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3 Ways the Shale Boom Will Impact the Trucking Industry

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A white paper authored by the Benesch law firm, based on a national survey conducted by Benesch and the National Tank Truck Carriers and Ohio Trucking Association. The white paper outlines the ways in which the shale boom in the U.S. has and will continue to change trucking in this country. In short, the increase in shale drilling has lead to an increase in trucking--a positive sign of economic growth for the future.

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3 Ways the Shale Boom Will Impact the Trucking Industry

  1. 1. 3 Waysthe Shale Boom Will Impact theTrucking Industry2013123Insights from thetransportation industrysurvey conducted incollaboration with:• Benesch• National Tank Truck Carriers (NTTC)• Ohio Trucking Association (OTA)
  2. 2. 23 Ways The Shale Boom Will Impact The Trucking IndustryContents:• Executive Summary• Impact One: Overall Industry Growth - Revenue Growth - Volume Growth - Segments of Growth• Impact Two: Shortages in Means of Production - Shortage of Workers (drivers and mechanics) - Shortage of Equipment - Meeting Needs through Acquisition• Impact Three: Regulatory Change - Federal Trucking Industry Regulations - State Oil/Gas Industry Regulations - Impact on Growth• Conclusions• About NTTA• About OTA• About Benesch1233 Waysthe Shale Boom Will Impact theTrucking Industry
  3. 3. 33 Ways The Shale Boom Will Impact The Trucking IndustryShale energy exploration, thegrowing practice of deep horizontaldrilling to harvest oil and naturalgas previously beyond reach, haschanged America’s energy industryand overall economy. According tothe American Chemistry Council,abundant natural gas is creatingan “American manufacturingrenaissance” that is expected toproduce more than 400,000 newAmerican jobs, and over $132 billionin new U.S. economic output. Andin the areas where the actual drillingoccurs—Ohio, Pennsylvania, Texas,Louisiana and North Dakota—thereare even more direct economicimpacts of what has been called the“shale boom.”These impending economic changespresent both challenges andmonumental opportunity.As a leader in the transportationindustry, it is important to have theinformation necessary to positionyour company to capitalize onopportunities in this new market.This white paper identifies threeimportant ways that the shale boomwill impact the trucking industry.• Increased Demand for Trucking• Shortages of Workers and Supplies• Regulatory ChangesExecutive SummaryIt summarizes and interpretsthe results of a survey recentlycompleted by Benesch, an Ohiobased firm with a nationally-recognized transportation andlogistics practice, in collaborationwith National Tank Truck Carriers(NTTC) in Washington, DC and theOhio Trucking Association (OTA) inColumbus, Ohio.The survey provides a snapshotof changes in the initial four yearsof the shale boom, as well asexpectations for the coming half-decade both in areas of activeshale gas production, and thenation as a whole.“As many economistswill tell you, [trucking] isan important harbingerof economic vitality andchange. Increases intrucking activity signalcorresponding changes inmanufacturing and industry.After all, you can’t makeor sell a product withouttransportation playing a keyrole in the process.”Richard Plewacki, partnerBenesch’s Transportation & Logistics
  4. 4. 43 Ways The Shale Boom Will Impact The Trucking Industry11.The Shale Boom will spurtrucking industry growth:As the US and global economiesbegin to emerge from recession,the trucking industry is showingearly signs of growth, and the shaleboom is a significant part of thisequation. When asked about activityfrom 2009 to 2012, 80% of Ohiotrucking companies and 85% ofnational trucking companies reportedgrowth. Looking ahead to the nextfive years these groups are evenmore optimistic, with the percentageanticipating growth rising to almost92% of Ohio trucking companies and95% of national trucking companies.
  5. 5. 53 Ways The Shale Boom Will Impact The Trucking IndustryAnd much of this anticipated growthis due to the activity in the shaleindustry. When asked whether shalewould impact the trucking industry,97% of national companies, and 91%of Ohio companies agreed. Theimpact is expected to be positive,with 16% of future growth attributedto shale nationally, and 11% in Ohio.1
  6. 6. 63 Ways The Shale Boom Will Impact The Trucking IndustryWhile shale-driven growth willcut across sectors of the truckingindustry, the greatest impact willbe in the tank sector. Nationallyrespondents anticipated 77% growthin the tank sector, and 50% growthin the bulk sector. In emergingshale plays like Ohio, the increaseddemand continues to be for the dryvan and specialized trucks neededfor building infrastructure, but willtransition to bulk and tank as thesefields build to full production.1 “Because of fracking,the process to getnatural gas out of shale,tank trucks will be thebest sector.” Bob Costello, ATA Chief EconomistTrucking 2013 forecast
  7. 7. 73 Ways The Shale Boom Will Impact The Trucking Industry2The Shale Boom will increaseshortages in means of production.The shortage of qualified drivers andmechanics is not a new concern in thetrucking industry, but the increaseddemand will put more pressure on aworkforce already in short supply. Thisshortage has already limited growth forsome companies, and it continues to bea primary limiting factor for companieslooking to take advantage of opportunitiespresented by the shale boom.
  8. 8. 83 Ways The Shale Boom Will Impact The Trucking Industry2When asked to identify the singlebiggest barrier to capitalizingon shale opportunities, driverand mechanic recruitment wasidentified by 47% of nationalcompanies, and 24% of Ohiocompanies. The rate of workforcegrowth is expected to be 17%nationally, including 12% of Ohio-based companies.“We’ve seen smallfleets have to downsizebecause they had to selltwo older tractors just tobuy one new tractor.”Bob Costello, ATA Chief Economist,Trucking 2013 forecast
  9. 9. 93 Ways The Shale Boom Will Impact The Trucking Industry2Shortages of available equipmentare also a concern, and accordingto American Trucking AssociationsChief Economist Bob Costello, newequipment is replacing aging trucksrather than building fleet capacity.These combined shortages of laborand equipment have companiesincreasingly considering acquisitionas a means to growth.Nationally, 27% of companiesare considering acquisition inthe next 5 years (an increaseof 11%), and in Ohio 15% ofcompanies are consideringacquisition in the next five years(an increase of 6%).
  10. 10. 103 Ways The Shale Boom Will Impact The Trucking Industry3The Shale Boom will requirecompanies to comply withcomplex, changing regulations.While nationally less than 10% ofrespondents identified regulationas the primary barrier to growth,in Ohio—the hotbed of activityin the emerging Utica shale playwhose oil and gas regulationsare still emerging—regulationwas identified as the leadingbarrier to growth by over 24% ofrespondents.“The regulatoryconditions aresignificant, as is theabsence of many/mostcarriers (unless theyare true hazardousmaterials transporters)understanding whatthey have to do to be incompliance.”--Ohio Survey Respondent
  11. 11. 113 Ways The Shale Boom Will Impact The Trucking Industry3Capitalizing on shale activityrequires trucking companies to beknowledgeable and compliant withnot only Federal transportationlaw, but oil and gas production law,which is regulated by individualstates. But the difference in thelevel of concern about regulationsbetween national and Ohiocarriers is likely a function of priorexperience in the oil and gasarena—not one of ability. Nationalcarriers have had experience inother settings outside of Ohio andhave become educated about andfamiliar with applicable regulationsand other oil field operationalchallenges.And while regulations continueto evolve, the changes canbe anticipated and plannedfor. Carriers should already beplanning for a change of the Hoursof Service Regulations (which areanticipated to come into effect July,2013), as well as the prohibitionagainst traditional motor carrier-to-motor carrier subcontracting thatrecently became effective throughMAP-21. But these regulatorychanges are just part of theindustry, like changing customerrequirements, and communityinitiated limitations with respect toinfrastructure and transport and oilfield conduct.“There is no reason whywith due diligence, Ohiomotor carriers cannotposition themselves to becompetitive as the UticaShale play grows.”Richard Plewacki, partnerBenesch’s Transportation & Logistics
  12. 12. 123 Ways The Shale Boom Will Impact The Trucking IndustryAbout the surveyThe survey took place, via email, in November and December of 2012. Benesch developedthe questions in partnership with NTTC and OTA. All members of both associations weregiven the opportunity to participate in the survey. The data-gathering phase of the surveyended on December 18, 2012.About BeneschBenesch is a full-service business law firm with offices in Cleveland, Columbus,Indianapolis, Philadelphia, White Plains, Wilmington and Shanghai. The shale oil and gaspractice co-chairs are Orla E. “Chip” Collier III (Columbus office) and Kevin D. Margolis(Cleveland Office). You can learn more about Benesch by visiting www.beneschlaw.com.Also, read Benesch’s daily updates on the Ohio Shale Play at www.ohioshaleupdate.com.About the Ohio Trucking AssociationThe Ohio Trucking Association (OTA) is a nonprofit, full-service trade association thatpromotes and protects the interest of the trucking industry in Ohio. Membership includesmore than 800 companies across the buckeye state. For more information, visit http://www.ohiotruckingassn.org .About National Tank Truck CarriersNational Tank Truck Carriers (NTTC) represents the tank truck industry before Congressand federal regulatory agencies, including the DOT, EPA and DHS. NTTC is also involved instate and local issues across the country that impact its membership of 200 companies. Formore information, visit http://www.tanktruck.org/ .“The survey illustrates the degree towhich shale energy is an economicgame-changer,” says Benesch’sPlewacki. “High demand for domesticand stable sources of energy aredriving shale development at arapid pace. Ancillary businesses,such as trucking, are reapingtremendous benefits and this canonly benefit the economy as a whole.There are, however, threats to thisConclusionsprosperity. The trucking industryneeds new ways of finding andretaining drivers and mechanics.Growth isn’t possible without thisvital human capital. And truckingcompanies need to find and retainlegal professionals to help navigatechanges in state regulation andmaximize their opportunities.”

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