The burgeoning shale industry is fueling growth for law firms, chemical companies, engineers, manufacturers and other sectors.
When Matt Warnock joined Bricker & Eckler six years ago, the law firm’s business in the energy sector was scarce. He was the first and only attorney in that practice in the Columbus office.
Three years later, his boss advised that because of Utica shale exploration, they should expect increasing activity. He was right, and today it’s practically all Warnock works on. Bricker has expanded its local energy practice to eight employees and a paralegal in an effort to keep up with demand from those looking to sell, buy or secure mineral rights in eastern and northeastern Ohio, where Utica shale is most prevalent.
“It is taking up more than 100 percent of my time,” Warnock says. “It has been a great business opportunity and a great learning experience. When this started, there were very few true oil and gas attorneys,” he says, “but today a lot of lawyers have become oil and gas lawyers.”
Bricker & Eckler is not alone. Businesses across Central Ohio are reaping economic rewards from the exploration of Utica and Marcellus shale in Ohio and Pennsylvania. From law firms to public relations agencies to manufacturers to engineering companies, there has been a noticeable impact from the shale boom on Ohio’s economic landscape.
“We did not plan this,” says David Caprio, president at Geotechnical Consultants of Westerville, which tests soil to ensure the ground is stable and strong enough to support drilling structures and also provides solutions to make that happen.
Shale commerce has allowed Geotechnical to hire additional engineers and field staff and to purchase equipment, including an additional drilling rig, which it uses to train staff. Caprio says the business is subcontracting out some of its other jobs to accommodate increased demand from shale activity.
“Not only has there been this influx of work, it has come at a time when other parts of our business are starting to come back,” says Caprio. Geotechnical is itself a subcontractor for larger engineering firms whose clients include the big energy interests that buy land and drill through shale to reach oil and natural gas deposits.
The company’s experience illustrates how the trickle-down effects of shale can stimulate activity across the supply chain, not only for the oil and gas industry but others as well.
Shale-related oil and natural gas development is expected to have a significant impact on the state and national economies. Proponents say extracting oil, natural gas and other liquid gases from shale rock formations could create tens of thousands of jobs in areas where shale is prevalent.
In a December report, IHS Global Insight said 39,000 Ohio jobs were linked to shale exploration last year, with the total value of goods and services provided exceeding $4 billion. The information and analytics company estimated the number of jobs will reach 144,000 by the end of the decade and the value of services will more than triple to $18 billion by 2025.
A year earlier, accounting firm PricewaterhouseCoopers concluded that the manufacturing and chemical sectors alone would see more than 1 million new shale-related jobs by 2025. The report surmised that if an abundance of natural gas is produced and stored domestically, it would drive down energy costs for producers and make U.S. business more competitive globally.
‘Ready for Expansion’
Some of that rosy outlook is already coming to fruition. “We are already seeing a lot of revitalization in the chemical industry,” says Jack Pounds, president of the Ohio Chemistry Technology Council. The industry buys a lot of electricity and uses a lot of raw materials. “It’s a global marketplace and fiercely competitive. With the development of shale, it will strengthen our competitiveness,” Pounds says.
The real value for the trade group’s members will come in the liquids extracted from shale. Ohio’s chemical industry accounts for more than 42,000 jobs and $25 million worth of products sold annually.
In recent years, high prices for energy and raw materials plus a struggling economy sapped capital investment plans for chemical manufacturing companies. Shale and natural gas reserves are giving the industry reason for optimism and to start thinking longer term, Pounds says. “This is the best time I have ever seen for this industry in the 30-plus years I’ve been in it,” he says. “They are lean and mean and ready for expansion.”
Tom Stewart, executive vice president at the Ohio Oil and Gas Association, says the jobs IHS cited encompass not only workers in the oil and gas industry itself but also at professional services firms that are finding opportunities. “And there is a slew of them,” he says.
Drilling for oil and natural gas traditionally has been a cyclical part of the economy, but Stewart says shale play, as the industry has termed it, is transformational because the technology allows for horizontal drilling that can extract and retain more raw materials from the rock. Workers start by drilling downward, then turn the drill at a 90-degree angle and continue horizontally. A water, sand and chemical mixture is then pumped in at high pressure to widen cracks in the rock; the process is referred to as fracking, short for hydraulic fracturing.
Ohio manufacturers are finding themselves lured into shale play because of its promise or because the products they make fit well with the industry. For instance, Ariel Corp. in Mount Vernon makes reciprocating compressors that are used in a variety of production facilities, including gas transmission pipelines, petrochemical plants and refineries. Ariel has said the nationwide shale boom has kept the company’s 1,200 employees busy.
Closer to home, Worthington Industries Inc. is positioning itself for greater visibility in energy markets as two acquisitions in the last six months have launched the company into shale in a big way. The company’s pressure cylinder segment acquired Palmer Manufacturing & Tank of Kansas, which makes fiberglass tanks and processing equipment for the oil and gas industry. Palmer has been active in the Bakken shale formation in North Dakota and in Texas.
Earlier, Worthington bought Westerman Cos. of Bremen, Ohio, whose tanks and pressure vessels are prevalent in the oil and gas, nuclear and marine markets. Its customer base is active in the Utica and Marcellus shale plays, and 30 initial jobs have been added to a Westerman plant in Wooster to meet demand.
“We clearly are on the march in the energy sector,” says Cathy Lyttle, Worthington Industries’ vice president of corporate communications and investor relations.
The industry is evolving for sure, and so is the landscape for businesses working within it. Bricker’s Warnock says the work is moving into more litigation over mineral rights, property title and pipeline right-of-way issues.
Columbus attorney Michael Braunstein agrees. His firm, Goldman & Braunstein, works in eminent domain issues and started getting calls about Marcellus shale two or three years ago. Specifically, attorneys were hearing about the Enterprise Pipeline designed to transport liquid ethane extracted from shale formations in Ohio, Pennsylvania and West Virginia to the Texas Gulf Coast for use in producing consumer plastics. The 1,200-mile pipeline will careen through 11 Ohio counties, including Fairfield, Licking and Pickaway in Central Ohio. “I was very surprised,” Braunstein says. “Who would’ve predicted Ohio would be the center of an oil boom?”
But the calls kept coming. Today, his firm represents landowners whose properties line the pipeline’s track. Enterprise Product Partners is asserting the pipeline is a utility and therefore eminent domain can be used to acquire the acreage it needs from landowners. But Braunstein disagrees, saying unlike a utility, where end users include the general public, the ethane is dedicated only to private-sector enterprises.
To communicate with landowners (and potential clients) who might be affected by the pipeline, the law firm retained Columbus-based Fleisher Communications Group to craft a strategic outreach plan. Founder Marcy Fleisher says the company designed a website with questions and answers about the pipeline and spearheaded public meetings across the affected areas. “We really implemented a full-scale strategy,” she says. “More important is that [the firm] got a real return on their investment because of the additional calls they received. … And yes, it was good for our business as well.”
Braunstein won’t talk dollars, but he estimates pipeline issues have comprised 20 percent of the firm’s total revenue in each of the last three years. “It’s been dramatic, especially considering that before then it was zero,” he says.
Then there are those like Tom Heiby, the CEO of FrazierHeiby, who says the marketing and public relations agency “took a leap of faith” when it jumped into shale play by representing the Ohio Oil and Gas Association. Heiby says he attended an agribusiness seminar in February 2010 where one of the speakers discussed Utica shale, which was the first time he’d heard of it. “I had no idea what they were talking about,” he says.
Heiby reached out to Stewart, asked him for 30 minutes to discuss the issue, got 90 minutes, and walked away very interested and with a contract to represent the organization. “My mind was spinning and I was blown away,” Heiby says.
FrazierHeiby has since added staff and its energy sector now makes up a third of its billables. “It has been important to us, there is no doubt about that,” Heiby says.
Leaders at Dublin engineering consulting firm Hull & Associates Inc. share Heiby’s sentiment. Hull CEO Craig Kasper says 2012 revenue grew by 20 percent, and much of that can be attributed to shale. It’s been so busy that the firm added shale consulting to the list of sectors in which it works (other industries include waste management, environmental, brownfield reclamation and alternative energy).
The firm entered the shale industry in 2009 after buying a Pittsburgh consulting firm that worked with companies drilling Marcellus shale in the Keystone State. Kasper says shale play is the biggest development he has witnessed in his three decades as an engineer.
“It has been the largest investment in the shortest amount of time,” Kasper says. “It’s getting more difficult to find engineers and scientists; it’s getting more competitive. I am fascinated by the whole industry.”
Craig Lovelace is a freelance writer.