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Researcher Says Ohio Can Avoid 'Natural Resource Curse'

Oil and gas companies now have permits for more than 250 horizontal wells in Ohio's Utica and Point Pleasant shale regions.  While state officials expect continued increases in oil and gas development, researchers warn of a "natural resources curse" that has plagued other areas where wealth comes suddenly. The latest evidence of the beginnings of an  oil boom in Ohio comes from the small town of Sardis. Its situated along the Ohio River in Monroe County and this month a Pennsylvania Company is distributing $38,000,000 in oil and gas lease payments to a couple  hundred property owners. "Its almost surreal, they're not used to seeing that kind of money." 37 year old Joel Davis helps run a family restaurant in Sardis.  He's among those getting lease payments. Most checks are six figures. "I think there's still a little bit of a shock value right now."  Says Davis. While Davis and some of his neighbors come to terms with their new wealth, the Ohio Department of Natural Resources says similar stories will play out in other Ohio communities that sit atop a formation known as the Utica-Point Pleasant shale.  So far, there are ten horizontally-fractured wells in Ohio that are producing new oil and natural gas resources, but the state has issued 255 permits. ODNR's Mike McCormac says he expects what he calls "slightly rapid" development of Ohio's shale fields. "We're thinking there could be a couple hundred drilled this year and maybe four or five-hundred next year and depending on the results it could increase then again."  Says McCormac. As oil and gas companies  pour more money into the state through lease agreements and drilling activity, Ohio State University researcher Mark Partridge  urges state  leaders to avoid a what he calls the  "natural resources curse" suffered in other regions  where extraction of coal, oil and natural gas lead to a boom-bust economy. "During the boom there's very high prices, there's activity, drilling activity around the world or depending on natural gas say in the United States. A lot of natural gas is pulled out. Markets then get flooded with the natural gas, prices greatly fall then drilling activity greatly  declines so you go through this boom bust, boom bust," Partridge says. Partridge likens the boom to winning the lottery. He says after four or five years many lottery winners fare poorly.  He says the same fate awaits regional economies unless they diversify away from natural  resources during the boom years. "And in terms of  local communities, where it affects them is, they really see the activity during the boom. That's when there's all this construction phase, people coming in and drilling  and then during the bust there's still production going on there's still stuff being pulled out of the ground, but there isn't a lot of people associated with just plain old production. It comes with the drilling activity." In Ohio, the drilling activity is in its early stages. So,Partridge says the state has a chance to avoid a boom-bust economic cycle if it uses the new wealth to develop less cyclical industries and promote education.  Partridge says  state leaders still have time to make decisions on how to use wealth from extraction of underground resources. In the small town of Sardis, Joel Davis says individuals are already making decisions on what to do with their oil and gas lease money. "You see some farmers are buying new tractors. Alot of people are talking to financial advisers on what to do with the money. You hear about other  people paying off their debt so they're finally debt free, paying off their vehicles." Davis says.