Report: Ohio fracking counties saw declines in jobs, population and income
A decade earlier, the oil and gas industry was touted as being the savior for the Ohio River valley region, which had weathered the crumbling of the steel industry and watched helplessly as the coal industry declines.
The millions of dollars invested in the Marcellus and Utica region were supposed to translate into local wealth in the form of more jobs, higher incomes and more people moving into the region.
However, a new report released recently by an independent think tank based in Johnstown, Pennsylvania, the Ohio River Valley Institute, showed that 22 counties in Ohio, Pennsylvania, and West Virginia responsible for 90% of Appalachia's oil and gas production saw their share of the nation's jobs, personal income and population all decline.
"In many respects, it's the region that should have theoretically benefited the most from development," said Sean O'Leary, a native of Wheeling, West Virginia, and senior researcher of the institute's 27-page report.
In fact, Ohio fared the worst of the three states examined for economic success.
Seven eastern Ohio counties — Belmont, Carroll, Guernsey, Harrison, Jefferson, Monroe and Noble — were the hardest hit amongst those analyzed, experiencing a net job loss of more than 8% and a population loss of more than 3%.
Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, disagreed with the report's conclusions, saying the industry has worked to revive Appalachia.
"There are certainly people who take this as gospel. But all you have to do is look at the unemployment numbers from the state, from when oil and gas started in the shale development and unemployment went down," he said. "We know that people found jobs. We know that people are getting $5,000 to $7,000 an acre to lease their property. What they did with that was create all these family foundations and community foundations so they can reinvest their money."
Unemployment data doesn't tell the full story, O'Leary said.
"The reason the region's unemployment rate dropped during the period wasn't because they were adding jobs. It's because people were moving away and the number looking for jobs was declining," he said.
By comparison, the report found, Pennsylvania’s eight primary gas counties fared better with a net gain of 4.5% jobs, which was slightly less than the statewide average gain of 4.6%. Population declined by 1.4%.
"It's because in the Ohio Valley, in Belmont County and Jefferson County in particular, you have established economies. They may have been struggling in recent years, but they were established. There was a foundation upon which to build," O'Leary said. "And not only did it not happen, but as the numbers show — conditions, frankly, got even worse."
For example, in Belmont County, the report found the county received more than a third of all natural gas investment in Ohio and produced more than a third of the state’s output.
"Also, the oil and gas sector makes up nearly 60% of the county’s economy. Despite those gaudy numbers and a rise in gross domestic product that was over five times the national rate, Belmont County experienced a nearly 7% decline in jobs and 2% decline in population between 2008 and 2019."
There are some reasons why there may have been decline across the region.
While property owners may have received royalties from the oil and gas industry, many of them saved about half the money they received, O'Leary said.
"They're going to leave that money to their kids. They're going to reinvest it in their small farm, which is probably a new roof on the house, a new barn and a new pickup truck," Chadsey said. "We know that John Deere can't keep equipment on their lots. We've heard anecdotal stories. These are not flashy people, they're not going to make flashy investments. There's not a lot of Bentleys rolling around southeast Ohio."
The portion that they did spend was mostly spent outside the region, O'Leary said. There was also the issue of many landowners residing out of state.
"When you looked at it, only about 10 to 12 cents on the dollar actually got spent in the local economy as compared to what was expected or assumed in the economic impact study," O'Leary said.
Couple that with the plummeting prices for natural gas and natural gas liquids. Economic impact studies had assumed the price would never fall below $4.50 per million btu. It fell to less than $2 and "it has not recovered even to a sustained $3 ever since. So right away, you can take almost half of the anticipated revenues off the table," O'Leary said.
The report also cites a failure of policies. Because communities were counting on job creation and more money coming into local economies, oil and gas companies were often given breaks to set up shop, according to the report.
"Many jurisdictions reduced taxes and provided incentives that reduced the amount of revenue they realized," the report states.
O'Leary said he hopes policymakers will use the report to make informed decisions.
"Particularly embrace the shift to renewable resources, clean manufacturing ... because we also happen to be entering a time, with the arrival of the Biden administration, when there is going to be significant support for efforts to transition to renewable energy," he said.