STUDY FORECASTS MAJORINVESTMENT, GROWTH IN JOBS
THE STUDY                                                                                           The Ohio Shale Coaliti...
THE                                                            FINDINGS                                                   ...
VALUE ADDED                             EMPLOYMENT                             EMPLOYMENT contd             Total value ad...
OUTPUT                                  STATE & LOCAL TAXES                    STATE & LOCAL TAXES             Output is t...
$50,000 a year per job. In the majority of   numbers will likely continue in this this range in the landgrowing whowho hav...
ABOUT THE STUDY                                                                      The Study Team used very conservative...
ABOUT THE OHIO SHALE COALITION                            STUDY TEAM                                                      ...
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Ohio Shale Coalition

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Ohio Shale Coalition

  1. 1. STUDY FORECASTS MAJORINVESTMENT, GROWTH IN JOBS
  2. 2. 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  Coali+on 2 of    9 www.ohshalecoali.on.com
  3. 3. 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 in  ntributors being          Ohio  Shale  Coali+on employment doubling between 2013-2014. The3 of    9 basically household spending. www.ohshalecoali.on.com shale development ac
  4. 4. VALUE ADDED EMPLOYMENT EMPLOYMENT contd Total value added is expected to Development of the Utica Shale will This number is a great indicator of grow during the next three years in trigger job growth in four general the broad effect the development of part due to increased oil and gas areas: the Utica Shale will have on the drilling and also due to expansion • Field Development & entire economy. in other parts of the economy. For SupplyChain, example, demand will go up for • Mixed Sources of Demand architectural and engineering • Professional Services LABOR INCOME services. In addition, improved earnings will be spent on a wide • Personal Services With the growth of local service Based on employment projections, variety of local goods and services, industries supplying to oil and gas wages and benefits for workers will including for example more retail, producers, the number of workers grow to $3.3 billion in 2014, with entertainment, and healthcare. supported by the Utica Shale an average income of more than In 2011, the value added impact development is expected to grow $50,000 a year per job. In the totaled $162 million, with the rapidly. majority of growing industries we biggest contributors being leases expect the average income to be By 2014, the economic impact of and right-of-way payments to land significantly above this level. development will create or support owners. By 2014, value added Expected average earnings are at least 65,680 jobs. The majority impact will grow to $4.9 billion, and highest in the professional services of the increase in employment will more than 75% of the value added sector, following by those directly come from oil and gas service impact will come from drilling and involved in developing the companies, with employment well maintenance. resources. doubling between 2013-2014. The personal service sector will also grow significantly, with over 16,000 jobs created or supported in 2014.            Ohio  Shale  Coali+on 4 of    9 www.ohshalecoali.on.com
  5. 5. OUTPUT STATE & LOCAL TAXES STATE & LOCAL TAXES Output is the economic The growth in sales and These taxes are assessed by the development number most policy employment as a result of the Utica county auditor and the tax revenue makers look to for guidance as to Shale development will lead to is paid to the county taxing district the economic impact of a particular increases in the amount of state political subdivision where the oil industry. It is calculated by adding and local taxes. and gas property is located. This the direct effects of expenditures, There are two forms of taxes that tax will primarily benefit the indirect expenditures from are directly impacted by shale counties in eastern Ohio where subsequent business, and induced development: shale development activity is effects, which is basically greatest. household spending. Severance Taxes - imposed by the State of Ohio on natural gas and oil Companies that have already seen The Study Team expect outputs to production. Current rates are $0.10/ an increase in demand for their total nearly $10 billion dollars per bbl and $0.025/mcf with a cost products and services and land year by 2014 and those numbers recovery fee of $0.10/bbl and owners who have received lease will likely continue in this range in $0.005/mcf. bonus and royalty payments the years beyond the study. combined to contribute an Ad Valorem Taxes - (meaning additional $16.6 million in taxes in “based on value”) are property 2011. taxes based on the value of hydrocarbon reserves in the It is projected that, by 2014, ground. additional state and local income taxes collected as a result of the Utica Shale development will total $433.5 million.            Ohio  Shale  Coali+on 5 of    9 www.ohshalecoali.on.com
  6. 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 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  Coali+on 6 of    9 www.ohshalecoali.on.com
  7. 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. 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.            Ohio  Shale  Coali+on 7 of    9 www.ohshalecoali.on.com
  8. 8. 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 local Energy Policy Center chambers of commerce, businesses, development Maxine Goodman Levin College of Urban Affairs organizations and individuals who seek to Cleveland State University 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 Cleveland State University The major focus of the Ohio Shale Coalition is on Dr. Robert Chase the potential of shale energy to drive economic Chair and Benedum Professor, development and job growth in every corner of Department of Petroleum Engineering and Geology Ohio. From land payments and pipelines to the Marietta College entire supply chain and supporting infrastructure, Dr. Douglas Southgate Co-Director, Subsurface Energy Resource Center the opportunity to create thousands of jobs for Professor, Department of Agricultural, Environmental, and Ohio- ans and achieve prosperity for our state is Development Economics tremendous. At the same time, the Ohio Shale The Ohio State University Coalition supports sound government policies that Dr. Edward W. Hill Dean, Maxine Goodman Levin College of Urban Affairs promote affordable energy, job growth and protect Cleveland State University our state and its citizens.            Ohio  Shale  Coali+on 8 of    9 www.ohshalecoali.on.com
  9. 9. THANK YOU

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