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Ohio State Professor: Shale Will Create 20K Jobs, Not 200K

A report by an economics professor at Ohio State University says shale gas development in eastern Ohio will generate jobs, but only a fraction of the total projected by the industry.

In a 38-page report titled "Economic Value of Shale Natural Gas in Ohio," Mark Partridge and doctoral student Amanda Weinstein estimate that about 20,000 jobs will be directly and indirectly created in Ohio over the next four years as energy companies develop the state's portion of the Marcellus and Utica shales.

"We're not condemning natural gas," Partridge told NGI's Shale Daily on Monday. "It has a lower carbon footprint, it's cheaper and without it we would have to rely much more on coal. But there is a boom-bust cycle to this, and from an economic development standpoint, we need to have long-range planning."

He added that economists "and other independent people who look at our report are going to come up with about the same [jobs] numbers," and referred to a study by Pennsylvania State University released in August that found development in the Marcellus Shale created about 23,000 new jobs in Pennsylvania in 2009 (see Shale Daily, Aug. 30).

According to Partridge, it would be more realistic to project that shale gas development would create about 20,000 jobs in Ohio over the next four years. That projection is one-tenth of the 200,000 jobs forecast by the Ohio Oil & Gas Energy Education Program (OOGEEP), which released its findings in September (see Shale Daily, Sept. 23). The OOGEEP report was conducted by Cleveland-based economic research firm Kleinhenz & Associates Inc. with input from four state universities, including Ohio State.

According to the Partridge report, the job creation figures put forth by the industry were flawed because they failed to take into account the costs of natural gas extraction, coupled with an unrealistic assumption of how much hiring and spending would occur in Ohio.

"Ohio has a long history of energy booms that illustrates that booms too often have few lasting effects," the report said. "Ohioans need to be aware of this cycle if they are to make prudent decisions and try to gain sustainable gains after the boom has ended."

Partridge asserts that it would difficult to assume shale gas development would be any different.

"There's no reason to think that you're not going to have a pretty common cycle," Partridge said. "You're going to have a construction phase where you're putting in the rigs and building some infrastructure. But once the rigs are producing you won't need as many people. So you won't have a lot of permanent effect on the local economy."

Partridge said the OOGEEP study -- as well as a second conducted by Penn State in July, which asserted that Marcellus development supported nearly 140,000 jobs in Pennsylvania in 2010 (see Shale Daily, July 22) -- had inflated job creation estimates because researchers may have double counted some jobs and used unreliable software programs for their computations.

"These studies have multipliers well above what any credible economist would put their name on," Partridge said.

What happened in neighboring Pennsylvania was also a factor in the Partridge report, which found that state had gained about 20,000 direct, indirect and induced jobs in the shale gas industry from 2004 to 2010.

"[That] is a far cry fewer than the [more than] 100,000 jobs reported in industry-funded studies," the Partridge report said. "Given the anticipated size of the boom, Ohio is expected to follow Pennsylvania's experience [with job creation]."

Both before and after taking office nearly one year ago, Gov. John Kasich has been a strong proponent of shale gas development in Ohio (see Shale Daily, Sept. 26; Jan. 4). Kasich spokesman Rob Nichols told the Columbus Dispatch that the disparity between the two job creation reports was of little consequence.

"Whether it's 20,000 jobs or 200,000, that's tens of thousands of families living in a part of the state that's starving for good economic news who would say, 'Sounds good, sign me up,'" Nichols said.

OOGEEP Executive Director Rhonda Reda told NGI's Shale Daily that state economic development officials and the industry were stunned by the Partridge report.

"It caught everybody off guard," Reda said. "In talking with industry as well as the very large players, nobody can figure out where they got this data from. I'm not going to challenge that other than saying we still stand behind the study that we did and the projections we gave.

"We looked at confidentiality agreements and business development plans in the Utica for the next five years. We're still very confident in those numbers. You wouldn't see all of the workforce initiatives out there if we did not believe those numbers were accurate."

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