Drilling for oil and gas in the Utica shale underlying eastern Ohio has led to an increase in plentiful, well-paying jobs in the region, with established operations actively seeking local workers rather than outsiders. While some companies used experienced workers from other states to begin drilling operations, jobs for drivers, welders, diesel mechanics and other trades will be going to local workers in areas where wells have been drilled. Utica shale development has been credited as a factor in Ohio’s unemployment rate dropping from 8.6% in 2011 to 6.5% in November of 2012, and there are projections that development of the Utica will generate more than 140,000 jobs in Ohio by 2020.
As shale gas development continues to fuel economic activity in Ohio, one group of companies already experiencing business growth is the railroad industry. In December 2012, Hannibal Real Estate and Carload Express announced plans to revive a short line in Monroe County, Ohio. Now, more railway companies, such as Norfolk Southern Railway and CSX Transportation, are touting the benefits of Utica gas wells for their short line rails. Not only are trains hauling sand and other aggregates to development sites, but wet gas and oil production presents the opportunity to haul products from the well site to industrial centers. The demand for rail services is expected to increase in 2013 and 2014 as the number of wells drilled in the Utica grows.
Confident in the future of the Utica Shale play, Kansas based Lario Oil & Gas Company has acquired an interest in 25,000 acres situated in the oil-rich northern portion of the Utica/Point Pleasant Formation in eastern Ohio with an un-named industry partner. The announcement comes on the heels of Lario’s recent drilling success in North Dakota and Colorado. In a statement released via its website, Lario detailed that it intends to drill a scientific well in the second quarter of 2013, with horizontal wells to drilled later.
The Ohio Department of Natural Resources (ODNR) reports that during the week of December 30, 2012 through January 5, 2013, it approved 8 new horizontal well drilling permits, 4 of which were issued to Gulfport Energy Corporation for operations in Harrison County, bringing the total up to 63 Utica/Point Pleasant Shale well permits issued for activity in Harrison County. Through January 5, the ODNR has issued 487 horizontal well permits, and 205 horizontal wells were drilled under such permits, 47 of which are in production.
The Ohio Department of Natural Resources (ODNR) reports that during the week of December 23 through December 29, it approved 4 new horizontal well drilling permits regarding the Utica/Point Pleasant Shale, all of which were issued to Mountaineer Keystone, LLC for operations in Portage County. ODNR issued 14 permits for horizontal wells in Portage County in 2012. Through December 29, the ODNR has issued 485 horizontal well permits, and 199 horizontal wells were drilled under such permits, 45 of which are in production.
Triad Hunter LLC, a subsidiary of Magnum Hunter Resources Corp., and Eclipse Resources I LP, of State College, PA, have formed a joint venture in order to develop 1,950 mineral acres in Monroe County, OH. Triad, as operator, will drill a total of 24 wells into the Marcellus and Utica formations over a three year period. Another Magnum subsidiary, Eureka Hunter Pipeline LLC, is expected to carry the production through a midstream pipeline, which is currently under construction.
Houston-based Plains Marketing LP purchased 40-plus acres situated on the outskirts of Toronto, Ohio from FirstEnergy for its shale-related business activity. According to the papers filed in the Jefferson County recorder’s office on December 28, 2012, Plains Marketing LP paid $2.5 million for the property. Sources close to the transaction have indicated that Plains Marketing LP intends to transport wet gases from Utica shale wells to the site, where it will be stored and eventually shipped to refineries on the Gulf Coast.
Toronto Mayor John Geddis described the site, which has been vacant since 1986, as “prime property,” with barge docking facilities and the potential for a rail spur. Mayor Geddis further indicated that the project would likely bring jobs to the area in the near future.
The Ohio Department of Natural Resources (ODNR) reports that during the week of December 16 through December 22, it approved 11 new horizontal well drilling permits regarding the Utica/Point Pleasant Shale, the majority of which were issued for operations in Carroll County, which leads the state in well permits issued for the year (177, through December 22, 2012). Other recently issued permits include one in each of Columbiana and Guernsey Counties, and two in Monroe County. Through December 22, the ODNR has issued 485 horizontal well permits, and 196 horizontal wells were drilled under such permits, 45 of which are in production. Additionally, the rig count for Utica Shale development has reached a total of 30 rigs.
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Royal Dutch Shell plc and Horshead Corp. agreed to a six-month extension for Shell to acquire land for a proposed cracker plant that it is considering building in Beaver County. Shell had a December 31, 2012, deadline to buy the land in Center and Potter Townships, but obtained the extension to allow it more time to assess the project. The Tribune-Review reports that local and state officials remain optimistic that Shell will move forward with the plant. The cracker facility will be used to process ethane produced from the Marcellus and Utica shales, and the plant and associated businesses are projected by some to create up to 8,000 jobs for the local economy.
Hannibal Real Estate of White Plains, NY, and Carload Express of Oakmont, PA, plan to revive a 12 mile rail line serving Hannibal Industrial Park in Monroe County, OH. The partners hope the rail line, known as the Ohio Terminal Railway Co., will attract businesses that are participating in the Utica and Marcellus shale plays. Trains are expected to haul sand, concrete and other materials used in shale development to and from the 122 acre industrial park.
On December 20, 2012, the Buckeye Water District, a municipal sewer and water authority in Columbiana County, Ohio, approved the sale of treated sewage water for use in hydraulic fracturing operations. Under the one-year agreement with Keystone Clearwater Solutions, Keystone will pay a bulk rate of $6.60 per thousand gallons for the first 30 million gallons used. For any additional water, Keystone will pay a descending scale of $12, $10, $8 or $6 per thousand gallons depending on the daily volume used.
On December 20, 2012, Dominion and Caiman Energy announced they are forming a $1.5 billion joint venture to provide midstream services to natural gas producers operating in the Utica shale in Ohio and portions of Pennsylvania. The infrastructure to be developed and the services that will offered include gathering, processing, and fractionation, which are critical to meet the demands of increased production in the Utica. Dominion is also contributing its Natrium Extraction Plant and related facilities that are already under construction in Marshall County, West Virginia.
Encouraging well results have fueled the creation of 38,830 jobs in Ohio since the beginning of 2012, and studies have indicated another 100,000 jobs could be produced by 2020. Labor income from jobs created directly and indirectly from the development of the Utica Shale in Ohio is estimated to reach $9.2 billion in 2020, a 3.8 percent increase to wage earning potential and salaries across the state. According to the Ohio Chamber of Commerce, such an influx in jobs and wage earning potential could provide the resources going forward for Ohio to reinvest in its infrastructure, schools and other areas of need.
BP has announced plans to expand existing infrastructure in northeast Ohio to accommodate increased natural gas production in the area, as well as exploring partnerships with midstream processing plants in Trumbull County. Such plants are already under construction in Mahoning and Columbiana counties. BP has leased more than 84,000 mineral acres in the area and are expected to have invested $100 million in Trubull County drilling by next year.
On November 6, 2012, residents of the city of Mansfield, Ohio voted to approve an environmental bill of rights that will require any company planning to construct an injection well for the disposal of brine from oil and gas production operations to obtain prior approval from the Mansfield city council. The city council decided to put the environmental bill of rights before voters in July 2012 but the bill did not garner much attention until a few weeks before the election when the Ohio Chamber of Commerce, American Petroleum Institute, and Mansfielders for Jobs issued political materials opposing the bill. The bill was approved with 62.9 percent of voters in favor of the bill.
Opponents of the environmental bill of rights have expressed concern that the regulatory scope of the bill may extend beyond injection wells. Section 1.02(H)(2) states that “No permit, license, privilege or charter issued by any State or government agency . . . which would violate the prohibitions of this Charter provision or deprive any City resident(s), of any rights, privileges, or immunities secured by this Charter, the Ohio Constitution, the United States Constitution, or other laws, shall be deemed valid within the City of Mansfield, without the written legislative consent of the City of Mansfield.” However, the bill of rights may not be enforceable and could face a court challenge since the local legislation would be preempted by state law under Ohio Rev. Code 1509.03.