Ohio fracking forecast for ’15: Storm clouds gather intensity

In a review of the state of drilling for oil and natural gas in the Buckeye State in 2014, The Columbus Dispatch earlier this month likened the industry to a roller coaster thrill ride jolted with ups and downs. On the upside, production and profits soared to new heights. On the down side, a rash of serious accidents and troublesome tremors shook public confidence to new lows.

Unfortunately as 2015 begins, several signs point to a potentially perilous plummet in the fortunes of drilling and related industries in the region, state and nation. It is therefore incumbent upon industry and government leaders at all levels to work diligently to exhaust all options to soften the blows.

First, despite the euphoria consumers are enjoying from the precipitous drop in gasoline prices caused by the global oil glut, those same deep discounts at the service-station pump have produced growing gloom at the oil-field pump. Fracking ironically has become a victim of its own success. Thanks to the new technology, the record levels of oil produced within Ohio and the United States in recent years have played an important role in deflating the cost of oil to less than $50 a barrel.

Considering it costs oil companies $60 to $100 to produce one barrel of oil via fracking, drilling-industry losses are piling up. Just last week, Denver-based Antero Resources, one of the most active drillers in southern Ohio, announced it would lay off 250 workers. On Friday, Halcon Resources, which operates drilling sites in the Mahoning Valley, announced significant cuts in spending for early 2015.

“The continued weakness in crude oil prices, combined with elevated service costs, calls for conservative planning,” Floyd C. Wilson, chairman and chief executive officer of Halcon, explained in making the announcement.

In addition, the ripple effects of those and other cuts are extending to Northeast Ohio and the Mahoning Valley. Leaders of the U.S. Steel Corp. have announced layoffs of 614 workers at its energy industry-dependent steel plant in Lorain. In Youngstown, Vallourec Steel, the $1 billion plant producing Oil Tubular Country Goods and employing 700 workers, is studying its options as well.

“We are looking at oil price trends very cautiously and closely monitoring our customer’s activity,” H lo Øse Rothenb ºhler, a spokeswoman for Vallourec, said late last week.

Any downturn at the sprawling Vallourec complex not only would hurt employees, but also the cash-strapped coffers of the city of Youngstown, already reeling from the expected loss of tens of thousands of income-tax revenue at the soon-to-be downsized Northeast Ohio Correctional Center.

SAFETY CONCERNS MULTIPLY

But the impact of global oil economics on Ohio’s drilling industry is not the only cause for consternation at the start of the year. Safety and security for workers and residents who live in the shadows of drilling sites multiplied in 2014.

Some of those concerns struck close to home in 2014. A report published this month by scientists for the Bulletin of the Seismological Society of America calculated that a total of 77 earthquakes struck Poland Township in early March last year. The Poland study concluded that only two of the seven wells, with segments closest to the fault, were inducing the earthquakes, evidence that state officials could use in mapping new strategies for granting permits. Those earthquakes, coupled with 400 others in Harrison County and several near injection wells in Trumbull County, have intensified calls for stricter safety monitoring.

In addition, the image of fracking was stained even more by a series of accidents that included a June fire caused by fracking chemical runoff that killed thousands of fish in a 5-mile stretch of stream that leads to the Ohio River, the evacuation of more than 400 families due to methane spewed from a well in Jefferson County in October and the death of an electrician in an explosion at a Noble County well pad in November.

“We’re having a little too many accidents now,” Gov. John Kasich told the Ohio Chamber of Commerce recently.

Kasich is correct. That’s why he, the Ohio Department of Natural Resources, private drilling companies and legislators must commit in 2015 to studying the incidents and working to ensure safeguards in place in state law are closely monitored and strengthened if necessary to prevent similar calamities in the future.

To its credit, however, ODNR owns a record of responsible watchdogging. After the Poland Township quakes, for example, the department imposed new permitting requirements on operators statewide. Since then, no detectable quakes near drilling sites have been reported to ODNR.

ODNR and all others with a stake in ensuring a robust drilling industry in Ohio must continue such responsible and proactive oversight as economic and safety challenges confronting hydraulic fracturing continue to mount.

Some of those challenges — namely global geopolitical shake-ups that wreak havoc on the price of oil — lie outside the purview of local and state control. Others, such as those affecting personal safety and environmental purity, can and must be addressed if the promise of this growth industry is to be fully realized in Ohio.