The Ohio Shale Coalition—energy interests working with the Ohio Chamber of Commerce—issued a report this week on the economic potential of Ohio’s imminent shale boom. The report forecasts employment as a result of oil and gas drilling activities will reach 65,680 in 2014.
Previous employment forecasts have put that number anywhere from 20,000 to 200,000. Whatever the exact number, it is clear that shale drilling offers an opportunity to improve the employment picture in Ohio communities hard hit by the recession.
With that in mind, we reviewed the report to learn whether its authors saw hope for Ohio job-seekers. However, as we predicted in our report, the report foresees a significant reliance on out of state companies and workers as drilling gets underway here. From page 31 of the report:
“It was assumed that as more specialized labor becomes trained and available in Ohio, there would be a gradual increase in the percentage of Ohio-based workers employed by the oil and gas producers and service companies.”
The authors appear to agree with Innovation Ohio, that without a proactive state policy to encourage companies to hire Ohioans, transient workers will continue to fill the parking lots of Ohio oil and gas wells with out of state license plates for years to come.
Furthermore, the report identifies another complicating factor for out-of-work Ohioans seeking employment on the shale wells:
“Both neighboring states (PA/WV) have a large trained labor force ready and able to respond to the needs of oil and gas production in Ohio – a workforce that will be mobile and perhaps faced with a dramatic decrease of activity in the Marcellus with the recent drop in dry gas prices.”
In other words, thanks to declining natural gas prices, drilling activity may shift from the Marcellus shale to the more liquids- and oil-rich Utica shale in Ohio. Experienced workers can can easily migrate from just across the border to compete with Ohioans to chase these new opportunities. Workers from neighboring states offer little to Ohio in terms of economic benefit, as noted on p. 31:
“Daily expenditures of workers from non-Ohio companies for time spent in Ohio to conduct services for drilling and completion of wells were also not included because most of that labor will be from out of state and their pay and most of their personal expenditures will remain out of state.”
The result will be slow job growth and tax revenue as the benefits are exported back to neighboring states.
The bottom line is there is no guarantee that these specialized jobs, either in drilling itself, or in the ancillary white collar legal and professional supporting industries, will go to Ohioans. The most likely job gains for Ohioans will come from local service providers as a result of what is termed the “induced effect,” new employees in unrelated businesses like restaurants and hotels. Those gains are forecast to take off in 2013, but that will be largely dependent on how much of that money actually stays here.
Innovation Ohio recommends that state policymakers institute a “Hire Ohio” policy, providing incentives, such as a break on severance taxes, to oil and gas companies that hire Ohio workers. Since releasing our report a month ago, no indication has come from the Kasich administration or General Assembly of how they will improve the prospect of Ohio job-seekers seeking to participate in the shale boom.