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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Is Ohio on the Cusp of an Unprecedented Economic Boom?



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In recent decades, I wouldn’t say that the word “Ohio” has become a watchword for spectacular prosperity and technological innovation. Rather, the Buckeye State is generally seen as a Rust Belt state very much in decline, with cities that had once hummed with factories and that have now become economic backwaters. Mark Mills, co-author of The Bottomless Well, an excellent book on energy, argues that Ohio’s reputation is about to change thanks to the development of the Utica Shale formation:

Early evidence of [Ohio's] bright future is already blossoming on the shores of the Mahoning River in Youngstown, Ohio, where global steelmaker Vallourec & Mannesmann is building a steel mill.  Yes, in America.  In Ohio.  Some 400 jobs are in play building the ten-story building, and almost as many will be permanently employed.  The $650 million project is injecting real jobs, real opportunity, and real hope – and a window on the future.

Oh, yes.  The plant will build steel tubes for the energy market.  The oil and gas market.  The revenue gusher is unleashed by the constellation of advanced technologies that are collectively known as “fracking.”  Youngstown, in fact most of Ohio, sits above the massive geophysical Marcellus and Utica shale structures which are richly endowed with billions of barrels of liquid and gaseous hydrocarbons.

Fracking makes possible practical access to all that black gold.  But then, by now, a lot of people have heard about the ostensible “evils” of fracking – by any industrial standards, a safe process.  What this technology permits in immediate and long-term social terms is epitomized in Ohio.  The implications are much broader and deeper than just one steel mill in Youngstown – as exciting as that is in these days of shutdowns.

Mills goes on to describe the technological innovations that have made the exploitation of shale gas possible, and he offers a prediction as to what this new wealth might produce:

As money flows, and both unemployment and state deficits shrink, in parallel a whole new class of Ohio millionaires will emerge from their land’s oil and gas royalty bounty.  What will they do with their money?  A lot of things to be sure.  But a safe bet is that many will invest in the state they know and love, in local businesses, entrepreneurs and universities.

Ohio is a manufacturing-centric state – the third largest manufacturing economy amongst all the states.  A lot of Ohioans will invest in and build the kind of local businesses they know, in the manufacturing sector.  A lot will shower their alma maters with donations, where Ohio universities have deep roots in manufacturing-centric education.  Overall, expect a fresh flow of capital into a manufacturing-technology-centric region.  Nothing unleashes innovation like capital. …

From Pennsylvania and New York, to Texas and the North Dakota, there are plenty of other states across this vast land sitting on shale oil and gas unleashed, or unleashable by the hydrocarbon technology boon.  To note only one of the many shale formations, the East Coast’s Marcellus contains so much natural gas it is the world’s – not America’s – second largest known reserve, exceeded only by the gas field below Iran and Qatar.  We should note that New York State (yet to embrace this boon) sits over the Marcellus.  Imagine what this might do for depressed Binghamton, New York, strategically located atop that abundance?  It has already fueled a downtown construction boom in Pittsburgh.

Never mind the national security benefit of domestic oil.  And, thinking beyond the compelling near-term potential for a gusher of jobs, consider the long term.  The new private capital is what will fuel the essential “animal spirits” in our economy, bringing confidence back. And in due course, new technologies and new businesses too.

I don’t know whether or not to buy Mills’s portrait of Ohio as the epicenter of a new energy and manufacturing boom, but it is certainly compelling. It also sharpens our political debate: it suggests that environmentalist objections to fracking could prove extremely costly to future prosperity, and this might fragment the Democratic coalition. Fracking might prove a potent issue during next year’s presidential election. 



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