Ohio Shale Study

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Ohio Shale Study

  1. 1. STUDY FORECASTS MAJORINVESTMENT, GROWTH IN JOBS OHIOSHALECOALITION.COM 1
  2. 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.            Ohio  Shale  Coali+on 2 of    9 ohioshalecoali,on.com 2
  3. 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 theted 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 $0.10ue 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 oy. 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 ton, 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 localn 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  Shale  Coali+on employment doubling between 2013-2014. The3 of    9  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 growded 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. 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.            Ohio  Shale  Coali+on 4 of    9 ohioshalecoali,on.com 4
  5. 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.            Ohio  Shale  Coali+on 5 of    9 ohioshalecoali,on.com 5
  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 ohioshalecoali,on.com 6
  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. 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 ohioshalecoali,on.com 7
  8. 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.            Ohio  Shale  Coali+on 8 of    9 ohioshalecoali,on.com 8
  9. 9. THANK YOU 9

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