The Star Beacon; Ashtabula, Ohio

October 4, 2012

Gas exploration boosts local economy

Star Beacon

ASHTABULA — Down in Jefferson County, where Ed Looman is executive director of the Progress Alliance, 1,200 new jobs were created in seven months this year. And that job wave is headed north to Ashtabula County.

Looman, along with Nathan Paskey of the county’s Soil and Water District Office, and David Marrison of the county’s OSU Extension Office, were speakers for the October Profiles Breakfast, held at KSU Wednesday. The topic, Ohio shale gas exploration and its implications for the county, was a hot one, drawing what may have been the largest crowd ever to a Profiles Breakfast, about 150 people.

Paskey addressed the environmental issues related to the hydraulic fracturing, or “fracking,” method of gas drilling. He said that whenever stories of water contamination from this process are presented, the geology of the area where the contamination occurred must be taken into consideration.

Paskey said that Ashtabula County’s water table is very shallow. Further, there are large layers of either shale or sandstone between the water and the area of exploration.

“We have a huge buffer,” Paskey said.

Ohio is relatively late coming into the industry, so it had the advantage of being able to draw upon the experiences of other states in drafting regulations. Paskey said that, as a result, if the drillers do their job and follow the rules, “we should be O.K.”

“Ohio did it right by watching what happened in Pennsylvania and West Virginia,” said Looman, referring to S.B. 165. “Ohio law is extremely good when it comes to protecting us. If the well is constructed right, we shouldn’t have any issues.”

Marrison addressed the economic pitfalls that face landowners who lease their land. He said they need to plan on losing 45 percent of their payment to taxes. And they need to keep sustainability in mind when spending that money. He compared the challenge to what pro-athletes face after they retire — 78 percent of them are bankrupt within three years because the cash cow goes dry, but the bills associated with their large home, gas-guzzling vehicles and up-scale lifestyle continue.

Another issue for local governments is that the taxes on the income won’t flow into township or county coffers. If there is a windfall, it comes from the sales tax that the landowner pays on purchases made in the county with the new-found wealth.

Looman said he’s seen that kind of spending occur in Jefferson County.

“The majority of farmers in (Jefferson County) have new tractors, new barns from the leases they’ve signed,” Looman said.

Jefferson County is 18 to 24 months ahead of Ashtabula County in terms of fracking activity, predicted Looman. He said there are only three drilling rigs operating in Jefferson County, but that activity alone has brought in nine new businesses and added more than 1,000 jobs. Looman urged Ashtabula County officials to start planning now for the opportunities and challenges that will come with the industry.

“We got ready for this about one and one-half years before it hit,” Looman said. “An oil and gas committee was formed by the commissioners to address the issues of communication and education.”

Workforce development is especially important. With a grant from ShaleNet, Jefferson County used its community college to train more than 100 students for the new jobs. Looman said these jobs pay very well — one company pays $11 an hour, but the work week is 168 hours.

“The work is hard and you are outside a lot,” he said.

There also is opportunity for existing businesses to become vendors to the drilling companies. Growth Partnership for Ashtabula County is hosting a seminar about these opportunities at Spire Institute Oct. 10.

Looman said drilling can have a negative impact on tourism. When drillers come into a community for an extended period of time, they tie up large blocks of hotel rooms, leaving tourists without lodging. If tourists are forced to stay outside the county, local spending and visitation will suffer.

The law of supply and demand can wreck havoc with pricing of basic commodities. Restaurants can charge more for that roast beef dinner if the drillers are spending freely. Looman said Jefferson County experienced a steep rise in rental rates for homes and apartments. In some cases, the rates have tripled.

Despite the challenges, the impact on unemployment in the region has been dramatic. In Carroll County, the hub of the industry in Ohio, unemployment fell from 16 percent in 2010 to 6.9 percent this summer. Sales tax receipts are running $300,000 above last year’s and more than two dozen new businesses have opened their doors.

Looman said the wave is heading this way, and his advice is be prepared to evolve with it.

“This industry is having a huge impact on our part of the state,” Looman said.