these numbers are coming out while we remain in the early stages of this development.

With these early indicators, it is easy to see why there is so much excitement of what’s to come, something the Chamber’s report provides more insight on. Echoing the OOGEEP impact study, the report projects the creation and support of 267,000 jobs in the coming years as a direct result of the oil and natural gas industry’s continued development of Ohio’s natural resources. That’s over a quarter of a million jobs – or enough to cut the number of currently unemployed Ohioans by over two-thirds.

- Original post from 12/20/11- 

EID breaks down report from Ohio State researchers predicting “only” 20,000 new jobs from Utica Shale development

British historian Thomas Carlyle is credited with coining the phrase “the dismal science” to describe the study of economics. But though he devised that expression in the 19th century in reference to the work of Thomas Malthus, it may be an appropriate way to describe the report released last week by two researchers from Ohio State.

Authored by OSU professor Mark Partridge and graduate student Amanda Weinstein, the report seeks to attack a study prepared by the respected, Cleveland-based firm of Kleinhenz and Associates, released by OOGEEP in September, which found that responsible Utica development could produce and support more than 200,000 jobs in Ohio over the next four years. An interesting fact – and one unmentioned in the Partridge paper – is that a representative from Ohio State actually sat on the project committee for the OOGEEP report.

At its core, Partridge and Weinstein argue that the Kleinhenz’s estimate of 200,000 new jobs is too optimistic – suggesting instead that a more reasonable forecast is a scenario in which Utica development in Ohio nets only 20,000 new jobs by 2015.

Of course, with the state’s unemployment rate currently at nine percent, 20,000 new jobs is certainly nothing to sneeze at – not when those jobs carry average wages of $76,036, according to one analysis by the state of Pennsylvania. As a spokesman for Gov. Kasich put it in the Columbus Dispatch last week: “Whether it’s 20,000 jobs or 200,000, that’s tens of thousands of families living in a part of the state that’s starving for good economic news who would say, ‘Sounds good, sign me up.’  ”

Still, the question of whether Ohioans can expect 200,000 new jobs from the Utica or only 20,000 is an important one – and so is the matter of how Partridge and Weinstein arrive at figures so far below the ones produced by independent researchers not only in Ohio, but in similar studies released in other shale-producing states all across the country.

The answer, as it usual is, can be found in the methodology. Although you might expect to find lots of equations and algorithms and funny Greek letters in a macroeconomics modeling forecast, in the Ohio State report, the researchers arrive at their numbers in much simpler fashion.

First, Partridge and Weinstein argue that only 10,000 new jobs were created in Pennsylvania during the first four years of Marcellus activity, and then assume the same will hold true for Ohio. Next, to account for “indirect” jobs, they simply multiply that number by two. The researchers describe as “reasonable” their decision to use this multiplier – and indeed, it appears to fall roughly in line with the one used by Considine, et al. in their assessment of Marcellus jobs released this year. So if the problem with Partridge isn’t the multiplier, then where, exactly, are the discrepancies?

The chart included on page 12 of the OSU paper provides a straightforward answer to this question. As it turns out, the researchers only include a few basic employment categories in their analysis of the new jobs expected to be created from responsible resource development in Ohio – while leaving out many others (all of them relevant to the Utica) that any other reasonable, objective analysis would have incorporated.

To Partridge, only jobs related to the drilling of new wells, construction of new pads, geophysical surveying of new areas, and the manufacture of new pipe “count” as jobs that can be ascribed to the industry. Jobs in other sectors of the economy – from retail, to trade, to insurance, to manufacturing, to legal work and environmental consulting – simply don’t make the cut in this analysis.

The problems with the paper don’t end there. Importantly, it also fails to account for the downstream impact from billions of dollars in taxes, rents and royalties that Utica development is expected to produce for state and local governments and local mineral-owners. In Pennsylvania, Marcellus exploration resulted in the delivery of more than $2.06 billion to landowners in 2010, and another $1.085 billion to state and local governments, according to researchers from Penn State. Unfortunately, and remarkably, none of those revenues have the effect of creating a single job in the Partridge paper. They may as well just have been buried in the backyard.

Although the OSU paper is 35 pages in length, the calculations involved in arriving at its 20,000-job estimate are explained in just two pages. The rest of the study is best described as an extended op-ed, with the researchers laying out their views on the costs and benefits associated with producing natural gas (but strangely, not oil) from the Utica, citing various studies, news reports, and even scenes from Gasland before concluding – spoiler alert — that more research needs to be done before fully committing to shale development in Ohio.

Having identified the core weaknesses with the quantitative figures produced by Partridge and Weinstein (cited as “P / W” below), below we take a closer look at some of the other, more qualitative statements and conclusions found in the paper:

P / W: “[W]ith these assumptions, we assume that from 2004-2010, there was a gain of about 10,000 direct and indirect jobs in the natural gas industry in Pennsylvania.” (p. 12)

Facts:

Partridge and Weinstein employ two interesting tricks here to manufacture inexplicably low numbers for Marcellus employment in Pennsylvania.

P / W: “As the number of wells drilled dramatically increased, so did natural gas production in Pennsylvania, especially in the northeast region.” (p. 10)

Facts:

While it’s certainly true that the volume of natural gas produced in Pennsylvania has increased dramatically over the past six years, those increases have been realized even while fewer wells were being drilled across the state.

P / W: “In 2010, tourism employed approximately 400,000 people in Pennsylvania whereas the natural gas industry employed closer to 26,000.” (p. 5)

Facts:

P / W: “Overall, there are no clear employment effects for heavily drilled counties. We are not saying there are no drilling employment effects, but that they are not large enough to be detected …” (p. 15)

Facts:

P / W: “Thus, [natural gas’s] effects on ‘energy security’ are rather limited in the foreseeable future as increased electrical demand and the growing reliance on US natural gas will primarily be at the expense of US coal.” (p. 5)

Facts:

Here, the OSU researchers appear to be arguing that, just because the vast majority of natural gas from shale is expected to be used domestically in the United States, the energy security benefits of the energy source will be limited in a global and/or geopolitical context.

P / W: “Innovations in hydraulic fracturing are the reasons natural gas extraction has recently been developing in the Marcellus shale regions in Pennsylvania and Ohio and now expanding to the Utica shale regions in Ohio.” (p. 7)

P / W: “Horizontal wells and hydraulic fracturing in conjunction with advances in micro-seismic technology aiding both exploration and the drilling process have allowed the energy industry to extract natural gas at greater depths.” (p. 7)

Facts:

P / W: “Figure 3 on the next page shows that most natural gas is still used to supply electricity.” (p. 5)

Facts:

P / W: “In the 1980s, the Barnett shale in Texas became the first natural gas producing shale. More than a decade of production from the Barnett shale in Texas has helped improve the hydraulic fracturing process, leading the way for it to be used in other areas such as the Marcellus shale in Pennsylvania and the Utica Shale in Ohio.” (p. 7)

Facts:

Actually, America’s “first natural gas-producing shale” well was developed in the state of New York, not Texas. In 1825, not “the 1980s.”

P / W: “In 2005, hydraulic fracturing methods were exempted from the Safe Drinking Water Act and Clean Water Act.” (p. 5)

P / W: “Representatives of the natural gas industry have made similar claims that hydraulic fracturing has never contaminated drinking water sources. These claims were used to exempt the natural gas industry from the Clean Water Act and the Safe Drinking Water Act when Congress enacted the 2005 Energy Policy Act.” (p. 22)

Facts:

This claim is false. Hydraulic fracturing has never in its nearly 65-year history been regulated under the Safe Drinking Water Act, and it is in no way exempt from the Clean Water Act. It has, however, been aggressively regulated by the states, which have compiled an impressive record of enforcement and oversight over the past six decades.

P / W: “There may be other toxic chemicals in the hydraulic fracturing fluid mix though energy companies have continually refused to disclose these chemicals for proprietary reasons.” (p. 23)

Facts:

P / W: “Impact analysis is usually based on an old input-output technology that is typically not used today by economists to estimate actual economic effects.” (p. 11)

Facts:

Partridge and Weinstein may not personally approve of input-output analysis, but the committee that awards the Nobel Prize in economics disagrees.

P / W: “One other issue is that proponents of natural gas expansion in Ohio often claim that lower natural gas prices will provide a major stimulus to overall employment, especially in manufacturing. While we will not assess whether natural gas prices are a sufficient share of a typical firm‘s cost structure to make a tangible difference, we do note that there are reasons to be skeptical of those claims (though we hope we are wrong).” (p. 13)

Facts:

According to a report issued last week by the National Association of Manufacturers (and authored by researchers at PricewaterhouseCoopers):

P / W: “During the October 2007-October 2011 period … the entire state of North Dakota added about 39,000 jobs. It is highly unlikely that this is all due to energy as high commodity prices (for example) have supported North Dakota‘s relatively large farm economy.” (p. 13)

Facts:

Once again, the actual numbers for the Bakken are quite a bit higher than Partridge and Weinstein suggest.

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Shale and HF: A 50 State Jobs Plan

Wednesday, December 26th, 2012

**Cross posted from EnergyinDepth.org**

When we talk about shale development, states like Maine and Connecticut aren’t normally a part of the conversation. But this week, a new report shows that the benefits of shale development extend all across the nation – even in states without any actual shale resources to speak of.

The second stage of a study co-sponsored by the U.S. Chamber’s Institute for 21st Century Energy takes an in-depth look at the state-by-state economic contributions of shale development. Here are some of the key findings:

Certainly some welcomed news for the American economy, and even better news for state coffers. Producing states have seen a surge in employment with tens or even hundreds of thousands of new jobs coming online. In Texas, shale development has created over 575,000 jobs to date, which is expected to grow to nearly 930,000 in 2020. Close behind is Pennsylvania with 102,600 jobs, California with 96,500, Louisiana with 78,900 and Colorado with 77,600.  And by 2020 those numbers all nearly double. No wonder USA TODAY found that “of all the places that America’s new jobs are, the emerging energy business, directly or indirectly, might be responsible for more of them than almost anything else.”

And as for revenues, production is generating billions of dollars for state’s, allowing for new (and much needed) investment in schools, hospitals, roadways and more. In California, 2012 production generated  nearly $3 billion in taxes for state and federal coffers, which is roughly the equivalent of 10 percent of the state’s deficit. Colorado also saw $3 billion brought into the state, Louisiana $2.5 billion, and North Dakota a whopping $6.8 billion – with expected growth to $13 billion in 2020.

Even non-producing states are seeing major benefits as a result of shale development. As the report highlights, “less well-known are the economic benefits that accrue to non-producing states that lack oil and gas resources but nonetheless host firms that sell goods and services that are critical to the lengthy supply chain supporting unconventional oil and gas development.”  Some of the biggest winners are New York with 44,400 jobs, Illinois with 38,600, Michigan with 37,800, Missouri  37,700, and Florida 36,500. Even Connecticut is seeing growth with 8,300 jobs in the state already supported by production, and an estimated 14,100 by 2035. And with many of those states having shale deposits of their own, it’s only a matter of time before even more job opportunities find their way to areas in desperate need of them.

From new public revenues to jobs for American workers, shale development is truly reinvigorating the American economy – even where we don’t expect it.  Make sure to check out the Chamber’s rollover map to see how shale may be bringing these benefits to your state today.

Read more:

ISSUE ALERT: Shale Putting America Back In Motion (10/24)

ISSUE ALERT: Development of Shale has Saved Consumers $250 Billion Since ’09 (5/29)

EID-ILLINOIS: Hydraulic Fracturing Could Create 47,000 New Illinois Jobs (12/13)

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Merry Christmas and Happy Holidays from Energy in Depth – Ohio

Monday, December 24th, 2012

All of us here at Energy in Depth – Ohio wish you and yours a very Merry Christmas and Happy Holidays.

Whether you are traveling from the North Pole or North Canton, we wish you safe travels! As we enjoy our time with friends and family over the holiday season, let us all remember what we have to be grateful for today, and what we look forward to in the new year.

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Regional Chamber Helps Local Companies with API Certification

Sunday, December 23rd, 2012

This month, Eric Planey and Sarah Boyarko of the Youngstown/Warren Regional Chamber visited Houston, TX, for three days to meet with representatives of energy companies and trade associations.  From the meetings, they learned they can help local companies be a part of the oil and gas supply chain in Ohio by facilitating American Petroleum Institute (API) certification.

Once you’re an API-certified company, it makes the opportunities in the oil and gas industry that much better—Eric Planey, Vice President of International Business Attraction, Youngstown/Warren Regional Chamber (Regional Chamber to Facilitate API Certification, 12/17/12)

The Chamber is working with a Houston consulting firm to hopefully schedule a three-day course to help local manufacturer’s get an API certification.  Once the companies complete the course, API representatives come to the company’s facility to approve the certification.  EID sat down with Rebecca Heimlich of API for the Sunday Shale Show in November to learn more about the organization.

The Chamber is working with the Ohio Shale Coalition, part of the Ohio Chamber of Commerce, to get the course scheduled as soon as March.  This way, local companies and manufacturers can begin the process of entering the supply chain during the early stages of the shale play.  Planey and Boyarko held 13 meetings in Houston in which they learned the benefits using local companies in the supply chain:

They want to see the chamber and Ohio agencies assist with local companies becoming certified in areas such as API standards so they can use local supply chains. Not only is it good community practice to use local supply chains, it reduces overall costs—Eric Planey, Vice President of International Business Attraction, Youngstown/Warren Regional Chamber (Regional Chamber to Facilitate API Certification, 12/17/12)

During the trip, Planey and Boyarko met with many different sectors surrounding the oil and gas industry.  Since Ohio is in the very early stages of the shale play, Texas is a good gauge of what is to come.  Just this week, the U.S. Chamber released a study on job creation from shale plays around the nation and reported 576,000 jobs have already been created in Texas from the industry.  The Youngstown Business Journal reported on the Chamber’s itinerary in Houston:

It is encouraging to know organizations like the Youngstown/Warren Regional Chamber are being proactive regarding the Utica Shale.  They have recognized the incredible opportunities coming to Ohioans through job creation, revenue and investment, and are working to make the Mahoning Valley a national epicenter for shale development and its suppliers.

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Update: Gulfport Touts Utica’s Prolific Potential

Saturday, December 22nd, 2012

UPDATE (12/20/2012, 07:00 am ET): It seems Gulfport Energy’s CEO Jim Palm is backing up his claims about the Utica’s prolific potential by acquiring additional acreage.  Thanks to the tremendous results of Gulfport Energy’s first 10 wells, they have now procured an additional 37,000 acres. The company paid an approximate $372 million for the additional acreage to Windsor Ohio, a subsidiary of Wexford Capital.

The newly acquired additional acreage now gives Gulfport a total of 137,000 acres to develop in the liquids-rich portion of the Utica Shale.  Gulfport is extremely excited about the Utica Shale, and with 3 of the top producing wells in the Utica Shale; it would be hard not to be.

—Original post from November 8th, 2012—

In Gulfport Energy’s third quarter earnings call yesterday, executives from the company continued to tout the outstanding production they have seen coming out of the Utica Shale.   Due to the strong numbers they have reported throughout this year, Gulfport is looking to make the Utica Shale their primary focus area.  In result, Gulfport will be planning to invest $215-$225 million in Ohio to develop 50 wells over the next year.  These wells will be developed in Gulfport’s core area of Harrison, Belmont and Guernsey counties.

Thanks to wells like their Boy Scout, Wagner and Shugert wells, Jim Palm, CEO of Gulfport Energy, sees this play being one of the most prolific shale plays Gulfport has been a part of, rivaling the Eagle Ford.

“We believe that our position in the Utica could be as good as the best part of the Eagle Ford based upon the overall productivity and economics.”- Jim Palm, CEO of Gulfport Energy

In the early exploration of their initial 10 wells, Gulfport performed a myriad of tests while collecting extensive geological data, including full open-hole log suites and a full core from the Utica and Point Pleasant interval.  Their findings concluded their original assumptions about the Utica being a prolific play in the United States.

“It’s becoming increasingly apparent that the Utica is a prolific shale play and we are very pleased to have captured a significant position within its core.” Jim Palm, CEO of Gulfport Energy

In an unexpected announcement, Gulfport also released initial production rates for yet another well.  The BK Stephens 1-16H located in Moorefield, which is near Piedmont in Harrison County, was drilled to a total vertical depth of 8,225 feet, with a 5,276-foot horizontal lateral.  The well was completed using a 19 stage hybrid hydraulic fracture.  The well tested at a peak rate of 1,224 barrels per day of condensate and 6.9 million cubic feet per day of gas on a 32/64 inch choke.

The gas being produced is 1,207 BTU rich gas, making it liquids rich. Assuming full ethane recovery, this composition would produce 110 barrels of natural gas liquids per million cubic feet of gas resulting in a gas shrink rate of 11% and a total rate of 3,007 barrels of oil equivalent per day.

This is Gulfport’s sixth well that has come on line this year.  All six wells have put out significant initial production numbers echoing their assertion that their Utica holding will be as significant as the best part of the Eagle Ford.

Even though Gulfport has six strong wells ready for production, they are still waiting for midstream infrastructure to be put into place.  To date, none of their six wells have been put into full production.   Gulfport is working with MarkWest to remedy the issue of the lack of gathering lines to get these wells in production.  MarkWest is currently working on infrastructure in Harrison, Noble, Guernsey and Belmont counties to help get these wells on line as soon as possible.

Looking to 2013, Gulfport plans to heavily develop the Utica Shale. Currently Gulport has 2 rigs running in the Utica, but in 2013 they plan to add a rig every two to three months until they have 6 rigs running in the Utica by the end of 2013.

Gulfport and Chesapeake continue to put up strong numbers within the core areas of the Utica.  These numbers will continue to grow as methods are tweaked and refined.  As it stands these areas will be one of the most significant shale plays in the United States helping to create jobs and opportunity in a portion of the state that needed it the most.

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Ohio’s New Energy Promise

Friday, December 21st, 2012

This week the United States Chamber of Commerce, through its Institute for 21st Century Energy, released part two of a three-part series studying the topic of shale benefits state by state in a study called America’s New Energy Future. The comprehensive study was completed in conjunction with the American Petroleum Institute, American Chemistry Council, America’s Natural Gas Alliance and the Natural Gas Supply Association.

Some of the key highlights of the study show us that in Ohio more than 38,830 jobs have been created, including direct, indirect and induced categories.  Also, 143,595 new jobs will be created by the year 2020. By the year 2035, the number will climb to 266,624.

Karen Harbert who serves as President and CEO of the Energy Institute at the U.S. Chamber explained the importance of shale development in Ohio:

Shale energy is a game changer for American and for Ohio, the latest installment of this study allows us to quantify just how significant the impact on Ohio’s economy will be. It provides all the more reason to strongly support responsible shale energy development (U.S. Chamber’s Energy Institute Co-sponsors Study on Shale Benefits by State, 12/19/12)

IHS, a leading global energy research firm, looked at three main components of job creation in order to gain the full scope of job creation in the state.

Direct: Contributions of unconventional oil and gas energy development are those required to explore, produce, transport and deliver products to downstream elements or activities that provide critical on site equipment and services.

Indirect: Contributions are activities in outside industries that supply materials and services to the developers of unconventional oil and gas and to their tier of suppliers.

Induced: Contributions are the economic effects from workers spending their wages on salaries on consumer goods and household items.

The report also showed remarkable increase in tax revenue both at the local and state level. In 2012 over $911 million was paid to state and local government in Ohio and is estimated to grow to $4.5 billion a year by the year 2020. The total paid in taxes by this industry from the year 2012 to the year 2035 will be a staggering $120 billion to both local and state government.

According to Linda Woggon who serves as both executive vice president of the Ohio Chamber of Commerce and the executive director of the Ohio Shale Coalition Utica Shale development is already having a positive effect on local communities here in Ohio and will provide significant revenue in the future for our state.

Ohio is already seeing a significant boost to our economy from shale energy, and this new study shows that much more is to come,” said Linda Woggon, executive vice president of the Ohio Chamber of Commerce and executive director of the Ohio Shale Coalition. “The billions of dollars in new state and local government revenue will help support schools, infrastructure and other needs for our state, while the hundreds of thousands of new jobs will provide an economic boost for our families. (Shale expected to bring jobs, 12/20/12)

Unions throughout Ohio are also recognizing the significant impact shale development is having on our state.  In a recent interview, Butch Taylor, Business Manager, for Local 396 Plumbers and Pipefitters, said he has seen tremendous growth throughout their local, going from 40 percent unemployment among members to 100 percent employment, with a 12 percent growth in membership.

Due to the growth, Local 396 has now increased the number of times per year they take applications due to the influx of work they are receiving.

We’ve put 108 new members in the last two years. It’s really growing. And about 13 new contractors through that time period so it’s really growing and growing fast. Applications for the apprenticeship program will be taken on the third Wednesday of each month through April.  – Marty Loney, Local 396 (Shale Industry Leads to Growth of Pipefitters Union, 12/19/12)

During this holiday season, it is great to know that over 38,000 Ohioans are now working thanks to Utica Shale development.   As noted in the study this number will continue to increase providing more good paying jobs for our residents throughout Ohio, helping to lead our state back to prominence.

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