Wednesday, October 19, 2011

The Rust Belt Comes Back to Life: Shale Gas Revolution Could Bring 200,000 Jobs to Ohio

Steubenville, Ohio = "Little Saudi Arabia"
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ABC NEWS -- "Steubenville, Ohio, may not look like a city sitting on a multi-billion dollar industry. Unemployment here reached 15 percent in 2010, and a now-shuttered steel mill -- which was once the lifeline of the Steubenville economy -- is now just a painful reminder of what used to be. While the old way is gone for good -- a new way has already changed lives.

Two huge shale formations -- the Marcellus and Utica -- lay underneath a five-state region. Steubenville sits right on the epicenter of the Marcellus formation, ready to absorb all the new positions needed to open new and repurposed old wells. In a matter of months, rigs will begin to dot the landscape, and current and former residents hope the money will line their pockets.

More than 300 new jobs have already come to the Steubenville area. And as many as 10,000 more are expected in the next three years. If jobs keep growing at this pace, every adult in Steubenville could be working by April. 

No one in Steubenville can remember the last time anyone heard of a job that paid as much as $77,000 a year coming to town, but those jobs are coming. There could be more than 200,000 of them in Ohio in the next few years."

MP: Inspired by the jobs booms in energy-rich states like Ohio and North Dakota, let me propose the "Domestic Energy Jobs Act."  Unlike Obama's "American Jobs Act" that would cost the American economy $450 billion from a mix of tax cuts, tax credits, and government spending to create a questionable and uncertain number of new jobs, the "Domestic Energy Jobs Act" would open up more domestic areas to oil and gas drilling and cost nothing.

Thousands or even millions of guaranteed new jobs would be created throughout the country, bringing full employment to cities like Steubenville, Ohio.  Increased domestic production of oil and gas wouldn't require a penny of taxpayer subsidies or government spending, and instead would actually generate millions of dollars of government revenue from oil taxes and royalties.

In additions to more jobs, another benefit of increased natural gas production is that it would help lower energy costs for American manufacturers, increasing their competitiveness.  The National Association of Manufacturers explains:

"Manufacturers, users of approximately one-third of the energy consumed in the United States, strongly support the use of hydraulic fracturing to access our nation’s abundant supply of natural gas. We use natural gas not only as a source of electricity, but as a feedstock for products such as plastics, fertilizer and pharmaceuticals. Affordable natural gas provides manufacturers with the ability to expand their facilities, increase production and create even more jobs. It is critically important that the states and the federal government not stand in the way of our access to these valuable resources."

HT: Paul Evans 

19 Comments:

At 10/19/2011 7:28 PM, Blogger sethstorm said...

Way too late, as in 30 years too late.

Kind of easy to do that when you've got desperate people thanks to the steel industry closures. Also of note, is that it's more likely that they'll try to stiff the people that want to work there - by providing jobs that are far lower than that figure.

Do not think that Ohio does not know how empty promises of jobs are done, especially in East/SE Ohio. Second, do not think that Ohioans are not up to handling that problem with their own hands - should the company not live up to their promises.

Now if the company is willing to be sincere and pay out $50k+ on average, then there might be some hope. Given how things have played out in Ohio, one would want to have some weaselword-free assurances on paper from any company.

 
At 10/19/2011 8:23 PM, Blogger VangelV said...

In additions to more jobs, another benefit of increased natural gas production is that it would help lower energy costs for American manufacturers, increasing their competitiveness.

If Chesapeake is telling us on conference calls that it needs $7 gas to break even while it is working in better formations how the hell can Ohio drillers turn a profit at $4 gas in lower quality formations?

 
At 10/20/2011 4:35 AM, Blogger rjs said...

Safety First, Fracking Second, The Editors, Scientific American

 
At 10/20/2011 7:42 AM, Blogger The King said...

CSI had a show last season about natural gas being released into the ground water & making the locals ill. In one dramatic scene, a rancher threw a lighted cigarette into a well. It blew-up & killed him. Probably overdramatized, but it raised a concern. So, safety first is the watchword!

 
At 10/20/2011 8:01 AM, Blogger sykes.1 said...

Environmentalists and Democrats are trying to shut down shale gas development in Ohio. Here in Mt. Vernon, the local paper carries scare stories fairly regularly.

 
At 10/20/2011 11:04 AM, Blogger StVIS said...

Oh oh, better look out. Jim Chanos is sounding the bell on shale gas in this presentation (it's part his look on IOCs - slide 11).

The rest of the presentation is pretty interesting, too. It looks at nationalistic ore companies, for-profit universities, and the Chinese economy (he's been laughed at for this, but something tells me if you're building entire empty cities, and you have to spend $500,000 for 100 square meters, something's got to give).

Along with Meridith Whitney, he's been warning about the muni bond crisis well before it's become fashionable.

 
At 10/20/2011 11:43 AM, Blogger Jon said...

It's back to life unless the chemicals used destroy the drinking water. It would be nice for regulatory agencies to have some oversight, but in 2005 Cheney successfully managed to exempt fracking from EPA oversight, whether that means the Safe Water Drinking Act or the Clean Air Act.

It's not only that they might contaminate our water. Now the public is not even allowed to know what is going into the ground. Why? Profits.

Those that have sued because of the destruction done to them and their drinking water ultimately settled out of court and had gag orders imposed on them to prevent the rest of us from knowing what happened.

If it's so safe why do they block the EPA from even seeing what they are doing? Why do they prevent people that have been harmed by it from speaking about it? Profits. That's why occupying Washington is pointless. Occupy Wall St. That's where the power lies.

 
At 10/20/2011 1:59 PM, Blogger Ron H. said...

the King: "CSI had a show last season about natural gas being released into the ground water & making the locals ill. In one dramatic scene, a rancher threw a lighted cigarette into a well. It blew-up & killed him. Probably overdramatized, but it raised a concern. So, safety first is the watchword!"

"Probably" may not be a strong enough word. LOL

Do you rely on CSI for a lot of your understanding of the world around you?

 
At 10/20/2011 2:58 PM, Blogger Tom said...

Fracking is safe. There have been hundreds of thousands of wells fracked during 40 years. There has been only one case of proven contamination from drilling. (There have been cases of surface tanks and piping causing problems.) On Jim Cramer's Mad Money recent special on North Dakota drilling, I saw one oil company executive drink his fracking fluid. On another recent Cramer show an executive said his fracking mix was completely non-toxic.

Greenies have no respect for jobs and prosperity, and little regard for telling the whole truth. The environment movement's record on false alarms is embarrassingly bad. If you bet against every greenie gloom and doom prediction, you'd get rich.

 
At 10/20/2011 3:33 PM, Blogger VangelV said...

CSI had a show last season about natural gas being released into the ground water & making the locals ill. In one dramatic scene, a rancher threw a lighted cigarette into a well. It blew-up & killed him. Probably overdramatized, but it raised a concern. So, safety first is the watchword!

This has been going on for decades because natural gas leaks from source rock into well water. You don't need horizontal wells or fracking to set water on fire.

 
At 10/20/2011 3:39 PM, Blogger VangelV said...

Oh oh, better look out. Jim Chanos is sounding the bell on shale gas in this presentation (it's part his look on IOCs - slide 11).

I think that Chanos got some things wrong on slide 12. The purchase of XTO was all about hiding reserve declines, not a bet on natural gas prices going higher. On this topic he is actually more optimistic than he should be.

 
At 10/20/2011 3:41 PM, Blogger VangelV said...

Greenies have no respect for jobs and prosperity, and little regard for telling the whole truth. The environment movement's record on false alarms is embarrassingly bad. If you bet against every greenie gloom and doom prediction, you'd get rich.

I agree. Truth is not important to the greens. But in the case of shale the problem is not the environmental effects. It is the economics of the production process and the energy return on the energy invested.

 
At 10/20/2011 4:52 PM, Blogger StVIS said...

"I think that Chanos got some things wrong on slide 12. The purchase of XTO was all about hiding reserve declines, not a bet on natural gas prices going higher."

I think it depends on how you interpret it. He mentions shale gas drilling is uneconomical, and for those who've read about it, it's fairly common knowledge XOM purchased XTO to fudge its RRR (which the SEC allows).

XOM's acquisition gives a good surface impression in the short run, at least for the naive crowd, but deeper fundamentals suggest otherwise. Nowhere did I find opinions that natural prices are going to rise substantially in the near future.

 
At 10/20/2011 8:38 PM, Blogger VangelV said...

I think it depends on how you interpret it. He mentions shale gas drilling is uneconomical, and for those who've read about it, it's fairly common knowledge XOM purchased XTO to fudge its RRR (which the SEC allows).

XOM's acquisition gives a good surface impression in the short run, at least for the naive crowd, but deeper fundamentals suggest otherwise. Nowhere did I find opinions that natural prices are going to rise substantially in the near future.


I agree with you entirely. I have made the same argument here a number of times and have been attacked for pointing out the obvious. The entire shale hype reminds me of the internet bubble; a lot of promises but no positive cash flows or profits.

 
At 10/21/2011 2:31 AM, Blogger sethstorm said...


Those that have sued because of the destruction done to them and their drinking water ultimately settled out of court and had gag orders imposed on them to prevent the rest of us from knowing what happened.

Then find a legal way to nullify & prohibit further gag orders.

What could they gain from hiding the truth?

 
At 10/21/2011 7:55 AM, Blogger Jon said...

We believe we should verify claims. Watching Jim Cramer and an executive drink some fluid is not a sufficient test for me. Why exempt fracking from EPA oversight. The people are not even legally allowed to know what's being pumped into their groundwater. I can support fracking if it's safe, but let us see. It's important. Cheney saw to it that we can't ever test their claim. We can only trust a test shown by Jim Cramer. Give me a break.

Find a legal way to nullify the gag order? These are sometimes poor people facing down an army of Exxon lawyers and BP lawyers. Justice cannot be balanced when one side has enormous concentrated wealth and the other doesn't. These people had no choice. Their homes were destroyed, they had enormous health care expenses. Just to survive they had to do what they were told. You can't blame them.

 
At 10/21/2011 6:17 PM, Blogger Ron H. said...

Jon: "Find a legal way to nullify the gag order? These are sometimes poor people facing down an army of Exxon lawyers and BP lawyers. Justice cannot be balanced when one side has enormous concentrated wealth and the other doesn't."

Perhaps you could start a legal defense fund for them on your website. If many people feel as you do, the money should start rolling in.

 
At 10/21/2011 7:09 PM, Blogger The King said...

To Ron.

No I do not rely on CSI. But, occasionally, these popular shows have an impact on broader perceptions.

 
At 10/22/2011 2:37 AM, Blogger Ron H. said...

The King: "No I do not rely on CSI. But, occasionally, these popular shows have an impact on broader perceptions."

Unfortunately, most of them are inaccurate.

 

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