Undoubtedly one of the key drivers of the Ohio Valley’s recovery has been the oil and gas industry. It’s situated on top of two major formations, the Utica Shale and Marcellus Shale, with vast reserves of oil and gas and tremendous potential for development. In the Ohio Valley alone, deposits have been estimated in the billions of barrels. The Utica Shale reserves are mainly in Eastern Ohio while the Marcellus Shale formation is in Ohio, Pennsylvania, and the Northern Panhandle of West Virginia. Although the oil and gas deposits have been known about for some time, it is only now, with improvements in detection and extraction technology, that exploration has become financially viable. Ohio looks set to reap a financial harvest from the black gold over the next 25 years.

Inward investment from energy companies has been flowing into Ohio in recent years. Ohio State geologist Mike McCormac estimates that drilling companies have already spent in the region of $6 billion just on drilling in the state with an additional investment of $14-16 billion on processing plants, pipelines, and leases. Chesapeake Energy, CONSOL Energy and EV Energy Partners are among the companies active in the region. In 2012 corporate investment in the construction of shale processing and pipeline infrastructure in the Wheeling Metropolitan Statistical Area equaled $60.3 million. By 2013 this had multiplied to $1.72 billion.

“Over the past two years the oil and gas industry is beginning to transform the county economically. St. Clairsville and the county are going to see an economy that they haven’t seen before. … It will be a dramatic and permanent change in our lifestyles.”
– Mark Thomas, Belmont County Commissioner

Manufacturing
While the energy sector understandably takes many of the headlines, manufacturing is also an important driver of the State’s economy. Manufacturing jobs across the country are starting to return from overseas, according to US Bank economist Jim Russell. In large part this is due to the substantial rise of Chinese manufacturing costs, particularly wages, which have doubled over the last five years. Whirlpool Corporation and Master Lock have both returned operations to the U.S. and, even Chinese manufacturers are now establishing or expanding operations in this country; auto glass maker Fuyao has invested $360 million in a former GM factory in Dayton, Ohio.

Russell believes that Ohio will benefit from the relocation trend ahead of other states. Jobs in manufacturing grew by 8.3 percent between 2010 and 2013, greater than both Indiana and Kentucky, and far higher than the national average (3.8 percent). Last year 65,200 extra jobs were created in Ohio with manufacturing leading the way (18,400), followed by the leisure industry (18,300) and the business and professional services sector (15,100). Manufacturing makes up around 17 percent of the State’s GDP (13 percent nationally), and the impact has been felt in people’s pockets. Median household incomes have risen to $47,500 to top the pre-recession peak.

“Ohio’s going to be an epicenter of something very good.”
– Jim Russell, US Bank economist

As well as traditional manufacturing, Ohio has also seen the growth of new industries. The National Additive Manufacturing Innovation Institute (NAMII), based in Youngstown, Ohio, was created in 2013 with the support of the Obama Administration. More commonly known as 3D printing, additive manufacturing is a breakthrough technology with tremendous potential for both commercial and consumer manufacturing. The NAMII is a consortium of members, including 40 companies, nine research universities, five community colleges and 11 nonprofit organizations. This sharing of knowledge should produce some exciting developments in the years ahead.

Healthcare
While the oil and gas boom is relatively recent, the healthcare sector has long been a key driver of the Ohio economy. Eighteen percent of the workforce, or 240,000 employees, is employed in the sector in the northeast of the State (national average of 13 percent). Ten of the largest 25 employers in Ohio are hospitals or healthcare systems and it is estimated that not-for-profit hospitals in the Columbus metropolitan area alone contribute more than $5.6 billion annually to the region’s economy. The wider economic impact is estimated at more than $10 billion per year and across the state as a whole, healthcare generates $24.1 billion in economic activity.

In 2014 Ohio expanded Medicaid, producing significant benefits. An additional 451,000 residents were covered last year and research by the Health Policy Institute of Ohio estimates that this expansion will translate into additional economic activity worth $19 billion between 2014 and 2022. On top of this, around 31,872 new jobs will be created State-wide as a result of the increased member base. Ultimately, these additional jobs will create an extra $17.5 billion in the Ohio economy.

Lower cost of living
It is a fact of life that salaries in the Ohio Valley are lower than in places like New York, Connecticut, or California. However, salaries tell only part of the story. To really understand what income means, we also have to take the cost of living into account. In the Buckeye State the cost of living is nearly 23 percent lower than in Massachusetts and 35 percent lower than California. This gives Ohioans much greater purchasing power, or in everyday terms, more bang for their buck. If we adjust average salaries, Ohio is second only to Rhode Island in real earnings power. As an example, a high school teacher earns an adjusted annual salary of $67,500 in Ohio, much higher than in New York ($62,868) or California ($59,814).

Property prices
When the energy boom struck North Dakota, it saw a huge increase in monthly rentals and leases, to such an extent that in some parts these even surpassed those of New York City. At one point Williston became the most expensive place to live in the country with an 800-square-foot, unfurnished one-bedroom apartment costing $2,100 per month to rent. Joint research from Cleveland State University, The Ohio State University and Marietta College has investigated the likely economic activity arising out of development of the Utica Shale formation. Their expectations are that energy will directly lead to the employment of 2,100 in the real estate sector to satisfy demand. Anecdotally, we have seen Ohio realtor Harvey Goodman being selected by one energy company to find housing for 100 to 300 employees in the Wheeling area.

However, expectations are that the housing market in the Ohio Valley will be robust but should avoid bubble inflation. The property market in Northeast Ohio has been categorized as strong by PNC Bank, a Pittsburgh-based bank with branches in northwest Ohio, with good affordability, low mortgage rates and better access to credit than in the past. Home sales, permit approvals, and prices are all rising. Property prices have risen by 3-4 percent in 2013 and 2014, and this trend is expected to continue over the next few years. In addition, single-family permit approvals in Northeast Ohio are predicted to rise by more than 10 percent in 2015, while multifamily permit approvals have increased by an average of 26 percent per year over the last three years.

Spotlight on St. Clairsville
One of those towns enjoying a resurgence is St. Clairsville, and in many ways it is a typical example of what living in Ohio can offer. With a population of 5,184, it is located in Belmont County, in the northern part of the state, between Columbus and Pittsburgh. Recently Ohio magazine named it as one of the top five towns in the state, describing it as a place where “Small-town living intersects with new industry in the Appalachian foothills.” A number of factors make it an attractive place to live.

Residents in St. Clairsville tend to have more money in their pocket than those in other areas. Annual incomes are slightly above the national average ($53,223 v. $53,046), but the cost of living is almost 7 percent lower. Employment levels in St. Clairsville are also high with an unemployment rate of just 4.8 percent (versus the national average of 7.9 percent). Annual incomes for younger workers (aged 25-44) are around $66,771, higher than both the state ($52,988) and the national averages ($57,132). Unsurprisingly, the town’s poverty level is very low – 78.7 percent lower than the national average. There is a broad mix of occupations in the town. Sales and office occupations are particularly common, but there are also teachers, lawyers, management, business, and finance professionals.

Safety is one of St. Clarsville’s most noteworthy features. Total crime is about one-third less than the state average, and violent crimes are particularly rare — 62 percent lower than state figures. Furthermore, St. Clairsville is safer than the vast majority (71.4 percent) of U.S. cities. Part of the reason for this safety is the settled nature of the community. Almost two-thirds (63.6 percent) of homes are owner occupied with around one-quarter (26.1 percent) rented. Another factor may be the quality of education. The high school graduation rate is 91 percent, better than either the state (84.4 per cent) or national averages (81.8 per cent). This, in turn, may be a product of smaller class sizes, where the average student-to-teacher ratio is 15:1, compared to 17:1 in the state and 16:1 nationally.

“St. Clairsville is a great place. It has a small-town atmosphere, low crime rate and good schools.”
– Jack Kemo, local barber.

Ohio has been faced with many challenges in recent years, but with the economy growing and industries new and old picking up steam, the future looks bright for current and future residents.



4 Responses

  1. MC

    Thank you for this article. There are many of us here in the Ohio Valley that are welcoming the Oil and Gas Industry and are very excited for the future here. This really is a HUGE adjustment for the local residents but remember change can be good.

    Residents need to remember some of these companies are investing millions to billions of dollars to build permanent offices right here in the Ohio Valley. That means jobs for our children in the future. Many of our high schools and higher education facilities are embracing this change and are making sure our children are ready for the workforce. This allows our children good paying jobs right here in their backyard. There are also hundreds upon thousands of other ancillary jobs that will come from more people coming into the valley. There will need to increased staffs at grocery stores, restaurants, hotels, gas stations, retail positions, etc.

    I understand change is hard but with increased population also comes tax dollars to help make our schools and towns better. This industry is here to stay and as a resident I am excited!

    Reply
  2. Jay D.

    The relatively few (landowners) who make a significant profit from the new gas and oil boom have/will realize a “dramatic and permanent change in their lifestyles.” Govt tax incomes should realize a flush into their coffers of new money (hopefully). The G&O workers apparently make a nice salary…mainly for the boys driving around the area with the Texas, Louisiana and Oklahoma plates on their big trucks. The scant, lucrative, career opportunities are basically shut for the local folk. If this evolves eventually to be more inclusive of our OV workforce..Great! But really, these few jobs are a small drop in the empty bucket of our job market.
    The trickle down G&O money mostly will perhaps provide some local tax relief (don’t hold your breath) but the new money will mainly support our low paying support-service providers. Excluding in the equation all the possible negative environmental impact (as Mike stated in his post) in all, it’s far better than nothing.

    Reply
  3. Mike Breiding

    “Over the past two years the oil and gas industry is beginning to transform the county economically. St. Clairsville and the county are going to see an economy that they haven’t seen before. … It will be a dramatic and permanent change in our lifestyles.” – Mark Thomas, Belmont County Commissioner

    Is it possible for an economy based on resource extraction to be “permanent”?
    They don’t don’t call it “boom and bust” for nothing.

    What about the still unknown long term environmental impacts and the industrialization of the rural landscape?

    Now there is talk of exporting the very resource our national security depends on – energy. Is this a good energy policy?

    Reply

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