2. THE MISSION
The Ohio Shale Coalition sponsored a research study
focused on the economic impact and opportunities
associated with the development of oil and gas
resources in the Utica Shale. The study was conducted
by researchers at Cleveland State University, The Ohio
State University and Marietta College.
The technologies that have enabled the development
of the Utica Shale - horizontal drilling and improved
hydraulic fracturing - will require considerable
investment by companies in Ohio. There are four
major areas of investment that the Study Team
reviewed for this report:
- Leasing, Royalties, and Right-of-Way Payments - Road Construction
- Drilling and Completion of Wells
- Midstream Infrastructure
The Study Team projects the annual production of oil and gas from the Utica Shale will grow to $9.6 billion
in 2014, when the total value added will amount to $4.9 billion. Utica Shale development will also support
65,680 jobs and generate an additional $3.3 billion in labor income in 2014.
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3. THE
THE FINDINGS
FINDINGS
2011 2011 2012 2012 2013 2013 2014 2014
VALUEVALUE ADDED
ADDED $162,030,036$878,982,133
$162,030,036 $2,980,378,198
$878,982,133 $4,857,632,095
$2,980,378,198 $4,857,632,095
EMPLOYMENT
EMPLOYMENT 2,275 2,275 12,150 12,150 40,606
40,606 65,68065,680
LABOR INCOME
LABOR INCOME $99,758,497$571,543,463
$99,758,497 $1,994,216,405
$571,543,463 $3,298,757,195
$1,994,216,405 $3,298,757,195
OUTPUT
OUTPUT $291,574,770 $1,667,574,417
$291,574,770 $5,823,268,396
$1,667,574,417 $9,642,544,988
$5,823,268,396 $9,642,544,988
TOTALTOTAL STATE & LOCAL TAXES $16,522,865
STATE & LOCAL TAXES $73,422,148 $271,539,607
$16,522,865 $73,422,148 $271,539,607$433,528,922
$433,528,922
incomeincome to be significantly this level. level. impacted by shale de
to be significantly above above this impacted by sh
Expected average earnings are highesthighest in the
Expected average earnings are in the
ted to grow during during
expected to grow professional services sector, sector, following by those on natural natura
professional services following by those Ohio Ohio on gas a
due to increased oil
in part due to increased oil directly involved in developing the resources.
directly involved in developing the resources. rates are $0.10/bbl an
rates are $0.10
ue to due to expansion in
also expansion in With the growthgrowth of local service industries
With the of local service industries recovery fee of $0.10/
recovery fee o
y. For example,
conomy. For example, supplying to oil and oil and gas producers, the number
supplying to gas producers, the number OUTPUT OUTPUT
itectural and engi- engi- workers supported by the Utica Shale devel- devel-
or architectural and of of workers supported by the Utica Shale value”)value”) are pro
are property t
on, improved earn- earn-
addition, improved opment is expected to grow rapidly.rapidly.
opment is expected to grow OutputOutput is the economic development number hydrocarbon reserv
is the economic development number of of hydrocarbo
e variety of local
n a wide variety of local most policy makersmakers lookguidance as to as to
most policy look to for to for guidance taxes are assessed by
taxes are asses
including for example By 2014, the economic impact impact of development economic impact impact of a particular industry. It taxthe tax revenu
ng for example more more By 2014, the economic of development the the economic of a particular industry. It the revenue is pai
ealthcare.
t, and healthcare. 65,680 jobs. The is calculated by adding adding theeffects effects of district district politica
will create or support at leastat least 65,680 jobs. The
will create or support is calculated by the direct direct of political subdi
majority of the increase in employment will
majority of the increase in employment will expenditures, indirect expenditures from subse- subse- property is locate
expenditures, indirect expenditures from gas gas property is
pact impact totaled $162come from oil and oil and gas service companies, with
ded totaled $162 come from gas service companies, with quent business, and induced effects,effects, is
quent business, and induced which which is benefitbenefit the cou
the counties in
gest hio
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ntributors being being
Ocontributors employment doubling between 2013-2014. The basically household spending.
basically household spending. ohioshalecoali,on.com
shale development ac
shale developm
way payments to land personal serviceservice will also grow signifi- signifi-
yments to land personal sector sector will also grow
ded impact impact will grow
lue added will grow cantly, with over 16,000 16,000 jobs created or sup-
cantly, with over jobs created or sup- The Study Team expect expect outputs to total nearly
The Study Team outputs to total nearly Companies that have
Companies tha 3
4. VALUE
ADDED EMPLOYMENT LABOR
INCOME
Total
value
added
is
expected
to
Development
of
the
U=ca
Shale
will
Based
on
employment
projec=ons,
grow
during
the
next
three
years
in
trigger
job
growth
in
four
general
areas: wages
and
benefits
for
workers
will
part
due
to
increased
oil
and
gas
grow
to
$3.3
billion
in
2014,
with
an
•field
development
and
supply
chain,
drilling
and
also
due
to
expansion
in
average
income
of
more
than
other
parts
of
the
economy.
For
•mixed
sources
of
demand $50,000
a
year
per
job.
In
the
example,
demand
will
go
up
for
•professional
services majority
of
growing
industries
we
architectural
and
engi-‐
neering
expect
the
average
•personal
services
services.
In
addi=on,
improved
earn-‐
Mixed
Sources
of
Demand
ings
will
be
spent
on
a
wide
variety
With
the
growth
of
local
service
of
local
goods
and
services,
including
industries
supplying
to
oil
and
gas
(real
estate,
insurance,
employment
for
example
more
retail,
producers,
the
number
of
workers
services,
etc.)
entertainment,
and
healthcare. supported
by
the
U=ca
Shale
devel-‐
opment
is
expected
to
grow
rapidly. 6,279
Jobs
In
2011,
the
value
added
impact
$38,414
Avg.
Income
totaled
$162
million,
with
the
By
2014,
the
economic
impact
of
biggest
contributors
being
leases
development
will
create
or
support
at
income
to
be
significantly
above
this
and
right-‐of-‐way
payments
to
land
least
65,680
jobs.
The
majority
of
the
level.
Expected
average
earnings
are
owners.
By
2014,
value
added
increase
in
employment
will
come
from
highest
in
the
professional
services
impact
will
grow
to
$4.9
billion,
and
oil
and
gas
service
companies,
with
sector,
following
by
those
directly
more
than
75%
of
the
value
added
employment
doubling
between
involved
in
developing
the
impact
will
come
from
drilling
and
2013-‐2014.
The
personal
service
sector
resources.
well
maintenance. will
also
grow
signifi-‐
cantly,
with
over
16,000
jobs
created
or
sup-‐
ported
in
2014.
This
number
is
a
great
indicator
of
the
broad
effect
the
development
of
the
U=ca
Shale
will
have
on
the
en=re
economy.
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5. OUTPUT STATE
AND
LOCAL
TAXES
Output
is
the
economic
The
growth
in
sales
and
employment
as
•Ad
Valorem
Taxes
-‐
(meaning
development
number
most
policy
a
result
of
the
U=ca
Shale
development
“based
on
value”)
are
property
taxes
makers
look
to
for
guidance
as
to
will
lead
to
increases
in
the
amount
of
based
on
the
value
of
hydrocarbon
the
economic
impact
of
a
par=cular
state
and
local
taxes. reserves
in
the
ground.
These
taxes
industry.
It
is
calculated
by
adding
are
assessed
by
the
county
auditor
the
direct
effects
of
expenditures,
There
are
two
forms
of
taxes
that
are
and
the
tax
revenue
is
paid
to
the
indirect
expenditures
from
subse-‐
directly county
taxing
district
poli=cal
quent
business,
and
induced
effects,
subdivision
where
the
oil
and
Professional
Services
which
is
basically
household
spending. Companies
that
have
already
seen
(engineering,
legal,
business
support,
an
increase
in
demand
for
their
etc.)
The
Study
Team
expect
outputs
to
products
and
services
and
land
total
nearly
$10
billion
dollars
per
5,712
Jobs owners
who
have
received
lease
year
by
2014
and
those
numbers
will
$69,177
Avg.
Income bonus
and
royalty
payments
likely
con=nue
in
this
range
in
the
combined
to
contribute
an
years
beyond
the
study. impacted
by
shale
development: addi=onal
$16.6
million
in
taxes
in
•Severance
Taxes
-‐
imposed
by
the
State
2011.
of
Ohio
on
natural
gas
and
oil
produc=on.
Current
rates
are
$0.10/bbl
It
is
projected
that,
by
2014,
and
$0.025/mcf
with
a
cost
recovery
fee
addi=onal
state
and
local
income
of
$0.10/bbl
and
$0.005/mcf. taxes
collected
as
a
result
of
the
U=ca
Shale
development
will
total
gas
property
is
located.
This
tax
will
$433.5
million.
primarily
benefit
the
coun=es
in
eastern
Ohio
where
shale
development
ac=vity
is
greatest.
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6. $50,000 a year per job. In the majority of
numbers will likely continue in this this range in the landgrowing whowho have received lease bonus
numbers will likely continue in are directly
There are two forms of taxes thatrange in the land owners have received lease bonus
owners industries we expect the average
years beyond the study.
years beyond the study. and and royalty payments combined to contribute
royalty payments combined to contribute
an additional $16.6 million in taxes in 2011.
an additional $16.6 million in taxes in 2011.
BY 2014: COLUMNS BULLET LIST + IMAGE
STATE AND LOCAL TAXES
STATE AND LOCAL TAXES
2
Professional Services
Field Development & Supply Chain It isMixed Sourcesthat, by 2014, additional state
It is projected of Demand
projected Services
Personal that, by 2014, additional state
d The The growth in sales and employment as a result
growth in sales and employment as a result and(real estate, insurance, employmentas a result of
and local income taxes repair,as a result of etc.)
local income taxesauto collected services,
(engineering, development will leadlead
legal, business support,to
of the Utica Shale development will
in of the Utica Shale etc.)
(construction, transport, distribution, etc.) to (retail, healthcare, collected etc.)
28,153 the amount of state and and local taxes. 6,279 Jobs development totaltotal $433.5
5,712 Jobs
increases in the amount of state local taxes.
increases in
the Utica Shale development will will $433.5
the Utica Shale
16,066 Jobs
$69,177 Avg. Income
$59,451 Avg. Income million. Avg. Income
million.
$38,414 Avg. Income
$36,018
There are two two forms of taxes that directly
There are forms of taxes that are are directly
Professional Services
Professional Services Personal Services
Personal Services
) (engineering, legal, business support, etc.)etc.)
(engineering, legal, business support, (retail, healthcare, autoauto repair, etc.)
(retail, healthcare, repair, etc.)
5,712 Jobs
5,712 Jobs 16,066 Jobs
16,066 Jobs
$69,177 Avg. Income
$69,177 Avg. Income $36,018 Avg. Income
$36,018 Avg. Income
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7. ABOUT THE STUDY
The Study Team used very conservative projections for all
variables used in the economic development model. Industry
experts and company representatives who were interviewed
by the Study Team gave a range of estimates from very
modest to very optimistic. The Study Team opted for averages
and omitted some possible economic benefits, such as
projections on future spending and engagement of Ohio
businesses in future Utica Shale development.
The Study Team used very conservative projections for all
variables used in the economic development model. Industry
experts and company representatives who were interviewed
by the Study Team gave a range of estimates from very
modest to very optimistic.
The Study Team opted for averages and omitted some possible economic benefits, such as projections on
future spending and engagement of Ohio businesses in future Utica Shale development.
Additionally, the Study Team did not include the “downstream” benefits of Utica Shale development in the
study. “Downstream” impact can be described as the benefit to Ohio as a whole from the oil and gas industry
operating in the state, particularly in the industries that consume oil and gas in their operations, such as oil
refining, fertilizer production, and the chemical and polymer sector.
It should be noted that Ohio’s shale industry is in its early stages and new data is gathered every day. As
more information becomes available, the public will get a more accurate picture of the economic impact of
the development of the Utica Shale. It is also important to point out this study only projects to 2014, and the
Study Team expects the industry to continue to be growing in Ohio. It is likely that the economic impact of
the Utica Shale development in Ohio will still be growing beyond the end date of this study.
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8. ABOUT THE OHIO SHALE COALITION
STUDY TEAM The Ohio Shale Coalition is a broad-based, state-
wide partnership for affordable
Dr. Andrew R. Thomas Executive in Residence
energy and jobs. Its membership includes local
Energy Policy Center
Maxine Goodman Levin College of Urban Affairs at chambers of commerce, businesses, development
Cleveland State University organizations and individuals who seek to
maximize the jobs and economic potential of shale
Dr. Iryna Lendel, Assistant Director, Center for
Economic Development gas and affordable energy production in Ohio.
Maxine Goodman Levin College of Urban Affairs
The major focus of the Ohio Shale Coalition is on
Cleveland State University
the potential of shale energy to drive economic
Dr. Robert Chase development and job growth in every corner of
Chair and Benedum Professor Department of
Ohio. From land payments and pipelines to the
Petroleum Engineering and Geology Marietta College
entire supply chain and supporting infrastructure,
Dr. Douglas Southgate Co-Director, Subsurface the opportunity to create thousands of jobs for
Energy Resource Center
Ohio- ans and achieve prosperity for our state is
Professor, Department of Agricultural, Environmental,
tremendous. At the same time, the Ohio Shale
and Development Economics Ohio State University
Coalition supports sound government poli- cies
Dr. Edward W. Hill Dean, Maxine Goodman Levin
that promote affordable energy, job growth and
College of Urban Affairs, Cleveland State University
protect our state and its citizens.
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