Ohio Oil and Gas Association touts 40,000 new Ohio jobs

Environmental and economic concerns have been at the center of public discussion about the potential benefits and dangers of horizontal fracturing, or fracking, to release natural gas and oil from deep shale deposits in Ohio.

The economic benefits, meaning jobs, are the focus of a TV ad that is also posted online by the Ohio Oil and Gas Association, the industry's leading voice in the state.

"Notice Ohio's economy picking up lately?" the announcer asks. "The recent increase in drilling here right here in Ohio has led to adding jobs at a breakneck pace, and jobs are coming in all walks of life. From construction to restaurants to manufacturing, jobs are being created in all sectors of the economy.

"Fact is, nearly 40,000 new jobs have been created in the last year due to the new wells. That's right -- almost 40,000 new jobs right here in Ohio. Renewing Ohio's heritage."

The onscreen text says, "New jobs," "Real economic growth" and "40,000 new jobs."

The addition of 40,000 jobs got the attention of PolitiFact Ohio, especially because the state as a whole had a net employment increase of 40,000 in 2012, according to the U.S. Bureau of Labor Statistics.

No source for the jobs figure was given with the ad, which we accessed on April 10, so we called the Oil and Gas Association and asked how it was supported.

They referred us to "America's New Energy Future," a report by the global market information and research company IHS, Inc.

Given wide coverage when it was released in December 2012, the report was commissioned by the U.S. Chamber of Commerce's Energy Institute, the American Petroleum Institute, the American Chemistry Council, America's Natural Gas Alliance and the Natural Gas Supply Association.

The report includes state-by-state breakdowns on how many jobs have been created and are projected to 2035 due to shale exploration. It refers to horizontal drilling and hydraulic fracturing as unconventional drilling.

"In addition to manufacturing," the section on Ohio says, "gas drilling supports jobs in the transportation, construction and professional, scientific and technical sectors. Currently, unconventional drilling employment supports 38,000 jobs."

The multi-state analysis uses a specific figure of 38,830 jobs for Ohio in 2012. It breaks those into three categories.

It says that 4,200 of the jobs were directly involved in the oil and gas industry, or in "activities required to explore, produce, transport and deliver products."

Another 13,601 were classified as indirectly involved, or employed in activities in outside industries that supply materials and services to the developers.

The largest number of jobs -- 21,020 -- are identified as "induced" jobs. The report says that  "Induced jobs are those that meet the new demand for consumer goods created by the increased income generated by the direct and indirect jobs," or "workers spending their wages and salaries on consumer goods and household items."

The induced and other jobs are broken down in 15 industry categories that include administrative and support services; food services and drinking places; wholesalers, health care, construction, real estate and insurance.

"All other industries" account for 11,115 of the induced jobs -- by far, the largest employment category for 2012.

The source cited for the numbers in the IHS report is IHS Global Insight. IHS told us the direct jobs count came from federally published data, principally the U.S. Bureau of Economic Analysis. The remaining 34,000 jobs were the result of standard economic modeling from the published data.

One of the authors of the IHS report, managing director of economic analysis Mohsen Bonakdarpour, told us that the figures for 2012 could be seen as a snapshot of the average number of jobs, full-time and part-time, supported by oil and gas drilling during the year.

We also asked about the term "cross-state contributions," found deeper in the report.

Bonakdarpour said it refers to material or personnel from another state. For example, he said, drillers in Pennsylvania might require equipment available from Oklahoma. The amount of cross-state contribution would be expected to diminish as the industry grows and matures in states like Pennsylvania and Ohio.

We thought that was pertinent because media reports on shale gas have found a significant number of out-of-state workers, and Gov. John Kasich has said he has "deep concerns" that jobs were not going to Ohioans.

According to the IHS report, the total number of oil and gas jobs in Ohio in 2012, "excluding cross-state contributions," came to 11,569.

Seeking numbers from another source, we went to the Ohio Department of Job and Family Services.

It issued "Ohio Shale," a quarterly report on trends in Ohio oil and gas industries, in February.

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Its shale-related employment report is a lagging survey -- going through the second quarter of 2012 -- because it is a hard count based on a census of employers.

It shows that employment in core industries and 30 ancillary industries related to shale gas increased by a combined total of 5,628 jobs from the same period in 2011.

The report notes "significant churn and turnover in the job market, as demonstrated by the levels of hires and separations." It says the levels of hires and separations suggest "a large temporary worker component."

A worker is counted only once, however, the quarterly report says, even if the person holds more than one job. But the state cannot determine the residence of workers in the data.

In a report issued in March, "Ohio Utica Shale Region Monitor," researchers at Cleveland State University's Maxine Goodman Levin College of Urban Affairs found a spending surge in 2012 but not many new jobs.

The researchers analyzed total employment for 2011 and 2012 in 13 eastern Ohio counties where shale gas and oil production was underway, and compared the data to the rest of the state. They found that employment growth due to shale development was not evident: employment rose 1.4 percent year-over-year in counties with heavy or moderate shale production, compared to 1.3 percent in other counties without shale development.

PolitiFact Ohio is not rating either the benefits or drawbacks of drilling. We are checking the statement, from the OOGA ad, that "nearly 40,000 new jobs have been created in the last year due to the new wells... right here in Ohio."

The figure of "nearly 40,000" is an accurate reference to the IHS report. And the ad's reference to jobs "in all walks of life" does indicate that the jobs net is being cast over a wide area not solely restricted to drilling.

But the reality and relevance of the number in the context of the ad is undermined considerably by the fact that it is not the result of surveying but of modeling; that fewer than half of its nearly 40,000 jobs are directly or indirectly related to drilling, and that the single largest element -- almost 30 percent of the jobs total -- consists of unidentified "induced" jobs.

We think the ad's reference to the creation of new jobs would reasonably be taken as referring to permanent or continuing jobs, not temporary employment.

Further, the touting of jobs "right here in Ohio" that are "restoring Ohio's heritage" is not supported by the substantial percentage of jobs going to out-of-state workers,  even if that percentage is diminishing.

Finally, the IHS report says its figure of 38,830 jobs refers to total jobs supported by drilling during 2012, not to new jobs created in the year, as the ad claims.

And the words matter. The IHS report itself makes clear that there is a difference between jobs that are "created" by the industry -- which, in a generous reckoning, would encompass direct and indirect jobs -- and jobs that are "supported," which would be all of the 21,020 induced jobs.

That’s an important distinction that the ad ignores, and it accounts for more than half the jobs that the ad claims.

So the association has misrepresented its own industry’s study with compounded exaggerations.

The Truth-O-Meter says Pants on Fire!