Fracking activity continues despite end of boom

The fracking frenzy in Eastern Ohio has come and gone, and it might never be back again in quite the same way.

Spurred by high energy prices, improvements in drilling technology and an abundance of gas beneath Ohio, oil and gas companies began rushing to drill in Ohio in 2011. They brought with them an unprecedented surge in economic optimism: high-paying jobs, windfalls for land owners and new business for a range of establishments in an economically challenged region.

But after a crash in fuel prices in late 2014 and early 2015 slowed new drilling, and the economic benefits that come with it, the outlook in the shale region has shifted. While shale fracking is expected to provide an economic boost to eastern Ohio for years to come, a more measured mindset has taken hold for both drillers and communities as energy prices have begun to tick up.

"When this thing came on, it hit really hard and fast to the point where it was almost unmanageable," said John Dunning, owner of Dunning Motor Sales in Cambridge in Guernsey County. "It has started to come back again, but it feels as though it's going to be a little more of an orderly transition."

Accustomed to striving for 5 percent year-over-year growth in the auto business, Dunning Motor Sales saw annual sales growth approaching 30 percent during the boom times of 2012 through 2014, he said.

Indeed, when the oil and gas industry set its sights on Ohio, it moved quickly — and the economic benefits rushed in. In 2011, just 25 shale wells were drilled in the state, but that number jumped to 198 in 2012, 389 in 2013 and 521 wells drilled in 2014, according to data from the Ohio Department of Natural Resources. Activity dipped slightly in 2015 to 451 new wells. Ohio has seen 192 new shale wells drilled in 2016 as of Aug. 25. The vast majority of Ohio's fracking wells are located in the eastern and southern parts of the state.

As drilling increased, so did Ohio jobs serving the industry. Those jobs reached 16,463 at the end of March 2015, more than double the 7,426 industry jobs at the end of 2011, according to data from the Ohio Department of Job and Family Services. But those numbers dropped 26 percent by the end of 2015 as the industry slowed amid crude oil prices that dropped from $113.39 a barrel in April 2011 to $26.19 a barrel in February 2016, according to data from the U.S. Energy Information Administration. Crude oil was hovering at about $47 a barrel on Aug. 25.

"The industry is all about ebbs and flows,"  said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. "We had a high time in 2011 through 2014."

Business was so strong it was hard not to take a very rosy long-term economic outlook, said Norm Blanchard, economic development director for the Cambridge-Guernsey County Improvement Corp. Nearly everyone in the gas business was saying the frenetic pace of business would continue for many years, he said.

"It was going to be a 20-year boom," he said. "We had a guy come and talk to the Kiwanis Club and he made the comment that the gas industry would be drilling 1,000 wells a year for 20 years."

But with a crash in oil prices came a steep decline in drilling — and a subsequent drop in both business and confidence that a boom could go on for decades, he said.

"In the process of this happening, we built four hotels and upgraded two or three others," he said. "Many were operating above 90 percent capacity, but now that has dropped to the 50 percent range."

Gas production in Ohio reached a record 954.7 billion cubic feet in 2015, according to data from the Ohio Department of Natural Resources. But keeping gas flowing from existing wells takes few employees, Blanchard said. The biggest economic impact comes with the drilling of new wells, an activity that requires the greatest level of workers, equipment and service providers, he said. During the boom times, hotels were brimming, pole barns on farms were being rented out to drillers and local hardware stores were doing a brisk business, he said.

"A guy built a huge Buffalo Wild Wings down here and, for a while, it was jammed," he said. "A lot of the investing here was based on the number of people coming in and out of the community."

The pace of the fracking business in eastern Ohio hinges on energy prices, said Bennett, of the Ohio Oil and Gas Association. As energy prices go back up, drilling activity will increase as well — but activity is likely to be more restrained than the last time prices rose, he said.

"It's a more deliberative industry," Bennett said. "It's going to be a different type of development when it comes back."

Many companies that didn't go out of business when prices dropped are still hobbled and will approach growth with more of an eye toward efficiency, he said.

The threat of new taxes and regulations could also slow the growth of shale fracking in eastern Ohio, he said.

"You have to do everything you can to create an environment that fosters growth," Bennett said. "Right now is the wrong time."

Ohio Gov. John Kasich has for years pushed for more taxes on Ohio's oil and gas drilling industry.

"The governor has been committed to modernizing Ohio's 40-year-old oil and gas drilling taxes,"  said John Charlton, communications director for the Ohio Office of Budget and Management in a written statement. "Tax reform will undoubtedly be part of Ohio's next operating budget that will be introduced in late January."

Despite the slowdown, economic benefits from the drilling surge abound in eastern Ohio. Houston-based Halliburton, which services the fracking industry, moved a facility from Pennsylvania to Zanesville in 2012 as Ohio's shale boom began. The company currently employs more than 360 workers who make an average of $80,000 per year at the site, said Matt Abbott, executive director of the Zanesville-Muskingum County Port Authority, which owns the business park where Halliburton is located.

"They are actively hiring at this point," he said.

But with only three wells in Muskingum County, much of the economic boost from the shale gas business comes to workers and businesses that provide services to the industry in the areas that have more wells, Abbot said.

Counties further to the east and south have a much more direct connection because they have more wells. Guernsey County has 191 wells, according to data from the Ohio Department of Natural Resources.

While the industry will have its ups and downs, Cambridge's Dunning said it is there to stay in eastern Ohio.

"It is probably the best thing that has happened in the last 100 years," he said. "It's going to be the backbone of our economy over the next 20 years in some form or fashion."