YOUNGSTOWN, Ohio – The Appalachian region of Ohio -- once considered among the poorest in the country -- is today the focal point of investments on a scale rarely witnessed before in the state.
"The 32 counties of Appalachia are really the hotbed and center of oil and gas in Ohio and possibly the country," says Jason Wilson, director of the governor's office of Appalachia. "There's a lot of excitement, a lot of opportunity."
Wilson, along with Lt. Gov. Mary Taylor and JobsOhio president Mark Kvamme, told reporters Tuesday that eastern Ohio is likely to draw, over the next several years, new companies, millions of dollars in new investment, and potentially tens of thousands of new jobs related to oil and gas exploration in the Utica shale.
The state officials were in Youngstown to attend the groundbreaking ceremony for Houston-based Exterran, a company that manufactures equipment for the oil and natural gas industry. Exterran is constructing a $13 million, 65,000-square-foot fabricating plant at the Salt Springs Road business park (READ RELATED STORY).
Wilson says the Exterran project is just one example of what’s happening across the region, from Youngstown to areas further south along the Ohio River such as Marietta. "Marietta has had a history of being an oil and gas producing area," he says. "It's also the home of Marietta College, where a lot of folks who are in this industry went to college, went out into the world and practiced their trade, and are now coming back to Ohio."
Moreover, the region can expect what is likely to be a multi-billion windfall in the form of a massive processing plant that Royal Dutch Shell wants to place somewhere in the Appalachian basin.
The "cracker" plant, so named because it breaks apart, or cracks, the molecular structure of liquid gas such as ethane, is integral to the production and processing of liquids found in the Utica and Marcellus shale, rock formations that lie deep beneath Pennsylvania, Ohio and West Virginia.
Shell has said that it wants to construct the plant – estimated to cost between $2 billion and $3 billion – on a site somewhere in those three states, presumably near the Ohio River.
"If we look at it regionally, wherever it goes, it's going to have a strong impact on us," Wilson says. "We think that Ohio would be a great place to put such a facility because of the Utica shale, which is strategically located in Ohio more than any of these other states," he says. "We think Ohio is well-suited for this opportunity."
Wilson expects a decision to come fairly soon, citing a shareholders meeting Royal Dutch Shell held last week where he believes the project was brought up. "We hope that we'll have some information between now and summer that allows us to move forward."
Ohio, West Virginia and Pennsylvania have each introduced competitive incentive packages, Wilson says. "I know that from the governor, to the lieutenant governor, to Mark Kvamme of JobsOhio, we have put together a very strong package for Shell."
The massive project would employ about 10,000 workers during the construction phase and between 200 and 400 full-time.
Even so, greater economic growth is expected to result from companies such as Exterran, which initially plans on employing 100 at its Youngstown plant, leaving open the potential for expansion there, officials say.
Kvamme, the president and interim chief investment officer of JobsOhio, the private entity Gov. John Kasich created last year to spearhead the state's development initiatives, says Ohio can expect additional companies such Exterran knocking at the door.
That's due in part because of corporate tax reform initiated in 2005, Kvamme says. That year, the state took measures to eliminate the tax it once placed on business inventory and personal property, and replaced it with a corporate activities tax, he says, allowing the Buckeye State to become more business-friendly.
"There's a whole lot happening with the supply chain up here," Kvamme says. "You're going to see it in piping, compressors, all kinds of different areas."
Plus, Ohio has the advantage of learning from the experience of communities in western and northeastern Pennsylvania, where the Marcellus gas rush hit in earnest about four years ago.
"We've learned about things that worked, and things that didn't work," he says.
Kasich recently attended conference in Houston where he met with representatives of the energy supply industry and touted the benefits of expanding their business to Ohio, Kvamme notes. "This is where most of the opportunities are," he says. "This is just the beginning."
The Exterran project is the company's first expansion outside of Texas in 20 years and it selected the Mahoning Valley as the location for its new plant.
Lieutenant governor Taylor says that it's important to engage all stakeholders in projects of this size in order to make them work. "This project was a great example of a partnership, the state working with the local community, working with the company to put together the right package."
Workforce training opportunities, job-creation tax credits and other assistance from the state helped bring the project together, as did local development initiatives, she says.
Yet it's still early in the game, and Kvamme says that it may take another year or two before the state has a firm grasp on the potential and opportunities related to oil and gas exploration.
"We won't really know until 2013 or 2014 on the size of this opportunity," Kvamme clarifies. "But investments from companies like V&M Star and Exterran are good examples that there is definitely something going on."
Copyright 2012 The Business Journal, Youngstown, Ohio.