Working Wednesday: Oil and Gas Industry

I attended an interview of Tom Stewart, Executive Vice President of the Ohio Oil and Gas Association (see: ooga.org) by Don DePerro of Columbus Business First. I have tried to stay informed on the subject of the Marcellus/Utica Shale oil and gas drilling and wanted to see what Tom would say. This was a timely interview because Ohio has experienced earthquakes in recent weeks directly tied to the extraction method used with this shale known as "fracking". Youngstown was the city closest to the epicenter with the last earthquake registering at 4.0.

Tom represented his "side of the street" well. He is a registered lobbyist and travels between the state capitol and Washington, D.C. Some facts about Ohio's contribution to the oil and gas industry:
* Ohio's first discovery of oil was in 1814. Ohio became a state in 1803.
* Ohio's first commercial oil well was in 1860. Commercial natural gas came along in 1884.
* 1896 was Ohio's first "boom" year when 24 million barrels of oil were produced.
* The boom and bust cycle has continued through the years, with the long bust stretching from 1986 to just recently with technology improvements to extract oil and gas out of a huge shale formation in mostly eastern Ohio.
* To date, there have been over 268,000 wells drilled in Ohio, ranking the state as one the most active in the nation.

So you see why my interest in this subject. Many small businesses in eastern Ohio and throughout the state can be revitalized with the renewed interest of shale exploration and extraction. Appalachia needs a solid industry that will be around for some years in order to help their economy. The question is "At what price?"

1. Rural Ohio, indeed rural America depends upon wells, not public utilities, for water. This is still under discussion. People are not yet convinced the oil and gas industry can protect their drinking water.

2. Roads in rural America are small, less traveled on, and can't have extra maintenance due to lack of funding. Huge trucks brought in by the drillers haul waste water, dirt, etc. away from the site and are heavy, causing damage to the roads. Who pays for the repairs?

3. Many people from outside the community show up--those who need to talk to land owners about leasing their property; driller companies with their staffs and employees; truck drivers; the noise; etc. etc. The once quiet and calm town now is a hot spot of activity with lots of strangers. I felt Tom was correct in saying that when these companies were drilling in Pennsylvania, there were few people around. But here in Ohio, they will be rubbing up against people and communities more.

4. One of the most controversial components of the operation is the waste water situation. To break up the shale layers where the oil and gas lay between, high pressure water mixed with sand and chemicals are shot down through the ground, break up the rock, and then most of that water is then retrieved. But of course it is not for human consumption nor can't be put back into streams/rivers. It is usually buried in its own deep wells and sealed. This is what is up most on community and environmentalists minds.

How does this apply to you?
1. From the panoramic view, determine what your vision is first and then a mission. There will be many on both sides of the street who will have good facts. But just because something is good, doesn't necessarily mean that it will match your business. The oil and gas exploration may very well work for Ohio, or even at a smaller scale, but someone/group needs to measure it against the vision and mission.

2. Look at all angles of a project even if it does match up. The extraction process costs millions and in some cases, billions of dollars. Stay within your means. Don't stretch so far that you have no profit. Or are you able to attract investors and if you do, who will get control of the project?

3. Will you have community support? Do you need community support to expand your business? Generally, small businesses grow to the next level through contacts and referrals. Trust plays an impact. How risky is this plan of action you are thinking about? Towns will have to list the pluses and minuses of drilling the shale and supporting such a change in their community. This will have to be a town by town decision. For some it will work, others it won't. Same in business.