Natural gas drilling in Ohio offers several benefits, but enough new jobs to impact the state's economy isn't one of them, a new economic study released this week by Ohio State University says.
"Although we should not expect natural gas to be a big job creator, there are significant benefits to producing natural gas that are getting lost in the hype of job creation," co-authors Mark Partridge and Amanda Weinstein said.
The two largest benefits of opening up shale drilling in Ohio are the environmental benefits of cleaner gas displacing coal for power generation and lower electricity costs benefiting the state's massive manufacturing economy, the authors said.
Manufacturing accounts for 27% of Ohio's $477 billion economy, according to the state government; oil and gas production accounted for 0.4% in 2010.
The 27-page study examining the economic impact of drilling in the Utica and Marcellus shales in the state faults previous industry-funded studies that predict as many as 200,000 new jobs for the state for using impact models long discarded by academic economists for routinely overestimating job creation numbers.
A September study sponsored by the Ohio Oil & Gas Energy Education Program predicted oil and gas investment in Ohio would increase more than 20 times the current $988 million/year and create 205,520 jobs. (OSU professors participated in portions of that study also.)
Partridge and Weinstein said the number of permanent jobs is likely to be a more modest 20,000.
"Previous studies on the economic impacts of natural gas appear to have widely overstated the economic impacts," Partridge and Weinstein wrote. In addition to being funded by industry, "not the best sources of information for economic effects (regardless of the industry)", those studies ignore that oil and gas operations are three times more capital intensive than other industries, resulting in fewer jobs per dollar spent.
Those studies, primarily focused on the Marcellus' impact on Pennsylvania, also have ignored the displacement effects of gas drilling - be it coal miners laid off because power plants burn more gas or tourism workers eliminated because of drilling's effects on the environment - the study said.
Partridge believes Pennsylvania gained 20,000 Marcellus Shale-related development jobs between 2004 and 2010, much fewer than the 100,000 jobs reported in "industry-funded studies."
"We're still standing by those projections," OOGEEP Executive Director Rhonda Reda said Tuesday while on the road between meetings with community and technical colleges in the state. While admitting she was "disappointed" with the competing lower projection, she said the infrastructure and workforce needs identified in her group's study will require efforts such as her Tuesday mission - aligning community college curriculum with the coming needs of the oil and gas industry.
Reda also claimed that the Pennsylvania data on the Marcellus Shale's impact used in the new OSU study was not up to date and missed significant job growth in that state.
Partridge and Weinstein didn't deny that new jobs are created by shale drilling, particularly in remote, rural areas such as northeastern Pennsylvania. But even those new jobs come at a cost, they said, increasing overall local wages and costs for housing and social services, crowding out lower-income workers.
University of Wyoming professor Tim Considine, part of a team of authors that's produced three Pennsylvania/Marcellus-related studies, sharply disagreed with Partridge and Weinstein.
"The core issue is how you define industry-related jobs," Considine said. Considine said Partridge doesn't include producer-paid lease/bonus payments, that the double-counting jobs issue is "hollow," and that collecting data post-well completion is inaccurate.
"Partridge totally missed the mark with the Utica, which is mainly oil, which means the infrastructure needed is a magnitude more than for natural gas," Considine said.
Partridge and Weinstein's paper did account for lease payments and bonuses, but noted their impact is blunted as other studies of Pennsylvania have found that 55% of those dollars are saved or invested out of state by lease holders.
"The true benefits of natural gas need to be highlighted," Partridge and Weinstein wrote, "while putting g the real costs into perspective."
Among the costs discounted by industry studies are the impacts of environmental damage, wear and tear on rural roads, and the potential clean-up costs for major accidents, Partridge and Weinstein said.
