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OSU, Cleveland State, Marietta join in shale economic study

August 21, 2011
By PAUL GIANNAMORE - Business editor ( , The Herald-Star

STEUBENVILLE - A study commissioned by a group called the Ohio Shale Coalition is aiming to quantify the potential impact of shale gas and petroleum drilling that state and energy company officials say will be booming within the next few months.

The shale coalition is a broad-based group put together by the Ohio Chamber of Commerce that is aiming to identify potential economic benefits to the state and to use information gathered to educate Ohioans. The group includes representatives of academia, business and energy companies, as well as users of potential downstream byproducts of drilling, such as plastics and chemical companies. The Ohio Shale Coalition was kicked off with an announcement June 13 at the Ohio chamber offices in Columbus. The organization calls itself "a grass-roots education and outreach organization intended to mobilize supports of responsible natural resource development in the Marcellus and Utica shale."

The study, said Douglas Southgate, a professor at Ohio State University in agricultural, environmental and development economics who holds a doctorate in natural resource economics from the University of Wisconsin, is being led by Cleveland State University, in collaboration

with OSU and Marietta College. Southgate said Marietta is the only college with a petroleum engineering department in Ohio, which includes about a fifth of the college's students.

"The broad objective is to assess the economic impacts on the size of the state economy, on employment and tax collections, specifically of shale development. We won't really address the old oil and gas industry but are focusing on this new industry," he said.

Southgate, speaking after a state government meeting with local officials to discuss shale impacts held Tuesday evening at Eastern Gateway Community College, said he's still earning about the industry.

"One thing I have learned is the significance of this Utica deposit," he said, discussing the shale layer that lies deeper than the more-publicized Marcellus shale. Chesapeake Energy officials recently said there could be $15 billion to $20 billion to be realized across Eastern Ohio from the Utica shale.

The unlocking of large shale resources nationally has driven down the price of natural gas, but Southgate said Chesapeake officials spoke at a recent seminar at its headquarters in Oklahoma City about getting involved in downstream uses of the gas and petroleum and byproducts of the wells.

"They particularly want to diversify their product instead of just producing the methane. They want to get into liquids," he said. Southgate said a Chesapeake senior official said particular areas of interest are the Bakken shale in North Dakota and the Utica shale. Southgate said while the Utica shale runs from Western Ontario under Lake Erie and down through Ohio all the way to Kentucky, Chesapeake seems particularly interested in the Eastern Ohio region.

"It has the really attractive resource profile, with the oil and ethane and so forth. What we are seeing here is a convergence of interests between Chesapeake and other parts of the industry and the state," he said.

While Chesapeake officials have been cautious in their discussions, Southgate said he thinks the company already has some good idea of what the production might be, and made its $15 billion to $20 billion announcement a week or so after the seminar he attended.

"We in Ohio have the opportunity to do this right. There is no excuse but to do this with safety utmost in mind and thinking about how to protect the interest of local communities," he said. "That has to be a part of what we are thinking about going forward, not simply jobs."

The study will be released by year's end, though some sources from the shale coalition said preliminary results could be ready as early as September.

Similar studies in Pennsylvania and West Virginia have revealed large revenue streams that are multiplied when spending occurs in communities.

Southgate said while the study will use multipliers, it is a cautious study.

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