Ohio Shale Coalition Executive Summary

STUDY FORECASTSMAJOR INVESTMENT, GROWTH IN JOBS

THE STUDY 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 STUDY 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:

THE STUDY 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. Ohio Shale 2 of 9 www.ohshalecoalition.comCoalition

THE FINDINGS 2011 2012 2013 2014 VALUE ADDED $162,030,036 $878,982,133 $2,980,378,198 $4,857,632,095 EMPLOYMENT 2,275 12,150 40,606 65,680 LABOR INCOME $99,758,497 $571,543,463 $1,994,216,405 $3,298,757,195 OUTPUT $291,574,770 $1,667,574,417 $5,823,268,396 $9,642,544,988 TOTAL STATE & LOCAL TAXES $16,522,865 $73,422,148 $271,539,607 $433,528,922 income to be significantly above this level. impacted by shale de Expected average earnings are highest in theted to grow during professional services sector, following by those Ohio on natural gas a due to increased oil directly involved in developing the resources. rates are $0.10/bbl anue to expansion in With the growth of local service industries recovery fee of $0.10/y. For example, supplying to oil and gas producers, the number OUTPUT itectural and engi- of workers supported by the Utica Shale devel- value”) are property ton, improved earn- opment is expected to grow rapidly. Output is the economic development number of hydrocarbon reserve variety of local most policy makers look to for guidance as to taxes are assessed by ng for example more By 2014, the economic impact of development the economic impact of a particular industry. It the tax revenue is pai ealthcare. will create or support at least 65,680 jobs. The is calculated by adding the direct effects of district political subdi majority of the increase in employment will expenditures, indirect expenditures from subse- gas property is locatepact totaled $162 come from oil and gas service companies, with quent business, and induced effects, which is benefit the counties inntributors being employment doubling between 2013-2014. The basically household spending. shale development ac

THE FINDINGS 2011 2012 2013 2014 VALUE ADDED $162,030,036 $878,982,133 $2,980,378,198 $4,857,632,095 EMPLOYMENT 2,275 12,150 40,606 65,680 LABOR INCOME $99,758,497 $571,543,463 $1,994,216,405 $3,298,757,195 OUTPUT $291,574,770 $1,667,574,417 $5,823,268,396 $9,642,544,988 TOTAL STATE & LOCAL TAXES $16,522,865 $73,422,148 $271,539,607 $433,528,922 income to be significantly above this level. impacted by shale de Expected average earnings are highest in theted to grow during professional services sector, following by those Ohio on natural gas a due to increased oil directly involved in developing the resources. rates are $0.10/bbl anue to expansion in With the growth of local service industries recovery fee of $0.10/y. For example, supplying to oil and gas producers, the number OUTPUT itectural and engi- of workers supported by the Utica Shale devel- value”) are property ton, improved earn- opment is expected to grow rapidly. Output is the economic development number of hydrocarbon reserve variety of local most policy makers look to for guidance as to taxes are assessed by ng for example more By 2014, the economic impact of development the economic impact of a particular industry. It the tax revenue is pai ealthcare. will create or support at least 65,680 jobs. The is calculated by adding the direct effects of district political subdi majority of the increase in employment will expenditures, indirect expenditures from subse- gas property is locatepact totaled $162 Ohio Shale come from oil and gas service companies, with quent business, and induced effects, which is benefit the counties inntributors being employment doubling between 2013-2014. The3 ofbasically household spending. 9 www.ohshalecoalition.com shale development ac Coalition

VALUE ADDED EMPLOYMENTTotal value added is expected Development of the Utica Shaleto grow during the next three will trigger job growth in fouryears in part due to increased general areas:oil and gas drilling and alsodue to expansion in otherparts of the economy. Forexample, demand will go upfor architectural andengineering services. Inaddition, improved earningswill be spent on a wide varietyof local goods and services,including for example moreretail, entertainment, andhealthcare.In 2011, the value addedimpact totaled $162 million,with the biggest contributorsbeing leases and right-of-waypayments to land owners. By2014, value added impact willgrow to $4.9 billion, andmore than 75% of the valueadded impact will come from

VALUE ADDED EMPLOYMENTTotal value added is expected Development of the Utica Shaleto grow during the next three will trigger job growth in fouryears in part due to increased general areas:oil and gas drilling and alsodue to expansion in other • Field Development and Supply Chain,parts of the economy. Forexample, demand will go upfor architectural andengineering services. Inaddition, improved earningswill be spent on a wide varietyof local goods and services,including for example moreretail, entertainment, andhealthcare.In 2011, the value addedimpact totaled $162 million,with the biggest contributorsbeing leases and right-of-waypayments to land owners. By2014, value added impact willgrow to $4.9 billion, andmore than 75% of the valueadded impact will come from

VALUE ADDED EMPLOYMENTTotal value added is expected Development of the Utica Shaleto grow during the next three will trigger job growth in fouryears in part due to increased general areas:oil and gas drilling and alsodue to expansion in other • Field Development and Supply Chain,parts of the economy. For • Mixed Sources of Demandexample, demand will go upfor architectural andengineering services. Inaddition, improved earningswill be spent on a wide varietyof local goods and services,including for example moreretail, entertainment, andhealthcare.In 2011, the value addedimpact totaled $162 million,with the biggest contributorsbeing leases and right-of-waypayments to land owners. By2014, value added impact willgrow to $4.9 billion, andmore than 75% of the valueadded impact will come from

VALUE ADDED EMPLOYMENTTotal value added is expected Development of the Utica Shaleto grow during the next three will trigger job growth in fouryears in part due to increased general areas:oil and gas drilling and alsodue to expansion in other • Field Development and Supply Chain,parts of the economy. For • Mixed Sources of Demandexample, demand will go up • Professional Servicesfor architectural andengineering services. Inaddition, improved earningswill be spent on a wide varietyof local goods and services,including for example moreretail, entertainment, andhealthcare.In 2011, the value addedimpact totaled $162 million,with the biggest contributorsbeing leases and right-of-waypayments to land owners. By2014, value added impact willgrow to $4.9 billion, andmore than 75% of the valueadded impact will come from

VALUE ADDED EMPLOYMENTTotal value added is expected Development of the Utica Shaleto grow during the next three will trigger job growth in fouryears in part due to increased general areas:oil and gas drilling and alsodue to expansion in other • Field Development and Supply Chain,parts of the economy. For • Mixed Sources of Demandexample, demand will go up • Professional Servicesfor architectural and • Personal Servicesengineering services. Inaddition, improved earningswill be spent on a wide varietyof local goods and services,including for example moreretail, entertainment, andhealthcare.In 2011, the value addedimpact totaled $162 million,with the biggest contributorsbeing leases and right-of-waypayments to land owners. By2014, value added impact willgrow to $4.9 billion, andmore than 75% of the valueadded impact will come from

VALUE ADDED EMPLOYMENTTotal value added is expected Development of the Utica Shaleto grow during the next three will trigger job growth in fouryears in part due to increased general areas:oil and gas drilling and alsodue to expansion in other • Field Development and Supply Chain,parts of the economy. For • Mixed Sources of Demandexample, demand will go up • Professional Servicesfor architectural and • Personal Servicesengineering services. In With the growth of local serviceaddition, improved earnings industries supplying to oil andwill be spent on a wide variety gas producers, the number ofof local goods and services, workers supported by the Uticaincluding for example more Shale development is expected toretail, entertainment, and grow rapidly.healthcare.In 2011, the value addedimpact totaled $162 million,with the biggest contributorsbeing leases and right-of-waypayments to land owners. By2014, value added impact willgrow to $4.9 billion, andmore than 75% of the valueadded impact will come from

VALUE ADDED EMPLOYMENT LABOR Total value added is expected Development of the Utica Shale INCOME to grow during the next three will trigger job growth in four years in part due to increased general areas: Based on employment oil and gas drilling and also projections, wages and due to expansion in other • Field Development and Supply Chain, benefits for workers will grow parts of the economy. For • Mixed Sources of Demand to $3.3 billion in 2014, with example, demand will go up • Professional Services an average income of more for architectural and • Personal Services than $50,000 a year per job. engineering services. In With the growth of local service In the majority of growing addition, improved earnings industries supplying to oil and industries we expect the will be spent on a wide variety gas producers, the number of average income to be of local goods and services, workers supported by the Utica significantly above this level. including for example more Shale development is expected to Expected average earnings are retail, entertainment, and grow rapidly. highest in the professional healthcare. services sector, following by By 2014, the economic impact of those directly involved in In 2011, the value added development will create or developing the resources. impact totaled $162 million, support at least 65,680 jobs. The with the biggest contributors majority of the increase in being leases and right-of-way employment will come from oil payments to land owners. By and gas service companies, with 2014, value added impact will employment doubling between grow to $4.9 billion, and 2013-2014. The personal service more than 75% of the value sector will also grow significantly, added impact will come from with over 16,000 jobs created or supported in 2014. This number is a great indicator of the broad effect the development of the Utica Shale will have on the entire economy. Ohio Shale 4 of 9 www.ohshalecoalition.comCoalition

STATE AND LOCAL TAXES

OUTPUT STATE AND LOCAL TAXESOutput is the economic The growth in sales anddevelopment number most employment as a result of thepolicy makers look to for Utica Shale development will leadguidance as to the economic to increases in the amount ofimpact of a particular state and local taxes.industry. It is calculated byadding the direct effects of There are two forms of taxes thatexpenditures, indirect are directly impacted by shaleexpenditures from subsequent development:business, and induced effects,which is basically householdspending.The Study Team expectoutputs to total nearly $10billion dollars per year by2014 and those numbers willlikely continue in this range inthe years beyond the study.

OUTPUT STATE AND LOCAL TAXESOutput is the economic The growth in sales anddevelopment number most employment as a result of thepolicy makers look to for Utica Shale development will leadguidance as to the economic to increases in the amount ofimpact of a particular state and local taxes.industry. It is calculated byadding the direct effects of There are two forms of taxes thatexpenditures, indirect are directly impacted by shaleexpenditures from subsequent development:business, and induced effects,which is basically household • Severance Taxes - imposed by the State of Ohio on natural gasspending. and oil production. Current ratesThe Study Team expect are $0.10/bbl and $0.025/mcfoutputs to total nearly $10 with a cost recovery fee of $0.10/billion dollars per year by bbl and $0.005/mcf.2014 and those numbers willlikely continue in this range inthe years beyond the study.

OUTPUT STATE AND LOCAL TAXES Output is the economic The growth in sales and Companies that have already development number most employment as a result of the seen an increase in demand for policy makers look to for Utica Shale development will lead their products and services and guidance as to the economic to increases in the amount of land owners who have received impact of a particular state and local taxes. lease bonus and royalty payments industry. It is calculated by combined to contribute an adding the direct effects of There are two forms of taxes that additional $16.6 million in taxes expenditures, indirect are directly impacted by shale in 2011. expenditures from subsequent development: business, and induced effects, It is projected that, by 2014, which is basically household • Severance Taxes - imposed by additional state and local income the State of Ohio on natural gas taxes collected as a result of the spending. and oil production. Current rates Utica Shale development will total The Study Team expect are $0.10/bbl and $0.025/mcf $433.5 million. outputs to total nearly $10 with a cost recovery fee of $0.10/ billion dollars per year by bbl and $0.005/mcf. 2014 and those numbers will likely continue in this range in • Ad Valorem Taxes - (meaning “based on value”) are property the years beyond the study. taxes based on the value of hydrocarbon reserves in the ground. These taxes are assessed by the county auditor and the tax revenue is paid to the county taxing district political subdivision where the oil and gas property is located. This tax will primarily beneﬁt the counties in eastern Ohio where shale Ohio Shale 5 of 9 www.ohshalecoalition.comCoalition

$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: STATE AND LOCAL TAXES STATE AND LOCAL TAXES 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 stated 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 willin 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

$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 stated 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 willin 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 Ohio Shale 6 of 9 www.ohshalecoalition.com Coalition

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. 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 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. Ohio Shale 7 of 9 www.ohshalecoalition.comCoalition

ABOUT THE OHIO SHALE COALITIONSTUDY TEAM

ABOUT THE OHIO SHALE COALITIONSTUDY TEAMDr. Andrew R. ThomasExecutive in Residence,Energy Policy CenterMaxine Goodman Levin College of Urban AffairsCleveland State University

ABOUT THE OHIO SHALE COALITIONSTUDY TEAMDr. Andrew R. ThomasExecutive in Residence,Energy Policy CenterMaxine Goodman Levin College of Urban AffairsCleveland State UniversityDr. Iryna LendelAssistant Director, Center for Economic DevelopmentMaxine Goodman Levin College of Urban AffairsCleveland State University

ABOUT THE OHIO SHALE COALITIONSTUDY TEAMDr. Andrew R. ThomasExecutive in Residence,Energy Policy CenterMaxine Goodman Levin College of Urban AffairsCleveland State UniversityDr. Iryna LendelAssistant Director, Center for Economic DevelopmentMaxine Goodman Levin College of Urban AffairsCleveland State UniversityDr. Robert ChaseChair and Benedum Professor,Department of Petroleum Engineering and GeologyMarietta College

ABOUT THE OHIO SHALE COALITIONSTUDY TEAMDr. Andrew R. ThomasExecutive in Residence,Energy Policy CenterMaxine Goodman Levin College of Urban AffairsCleveland State UniversityDr. Iryna LendelAssistant Director, Center for Economic DevelopmentMaxine Goodman Levin College of Urban AffairsCleveland State UniversityDr. Robert ChaseChair and Benedum Professor,Department of Petroleum Engineering and GeologyMarietta CollegeDr. Douglas SouthgateCo-Director, Subsurface Energy Resource CenterProfessor, Department of Agricultural, Environmental,and Development EconomicsThe Ohio State University

ABOUT THE OHIO SHALE COALITION STUDY TEAM The Ohio Shale Coalition is a broad-based, statewide partnership for affordable Dr. Andrew R. Thomas Executive in Residence, energy and jobs. Its membership includes Energy Policy Center local chambers of commerce, businesses, Maxine Goodman Levin College of Urban Affairs Cleveland State University development organizations and individuals Dr. Iryna Lendel who seek to maximize the jobs and Assistant Director, Center for Economic Development economic potential of shale gas and Maxine Goodman Levin College of Urban Affairs Cleveland State University affordable energy production in Ohio. Dr. Robert Chase Chair and Benedum Professor, Department of Petroleum Engineering and Geology Marietta College Dr. Douglas Southgate Co-Director, Subsurface Energy Resource Center Professor, Department of Agricultural, Environmental, and Development Economics The Ohio State University Dr. Edward W. Hill Dean, Maxine Goodman Levin College of Urban Affairs Cleveland State University Ohio Shale 8 of 9 www.ohshalecoalition.comCoalition

ABOUT THE OHIO SHALE COALITION STUDY TEAM The Ohio Shale Coalition is a broad-based, statewide partnership for affordable Dr. Andrew R. Thomas Executive in Residence, energy and jobs. Its membership includes Energy Policy Center local chambers of commerce, businesses, Maxine Goodman Levin College of Urban Affairs Cleveland State University development organizations and individuals Dr. Iryna Lendel who seek to maximize the jobs and Assistant Director, Center for Economic Development economic potential of shale gas and Maxine Goodman Levin College of Urban Affairs Cleveland State University affordable energy production in Ohio. Dr. Robert Chase The major focus of the Ohio Shale Coalition Chair and Benedum Professor, is on the potential of shale energy to drive Department of Petroleum Engineering and Geology Marietta College economic development and job growth in Dr. Douglas Southgate every corner of Ohio. From land payments Co-Director, Subsurface Energy Resource Center and pipelines to the entire supply chain Professor, Department of Agricultural, Environmental, and Development Economics and supporting infrastructure, the The Ohio State University opportunity to create thousands of jobs for Dr. Edward W. Hill Ohio- ans and achieve prosperity for our Dean, Maxine Goodman Levin College of Urban Affairs Cleveland State University state is tremendous. At the same time, the Ohio Shale Coalition supports sound government policies that promote Ohio Shale 8 of 9 www.ohshalecoalition.comCoalition

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Ohio Shale Coalition Executive Summary

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