Ohio economy has highs, lows as Super Tuesday approaches

McClatchy NewspapersMarch 2, 2012 

STEUBENVILLE, Ohio — When Ohio Gov. John Kasich broke with tradition last month to deliver his annual state address in Steubenville, it was an unexpected nod to the quiet river city's growing buzz as a new-millennium boomtown.

While the rest of Ohio faces a slow and uncertain economic recovery, particularly in its urban areas, the Steubenville metropolitan area is poised for better days — much better days.

Conservative estimates suggest that the city and surrounding counties sit atop two of the state's largest shale formations. Together they're thought to hold more than 15 trillion cubic feet of natural gas and 5.5 billion barrels of oil deep within the steep foothills and rocky terrain of eastern Ohio.

A mix of water, sand and chemicals injected into horizontally drilled wells at high pressure creates fractures in the shale that allows the extraction of fossil fuels inside it.

This hydraulic fracturing, known as "fracking," has stirred environmental concerns about land and groundwater pollution, but in a once-dying steel town where jobs are scarce, the technique is fueling an economic renaissance and breathing new life into other downtrodden industrial towns throughout the region.

As the four Republican presidential candidates crisscross the state in advance of Ohio's Super Tuesday primary, the slow growth of new jobs is the dominant issue on most voters' minds.

Ohio's manufacturing-rich economy has lost 400,000 jobs over the last four years. Even though 45,000 jobs were created last year, much of the state is limping toward recovery. New figures released Friday show that Ohio's unemployment rate dropped from 7.9 percent in December to 7.7 percent in January, as employers added 32,800 jobs and the number of jobless workers fell by 11,000 to 447,000.

"Have we solved the problem of job loss in Ohio? No. This is a very slow recovery," said George Zeller, a longtime Ohio economic-research analyst.

Eastern Ohio's good fortune hasn't quite caught up with workers in the state's large urban areas, where many continue to struggle for work.

In Dayton, visits to the county job-placement center have declined since the Great Recession, and more companies are moving back to the city, which was hit hard by the auto industry's downturn. General Electric is building a research facility in Dayton, while Caterpillar and Collective Brands Inc. have each built distribution centers that collectively employ roughly 1,000 people.

But that hasn't helped people such as 51-year-old Michael Stiles, who was using his lunch break earlier this week to put out resumes at the job center. A former food-service worker at the University of Dayton, Stiles had exhausted 99 weeks of unemployment insurance benefits before entering a six-month job training program at the St. Vincent de Paul Center, a social services organization. The state contributes $8,000 toward Stiles' salary, and after six months, the agency will decide whether to extend his training.

Despite the uncertainty, Stiles said he was much more optimistic about his job prospects than he was several years ago. Yet he remains cautious about the future.

"I was unemployed for two years and the feeling that I have, earning a paycheck, is just a 180-degree turn," Stiles said. "I feel like the economy is getting better, but it's not going to turn overnight. I think it's going to stay just like it is for a while."

But thanks to the shale deposits, Ohio's now-flush energy industry could help create and support more than 200,000 jobs by 2015, according to industry estimates.

From exploration through development, more than 75 different professions are required to produce a single well. These include geophysics, geology, law and civil, mechanical and electrical engineering.

Nearly half the required positions don't require bachelor's degrees: general laborers or "roustabouts," heavy equipment operators, cement manufacturers, welders, drill operators, skilled technicians and commercial truck drivers.

The importance of that was echoed Thursday during a brief chat between Aubrey McLendon, the chairman and CEO of Chesapeake Energy Corp., and James Baber, an executive vice president at Eastern Gateway Community College in Steubenville, which begins training workers for the shale industry Monday

According to Baber, McClendon told him, "I don't need Harvard grads. I need what you're doing."

Because of the shale industry's dependence on skilled blue-collar workers, many of Ohio's low-skilled unemployed can be trained for new positions that provide career growth and wages to sustain families.

That's what 45-year-old Tim Goddard of nearby Toronto, Ohio, is looking for. After losing his home-remodeling job in January, Goddard will begin training next week at Eastern Gateway for a roustabout position that he hopes will lead to an on-site foreman's job. He, his girlfriend and their children had considered moving to Texas or Florida for better job opportunities, but the expanding shale industry changed their minds.

"Both of our families grew up around here, so if I could find an opportunity to stay in this area, then I was all for that," Goddard said, adding that he's available for work the day after his classes end. "This could be the best thing that happened in this valley in years. The (Mahoning) valley needs something. Everything that had been good has left."

Located on the banks of the Ohio River and bordering West Virginia, the Steubenville area was once a vibrant steel industry hub before the mills began to close in the 1980s. The following years have proved difficult for the entire region, but the area's vast shale formations have changed everything. From December 2010 to December 2011, the Steubenville metro area logged the nation's largest unemployment rate decline, from 12.7 percent to 9.9 percent.

The shale industry's growth is even fueling a rebirth of the area's moribund steel industry. V & M Star, which makes seamless pipe and tubular goods for the oil and gas industry, is building a $650 million plant in nearby Youngstown that will provide 350 skilled-manufacturing jobs. As the industry moves from the leasing and exploration phase into production in 2015, analysts expect chemical and plastic companies to start popping up in the area as well.

As energy companies such as Chesapeake lease millions of acres in the area for oil and gas exploration, landowners are getting up to $5,000 per acre and up to 20 percent royalties for any oil and gas found on their properties.

The lease deals have made instant millionaires of farmers and landowners and generated new revenue streams for local governments.

Robert Hickle, of Toronto, Ohio, recently leased nearly 300 acres to a land-acquisition firm representing Chesapeake. A plumber and pipe fitter, Hickle held out for more money after being offered only $800 an acre two years ago. Other than some shallow natural gas reserves, most residents were unaware of the riches beneath them when energy companies began gobbling up properties some 10 years ago, Hickle said.

"Nobody was aware that there was gas around or knew anything about horizontal drilling. It was all new to us when the gas companies came around 10 years ago wanting to lease property," Hickle said. "We should have been more aware at that time that there was something there, but people were getting money for property they weren't making anything on."

Of his own windfall, Hickle would say only that he'd banked it and the transaction could continue to pay off handsomely for years to come.

Local officials are struggling to keep up with inquiries from businesses, hotels, restaurants, large retailers, commercial-property developers and homebuilders eager to service the growing shale industry.

Ed Looman, the executive director of Progress Alliance, a county economic development organization, said it used to be a struggle to attract development to the area, but not anymore.

"We used to have to beat the bushes, but now the bushes are beating us," he said. "We've had companies just walk in off the street, and that's just unheard-of for a small county."

Looman is looking for 30 homes to rent to energy-company executives by the first of May. Other companies are requesting short- and long-term housing for employees. Even more are looking for land and buildings.

"Someone will ask if we have a 35,000-square-foot building and they want to see it, and within a few days they're ready to move on it," Looman said.

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McClatchy Newspapers 2012

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