Seeking to avoid the boom and bust cycle of Ohio oil and gas

Boom, then bust. It’s a scenario often played out in local economies heavily reliant on one type of industry, especially in the energy sector. And it’s an underlying concern for Ohio communities currently experiencing a boom in shale oil and gas development.

But the cycle isn’t inescapable, say community development specialists with Ohio State University Extension. They have received funding to help eastern Ohio communities examine how shale development, also known as fracking, is affecting their economies, environmental conditions and social structures and to create plans for long-term viability.

With $200,000 in funding for a three-year project from the U.S. Department of Commerce’s Economic Development Administration, OSU Extension has joined forces with four regional EDA districts representing 25 eastern Ohio counties.

“We are trying to help the communities in the region position themselves for sustainable economic development that leverages the shale play and prevents the bust that inevitably would happen,” said Nancy Bowen-Ellzey, an OSU Extension field specialist in community economics and one of the project’s principal investigators. “History tells us that energy-related projects are especially vulnerable to the boom-bust cycle. Coal mining is a good example. It will fluctuate tremendously over time. It can help the economy greatly, but during downtimes, there is nothing to cushion the fall.”

Eric Romich, Extension field specialist in energy development who is also helping lead the project, said the team has five core objectives.

 

Conducting an advanced cluster analysis

“We’re using data sets to examine the economy in these counties and are identifying what we’re seeing growth in and what we’re seeing contraction in,” Romich said.

Bowen-Ellzey explained that the researchers are looking at data back to 2010, when shale development-related injection wells started coming into the area. They are tracking changes every quarter using data from Ohio State’s Center for Human Resource Research and are also collecting data on an annual basis from IMPLAN, an economic modeling program.

“We are looking, for example, at whether there’s a jump in employment in this sector or a change in that sector,” Bowen-Ellzey said. “And we’re not just tracking economic changes. We’re also looking at the social and environment aspects — school enrollments, housing starts, water quality.”

 

Assessing industry capacity

“This is the ‘So what?’ to our cluster analysis,” Romich said. “If industries are showing signs of growth, what does that mean? What type of change is this compared to a national average?

“We’ll take the business clusters we’ve identified using NAICS codes (North American Industry Classification System) and will work with our partners to identify what companies in their area fit into those classifications and identify contacts at those companies. We’ll build a database of companies in each region that fit those profiles and then do some business retention and expansion work.”

Specifically, Romich said, the team will examine how dependent companies’ growth is related to the construction aspect of shale development.

“We want to find out if, after the wellheads are built, they will continue to grow or if they will be reducing their staffing. We want to try to avoid the specialization of an economy tied to shale, especially the construction aspect of shale development.”

By assisting communities with business retention and expansion programming, OSU Extension specialists can help companies determine if they can increase their business by marketing their products to other regions or states, such as Illinois, that are just beginning to explore shale development, Romich said.

“But if they can’t do that and the rise in employment is going to go away after the construction phase, we want to know that, too,” he said.

 

Mapping assets

As researchers collect data, staff members at EDA’s district offices will input the information into geographic information system (GIS) mapping to provide a visual representation of an area’s economic activity, population and demographics, educational resources, and infrastructure. “This will help filter the raw information into something digestible by the community,” Romich said.

 

Creating sustainable strategic plans

OSU Extension and its EDA partners will take the information and incorporate it into the EDA district offices’ Comprehensive Economic Development Strategies (CEDS), which are designed to foster collaboration across community lines and are submitted to EDA every five years.

“This is the hidden gem in the project, the glue that holds everything together,” Romich said. “The information we gather as part of this project will give planners the insight to really address shale development in their CEDS plans.”

 

Establishing implementation strategies

Each EDA region involved in the project will use the information to develop strategies to diversify their economies and prepare for any downturn in shale development.

“We’re not just rolling into a community and saying, ‘Here’s what you need to do,’” Romich said. “Maybe one area’s infrastructure is fine but it needs to invest more in micro loans for manufacturing or in workforce training. Maybe another area needs infrastructure improvements to support new industry or training opportunities.

“The core of the idea is to determine how we can maintain long-term employment even when there’s a downturn in a major sector.”

The EDA offices working with the team include the Eastgate Regional Council of Governments based in Youngstown in Mahoning County, the Northeast Ohio Four County Regional Planning and Development Organization based in Akron in Summit County, the Ohio Mid-Eastern Governments Association based in Cambridge in Guernsey County, and the Buckeye Hills-Hocking Valley Regional Development District based in Marietta in Washington County.

 

Piloting the project

In addition to the EDA grant, the team received a related $20,000 grant from the North Central Regional Center for Rural Development to develop educational materials for local leaders in communities experiencing shale development.

Myra Moss, a member of the team and community development educator for OSU Extension, is leading the effort, called Preparing Communities for Shale Development through Sustainable Planning.

“The two projects really dovetail,” Moss said. “This project is specifically designed to identify best practices throughout the Midwest and the rest of the country as to what communities can be doing related to shale development.”

In Ohio, the team is piloting materials with leaders in Guernsey County to identify local assets, challenges and benefits related to shale development and how they fit into the area’s strategic plan, said team member Cindy Bond, also a community development educator for OSU Extension.

“We’ve divided the group into 12 subcommittees focusing on different aspects of the community — housing, tourism, agriculture, infrastructure, social services, all sorts of things. Those groups are responsible for preparing a plan with action steps and a timeline for their specific section, with a goal of developing a vision for what they want their community to look like in 20 or 30 years. We’ll put all the plans together, and we anticipate we’ll find three or four things in common, and that’s what they’ll work on first.”

Moss said the idea is to develop a comprehensive classroom and web-based curriculum that can be used by communities throughout the north-central region of the U.S.

“It’s designed to be a bottom-up process — to get the community engaged and work together to identify what they think are the most important goals,” she said.

Materials are also being piloted by partners in North and South Dakota as part of the grant.

For updates on the project, see OSU Extension’s Energize Ohio website, energizeohio.osu.edu.

 

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