Fossil Fuel Boom Is One of Several Trends Leading Ohio River Cities Back To Economic Relevance

Gas drilling, fossil fuel boom, upper Ohio River, rust belt
Gas drilling, fossil fuel boom, upper Ohio River, rust belt
After decades of job loss, income erosion, and industrial obsolescence, the cities and states of the Ohio River valley are leading an economic revival. Here the river flows near New Martinsville, West Virginia. Photo/Heather Rousseau

Thomas Jefferson once said, “The Ohio is the most beautiful river on earth. Its current gentle, waters clear, and bosom smooth and unbroken by rocks and rapids, a single instance only excepted.”

Downriver from Louisville, Kentucky, where the 1,000-mile long Ohio River reaches its widest points, and the mirroring waters slip by miles of unbroken hardwood forests, it’s possible to witness some of the very same beauty that inspired Jefferson.

The Ohio is much in my mind of late. A year ago I spent time in Wellsville, Ohio, south of Pittsburgh, where a West Coast developer proposed a multi-billion dollar industrial plant to convert coal to liquid fuels. Last summer, I spent weeks in Owensboro, Kentucky to report on the mid-sized river city’s authentic work to understand and react surprisingly well to the new market trends of the 21st century. I visited Louisville, one of the largest Ohio River cities, where Mayor Greg Fisher is leading a downtown reconstruction program, and the city just joined with Bruce Katz and the Brookings Institution’s peerless metropolitan research and planning group to foster a new economic strategy for the city and the region.

Change in total number of manufacturing jobs in metropolitan areas, 1954-2002. Maroon=greater than 58% loss Red=43%-56% loss  Pink=31%-43.2% loss Yellow=8.7%-29.1% loss United States average: 8.65% loss.

Last month I was in Sardis, Ohio and New Martinsville, West Virginia to report on the massing industrialization by the energy industry to drill the drill the deep shales on the Ohio side of the river for oil and gas. The Pennsylvania side has been a heavy drilling zone for four years, which is one of the reasons that the February unemployment rate in the Pittsburgh metropolitan region was 6.7 percent. That’s nearly two percentage points below the national average.

Cincinnati is redeveloping its historic Over-the-Rhine neighborhood, fostering the development of state of the art marketing and communications enterprises, and is building a streetcar line.

What a change in direction. For two decades at the end of the 20th century, the cities and states of the upper Ohio River were the pitted and marked buckle of the nation’s rust belt. The map at right illustrates the obsolescence and job loss that separated Cleveland, Pittsburgh, Wheeling and the smaller cities along the upper Ohio from the rest of the nation. Downstream, Cincinnati and Louisville also slipped into a generation or more of disinvestment and downtown decay.

That is no longer the case in Pittsburgh, now a showcase of research and innovation; Louisville, with its beautiful historic neighborhoods and great downtown university that make it one of the sweetest places to live in the country, or Cincinnati, a laboratory of social innovation. Further downriver, the soaring commodity markets for farm products are elevating the moods of Indiana and Illinois river cities. Even the wrecked river towns of Ohio and West Virginia, where steel and chemical plants fell victim to globalization, are finding themselves engulfed by an energy boom that is bringing $billions in new investment in energy processing, production, and transport infrastructure.

The Ohio River has few equals as a metaphor for the nation’s condition or spirit. During days of settlement it was the water highway, used by millions of Americans, to migrate into the Midwest and West. During slavery, it was the last physical barrier that brave men and women crossed to freedom. In the mid-20th century, it generated the energy, made the steel, built the cars, and supported the metropolitan regions that supported America’s drive-through economy of suburban convenience. Its cleanup in the 1980s and 1990s heralded the new era of environmental economics, especially those factors associated with metropolitan redevelopment. And its industrial decay was a foreshadowing of the immense transition and costs of keeping pace with the rest of the world, particularly Asia.

History, as viewed by most Americans, is one or two straight story lines in which a central character working with a select group of leaders makes the right choices and everything is closed so neatly. In reality, history is more like a slow-moving weather system in which people and institutions are often blown about like leaves in a storm. The revival of the Ohio River Valley today tells us something important about the people and river communities finding new paths to well-being, and about the country. Perhaps we are doing more as a nation than we give ourselves credit for, and certainly that appears to be the case in this pummeled American river valley, to understand the influence of  events and the need to establish a more dynamic foundation for making and acting on big ideas.

— Keith Schneider

Kentucky BioProcessing, a high-tech producer of plant-based pharmaceuticals, in Owensboro, Kentucky. Photo/Craig Schneider, Power Creative

Along A River of Descent, New Riches in Ohio

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SARDIS, Ohio — Frank Ellis, who is a 51-year-old electrician from this Ohio River Valley town, spent much of his time since high school working upriver at the PPG plant in Natrium, West Virginia. He owns 140 acres and the rights to the oil and gas below them.

Denny Cowley (in pix below) is a 55-year-old sheet metal worker who was raised on a dairy farm near Canton, Ohio, and 16 years ago bought a 47-acre place just outside Sardis, with its mineral rights intact, where he settled into a life of hard work, hunting, and friends. He drives a Ford F-350 pickup, with a big diesel that whines as he shifts gears on the steep and narrow roads that climb to hill summits on both sides of the river that are becoming staging areas for oil and gas drilling and production.

The great American energy boom that is rewriting the narrative on oil and gas production in the United States, raising growing levels of civic angst about safety, and helping to push the country out of the Great Recession, is arriving in force along the Ohio River. Upriver on the Ohio side, in Columbiana, Carroll, Jefferson, and Mahoning counties, drilling has already started and big mineral leasing checks arrived last year, lots of them with six and seven figures.denny-ohio-millionaire

Ellis (with Sharon Davis in pix above) and Cowley have spent the last six months helping to organize mineral owners around Sardis into an 8,000-acre block of mineral rights, more than enough to negotiate a lucrative lease that is, they say, “fair to everyone.” The two men have been spending a good bit of time meeting at Marv’s Place, the welcoming American cuisine cafe near the center of this town of 2,000 that was established over a decade ago by Sharon Davis. The cafe, with a long hardwood counter and big storefront display windows, is in the same two-story, 118-year-old brick building her grandfather once owned. Davis and her family own 168 acres of mineral rights.

Except for the prayers directed at lottery tickets, and the musings about accumulated wealth that occasionally cross the minds of hard working people unaccustomed to having money, neither Ellis, Cowley, nor Davis seriously considered the chance that their savings accounts would one day be filled to the brim. Then came Saturday, when the three joined some 200 other mineral-owning men and women at the Sardis Elementary School. The occasion: signing an oil and gas production lease with Eclipse Resources that instantly made the lessees financially comfortable, and could — if energy production soars — turn most into eventual millionaires.

“People stuck together and we got a good deal,” said Ellis.

Eclipse agreed to pay $4,250 for each acre of minerals leased for the first three years of the agreement. If Eclipse or its successors do not start a well in that time, mineral owners gain $1,000 more per leased acre. Other financial returns include a 20 percent royalty on gas and oil production, and a 20 percent royalty on production of liquid gas condensates like propane and ethane. By one estimate, made by a petroleum engineer who joined the negotiating unit and owns several hundred acres of minerals, the agreement will help ensure that every leased acre will generate $25,000 to $30,000 over the life of hydrocarbon production in the region, which could last 30 years.

“We wanted to bring something good here,” said Cowley. “The more we could get together, and stick together, and pull our acreage together, the more power we had to negotiate. We wanted something that was good for everybody.”

In an era riven by civic discord, the Sardis lease represents a rare feat of community cooperation achieved despite the competing emotions of greed, envy, and uncertainty. The latter three, of course, are generally exploited by gas and oil companies that swoop into energy-rich communities to take advantage of mineral owners who know nothing. I saw it happen here in my home region of Benzie and Manistee counties in northern Michigan, the western edge of the Antrim shale natural gas boom of the 1990s. Mineral rights owners signed five and ten-year leases for $10 an acre and 1/6th royalties that gave the energy companies pretty much the right to do whatever they wanted.

The Sardis mineral owners weren’t as naive. They turned for expert guidance to Jennifer Garrison, a lawyer from Marietta, Matthew Warnock, a lawyer from Columbus, and Bob Chase, a professor of petroleum engineering at Marietta College. The model lease that was signed on Saturday includes protections for the region’s water, safeguards to the land, and substantial returns for valley residents fortunate enough to own their minerals. The lease includes a provision that requires Eclipse to pay 80 percent of the increase in property taxes that could materialize as oil money draws new residents and land values rise. And the lease requires Eclipse to pay the 4.5 percent fee charged by the lawyers and Professor Chase.

Cowley smiles when he explains that provision. “This is going to help a lot of people here,” he said. “I can do improvements on my property. I can do some nice things for my family. It’s a good feeling to bring something that’s good for this community.”

The last point can hardly be overstated. For two generations, few places so darkly illustrated the erosion in American industrial vitality, and the heart sore circumstances of its people, than the upper Ohio River Valley. The 145 miles of river from Pittsburgh to Marietta, strikingly beautiful as it flowed past rounded hills, also drained a landscape of shuttered plants, broken towns, and lives bent by lost jobs and frantic worry. Sociologists and historians episodically descended on one river town or another to study the choices people made to stay, or to go. Journalists also came, treating the valley as a prime specimen in the nation’s laboratory of ruin. In the early 1990s, conditions had become so grave that residents and workers in East Liverpool, upriver from here, campaigned to build just about the only new industrial facility still interested in the upper Ohio — a big toxic waste incinerator constructed near an elementary school.

Last week, for the second time in a year, I spent some time in the upper Ohio River valley and found a much different mood. People were nervous, but not because another plant had announced a closing. They wondered how the new oil and gas wealth would change their lives and speed up towns accustomed to having no pace other than the passing of old people to the grave and young people moving out.

“Things will change now,” said Sharon Davis. “We know that. It could be fantastic for this community. It could also affect one of the really good things about this place. Our quaintness. Nobody likes change too much.”

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— Keith Schneider

Fossil Fuel Boom Shakes Ohio, Spurring Torrent of Investment and Worry Over Water

Little Hocking

Photo © Heather Rousseau/Circle of Blue

WELLSVILLE, OHIO – A torrent of investment in mineral leases, manufacturing plants, pipeline constructiion, and drilling platforms signals what business executives and state energy officials say is the most significant surge in oil and gas development in Ohio in decades.

But the development of the Marcellus and Utica shales, two hydrocarbon-rich rock layers that lie beneath much of eastern Ohio, also is producing fresh public concerns about the consequences to public safety and the state’s waters from disposing of millions of barrels of contaminated oilfield wastewater.

On Friday, the Ohio Department of Natural Resources (ODNR) imposed tough new wastewater disposal regulations on the operators of the state’s 176 deep injection wastewater disposal wells. The new rules, prompted by earthquakes last year that were centered around a year-old injection well in Youngstown, will make Ohio’s Class II deep injection wells among the most stringently monitored and regulated in the nation.

The other features of the new taxonomy of energy development, which span the promise of big job growth and the peril of inadequate oversight, are on display in and around this Ohio River Valley town of 3,800. Plans to build a $US 6 billion coal-to-liquid-fuels plant on a bluff above Wellsville were modified last fall in favor of a $US 3 billon gas-to-liquids (GTL) plant that would use natural gas to create 50,000 barrels (2.1 million gallons) of diesel and naphtha fuel each day. The switch is breathing new life into the project, which has struggled for four years to secure funding.

Total SA, France’s largest oil company, announced just after the start of the year that it had paid $US 2.32 billion to Chesapeake Energy Corp. and EnerVest for 250,500 hectares (619,000 acres) of mineral rights in northeastern Ohio. Natural gas companies are offering landowners in Wellsville and surrounding communities up to $US 5,800 an acre for mineral leases.

Royal Dutch Shell also is scanning the Ohio River Valley for a site to build a multi-billion dollar plant to convert natural gas to ethylene. “We are now assessing various possible longer-term options to use domestically abundant natural gas in new ways, extending its application beyond current industrial and residential uses and as a fuel to make electricity, including a natural-gas-to-liquids facility in the U.S.,” Kayla Macke, media relations coordinator at Shell Oil, wrote in a statement to Circle of Blue.

Chesapeake Energy, by far the largest investor in the Utica and Marcellus shale development in Ohio, announced in November that its production would anchor a 1,980-kilometer (1,230-mile) pipeline from Pennsylvania, West Virginia, and northeastern Ohio to the Gulf Coast. The pipeline would have an initial capacity of 125,000 barrels per day of ethane, the company said in a news release.

The state’s steel industry also is reviving to produce pipes and equipment for oil and gas production, and transport. More than 400 workers in Youngstown are constructing a $US 650 million steel mill for Vallourec & Mannesmann Holdings, Inc. to produce half a million tons annually of seamless steel well tubing used in drilling and in developing natural gas wells. U.S. Steel spent $US 100 million to expand and upgrade its tubular steel mill in Lorain, Ohio, and Timken Company is spending $US 250 million on a similar project at its Canton mill in northeastern Ohio.

Evidence of the rapidly improving mood of this part of the Ohio River Valley is emerging daily. Hotels and motels are full. Winding down one of the country roads outside Wellsville reveals a shiny new Camaro in the driveway of a farmhouse — the only bright spot on a wet winter day.

“That Marcellus shale that’s coming around here, that’s making a lot of people around here instant millionaires,” said Rick Williams, a lifelong Wellsville resident who serves as the town’s zoning commissioner. “People are so glad to see this. I mean, we need something, that’s for sure, and between the Marcellus shale and this gas plant, I think the two will go good together.”

See more from Circle of Blue here.

— Keith Schneider, Codi Yeager

Uptown As Cleveland’s Downtown in New York Times

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The New York Times today published my latest piece on places that are doing many of the right things to prosper and thrive in the 21st century. In this case it’s the collaboration between city officials, developers, institutions, universities, foundations, and bankers in Cleveland to produce the new Uptown District along Euclid Avenue.

In the last couple of months I’ve reported on how Toledo is recruiting Chinese investment capital to redevelop its Maumee River waterfront. And how Owensboro, Kentucky found the nerve to enact an $80 million tax increase to rebuild its downtown.

Cleveland, too, is finding ways to rebuild itself around successful clusters in health care, higher education, fresh food, transit, and entertainment. The daily newspaper last summer reported that $5 billion in new development is under construction or close to getting under way.

Public investment in each of these cities is attracting significant private investment and new jobs. The University Circle area of Cleveland has generated 5,000 new jobs in the last five years.

For those in Congress and state legislatures fixed to the idea that austerity and disinvestment produces new wealth, the lessons produced by these cities and many others provides valuable evidence of the foolishness of that approach.

— Keith Schneider

A Civic Pact: Owensboro’s Next Development Strategy

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The privilege to spend six months studying an American community is rare in journalism. Nevertheless that was the assignment from Citistates last spring. Immerse yourself in Owensboro, Kentucky and emerge with a clear sense of where the community is, and where it might consider going in the 21st century.

Last week, in a series of public events, Citistates described the findings in What’s Done, What’s Next: A Civic Pact. The project found a number of big impediments to Owensboro’s progress — particularly its recent tilt to Tea Party austerity. But that, and several more negative trends — poverty, obesity, rising rates of meth addiction, diminishing median incomes, to name a few —  are a reality check for a city and county that view themselves as distanced from the mainstream, but really aren’t.

Owensboro and Daviess County’s most recent narratives, in fact, are an exception. Local governments are actually leading – understanding the globally competitive context, visualizing the local response, then deciding and managing specific actions.

Working collaboratively with each other, as well as with schools, colleges, business organizations, and non-profits, the city and county have gathered the raw materials of a mission-oriented community environment that allows entrepreneurs and their staffs to flourish. The result, already emerging, has led to more home-grown businesses where effective executives are rewarded with opportunities to move up in the organization instead of out to a different job in another place.

Great communities are distinguished by their ability to instill such value-based incentives, which reward hard work and provide favorable conditions for people to succeed. The United States in the first years of the century has temporarily lost that ability. Owensboro offers invaluable lessons about how to recover that skill. It is steadily empowering its young people and its business owners to be adept in an unpredictable era of transformation.

Owensboro, it turns out, is an example of hope for a sore and confused nation. It is trying something new in order to spark something different. Here are recommendations, several of which were also made in previous Owensboro planning documents, to blow more oxygen into the fire of change that Owensboro has started.

Citistates made some recommendations — see below — that together form a new narrative for this small city and rural county. Chapter Three of A Civic Pact, which includes a more comprehensive discussion on each recommendation, is here.

Thank you to Rodney Berry, Kathy Stroble and Shelly Nichols for all the help in setting up interviews and providing guidance. And thank you to the Hager family and the board of the Public Life Foundation of Owensboro for making the project possible. Thanks also to my Citistates colleagues Curtis Johnson and Neal Peirce, who edited the manuscript and provided expert feedback.

These suggestions are not all-inclusive. They don’t, for instance, deal with the medically uninsured, or alterations in Medicare and Medicaid that are likely in the next generation, and will affect Owensboro’s growing population of seniors, and the region’s less economically fortunate.

These recommendations, rather, focus on what Owensboro’s residents and leaders can achieve over the next generation in what Mayor Ron Payne calls “this little city on the move.”

1. Undertake a New Community Strategic Plan – A new strategic planning initiative is needed to propel the city and county to the next stage of its progress as a center of opportunity.

2. Cultivate and Recruit Women to Serve as Elected and Appointed Leaders – Almost 52 percent of Daviess County’s adults are women and that percentage is not reflected in elected positions in the city or county governments.

3. Strengthen Internal and External Marketing and Communications – More focused outreach is vital to show citizens why a publicly-funded program of education, downtown development, and innovation makes sense in strengthening the economy over the next generation.

4.  Establish a Joint City-County Office of the Ombudsman — Thin out the cross-cutting permitting process while also providing the fairness and access that citizens expect.

5. Establish and Fund the Owensboro Promise – Provide every graduate of the six Owensboro, Daviess County, and Catholic high schools scholarships for tuition and fees to attend a two- or four-year college in or outside Kentucky.

6. Establish the Owensboro Top 20 Young Achievers Program – Provide the most talented young adults the chance to be part of Owensboro’s future and to stay connected in an elite mission-oriented group.

7. Foster Local Foods and Develop More Recreational Infrastructure – Healthier cities note their success as a marketing advantage in promotional campaigns.

8. Generate More Diversity in Civic Life and Improve Business – Recruit investment and development capital from Asia, and especially from China.

9. Promote New and Cleaner Energy Sources – Owensboro’s city-owned utility should serve as an innovator in carbon reduction technology, conservation, efficiency, solar development and other cutting edge thinking about energy production and consumption.

10. Strengthen Transportation Hubs, Build a Streetcar Line – Owensboro’s opportunities over the next two decades are significant in air, ground, and river transportation.

11. Put a Brake On Sprawl – Replace the love affair with big surface parking lots with a marriage to homes and businesses, recreation, and education infrastructure that is reachable on foot, on a bike, public transit, or a very short car ride.

12. Promote Events and Bluegrass Music – Design and develop a new music center that houses the International Bluegrass Music Museum.

— Keith Schneider

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