CSU Jobs Report Misses the Mark
When Cleveland State University’s Maxine Levin College of Urban Affairs released their Utica Shale Gas Monitor last week, news outlets were quick to highlight the fact that job growth was not equal to sales tax receipt growth in shale producing counties. What they missed or flat out ignored? That shale regions actually experienced job growth while the non-shale region saw a 1.6% increase in unemployment. In fact, shale jobs were up 177 percent over the past year, as we reported yesterday.
According to a recent IHS study, Utica Shale development has helped contribute to 38,000 jobs since development began a few years ago. These jobs include direct, indirect and induced jobs thanks to the burgeoning industry and are actually on pace with industry estimates. Even with 38,000 jobs attributed to Utica Shale development, the shale development is still very much in its infancy.
While job growth is not trending as close to sales tax receipts as the study would like, the CSU report did explain why there was this inconsistency:
“Employment growth is currently muted by three forces: (1) the pace of midstream, or infrastructure, development, (2) the use of highly specialized workers in the build-out of the exploratory phase of the field’s development, and (3) the early stage of training being delivered to Ohio’s incumbent workforce.” (p. 2)
Interestingly, the industry has been addressing these issues from the beginning. Pipeline infrastructure is being built throughout eastern Ohio in order to transport liquids rich gas to newly built natural gas processing plants to extract the ethane, propane and pentane for added economic benefit.
To wit: A total of six natural gas processing plants are in various stages of planning, construction and operation. Currently two projects are operational, the MarkWest Cadiz complex and the M3 Utica East Ohio project. Both of these have just recently had portions come online, allowing more wells to be put into production.
The construction of just these two projects did, however, provide a significant boost to the construction sector in Ohio. The construction of the UEO facilities created more than 1,700 jobs, with more than a dozen Ohio companies engaged in the project. MarkWest currently has over 3,000 people working in Ohio, many from local labor halls.
Labor organizations like the Western Reserve Building and Construction Trades Council and the Plumbers and Pipefitters Local 396 have both seen tremendous amount of work from the oil and gas industry. During a recent congressional field hearing, Butch Taylor with Local 396 commented on all of the new opportunities Local 396 has received associated with the oil and gas industry:
“One of my members from Local 396 was asking how I am handling the headaches of the demands of the work picture. My reply to him was, ‘I would rather deal with the headaches than the heartaches that I have experienced over the last 2 years when there were no opportunities.’”
While these trades have skilled members that are able to accommodate the oil and gas industry, many Ohioans are still acquiring the necessary skills. Luckily, Ohio has an organization like the Ohio Oil and Gas Energy Education Program (OOGEEP). Over the past two years, OOGEEP has been extensively auditing various educational institutions trying to find the best programs that will train Ohioans to fill these highly skilled positions in the oilfield.
OOGEEP identified 75 different career paths that will be in demand for the industry as it continues to grow in Ohio. In addition, OOGEEP has identified programs at more than 70 different Ohio colleges, universities, career centers and technical schools where Ohioans can find training. Now that these programs have been identified, Ohioans can become trained to fill these positions.
As Ohio moves out of the exploratory phase of development, natural gas liquids get processed and Ohioans receive training, job growth will follow sales tax receipts in a more cohesive manner. But let’s face it: billion dollar natural gas processing plants may skew the sales tax receipts a bit in the shale developing region when tied to job growth in the beginning.
It should be noted the Cleveland State study looked at job numbers that were not seasonally adjusted and included all employment, not just oil and gas related jobs. Using non-seasonally adjusted job numbers in January, February and March means farmers, construction workers, and temporary workers needed during Christmas time were all unemployed. It also didn’t take into account companies that may have gone out of business. The oil and gas industry also slows down during the winter time to focus more on pad development. All of these inputs that should have been taken into account.
The study also used a map of total organic carbon (TOC) in the Utica to decide where the strong, moderate and weak shale producing regions were in the state. The fact of the matter is that such a data point does not provide an accurate picture when discussing oil and gas development. If it did, Wyandotte County would be a new hotbed of Utica activity. As it turns out, there are many factors that need to be considered when determining regional potential of a shale play – leased acreage, infrastructure, and many other factors relating to capital development. Just using a TOC map ignores these critical factors, and it regrettably led the researchers astray.
Data confusion aside, we do know one thing: Utica Shale development is creating jobs in Ohio. The counties of Carroll, Harrison, Noble, Belmont and Guernsey as well as the Mahoning Valley are all seeing a tremendous boost in employment, which is great news for the eastern part of our state. As we continue to move into the production phase of development over the next year or so, opportunities will continue to increase and create good paying jobs for Ohioans.