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What's Worth $1,000,000,000,000?

Ohio's fracking industry isn't, but some stuff is

By German Lopez · August 8th, 2012 · Cover Story
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Ohio has a lot of oil and natural gas resources accessible by fracking, but are they worth $1 trillion? Gov. John Kasich seems to think so. Kasich has touted the number to media outlets to support hydraulic fracturing — or “fracking” — in Ohio. He says the number makes a strong case for his tax on Ohio oil and gas producers.

But Arthur Berman, a Texas-based petroleum geologist and independent energy consultant, says there is no way to verify Kasich’s number.

“No one knows what the reserve number is,” he says. “It takes longer before we know.”

Berman says a true analysis would take at least 18 months and, more realistically, eight to 10 years. This is because geologists need to wait until they “have enough months of production to see a trend,” Berman says.

Even when enough time has passed and geologists get a real estimate, Berman says there will still be a lot of uncertainty about how much of the oil and gas can actually be obtained. He says that although there might be a lot of oil and gas, it could be inaccessible due to technological and practical constraints. After all, if oil and gas reserves are found beneath a city, it’s unlikely operators will actually try to drill there.

Another question for Berman is whether Kasich expects the $1 trillion to come over time or immediately. With the way Kasich has been presenting the number to the media, Berman is worried Ohioans might be getting the impression that the $1 trillion would come as an “immediate windfall.” The reality, Berman says, is that “it takes a long time to produce natural gas and oil.” That means even if Kasich’s number was somehow right, it would take years — Berman estimates longer than Kasich’s gubernatorial terms — to see that $1 trillion.

Kasich claims he heard the number from an unnamed CEO at an energy company. That brings up some concerns for Berman. In his experience, oil and gas operators tend to overestimate production potential by about double, relative to Berman’s own data. Berman says they could be overestimating because it makes the venture seem more profitable to investors.

To truly understand how much oil and gas is underground, Berman would like to see an independent, objective opinion. More importantly, he hopes that Kasich would demand a higher standard of analysis before promoting any policy.

“I hope the governor would make decisions based on more than a lunch conversation,” Berman says.

Kasich and his spokesperson still refuse to disclose the name of the CEO in question.

While Kasich’s number is most likely off, it is true oil and natural gas are quickly becoming big products in Ohio. In June, the Ohio Department of Natural Resources (ODNR) gave out a record number of permits for horizontal drilling wells used for fracking, a drilling process that produces oil and gas. ODNR gave out 36 new permits in June, up from 22 in May. The permits will grant oil and gas operators access to the Utica and Marcellus shale formations in eastern Ohio, which are filled with oil and gas.

Critics claim there is too much uncertainty behind the safety of fracking, and they want the practice banned altogether. At a June 17 rally, the environmentalist group Don’t Frack Ohio took over the Columbus statehouse and demanded a halt to all fracking in Ohio. More than 1,000 attended the rally, according to the group.

However, Republican supporters insist fracking can be safe with proper regulations. In June, Kasich signed into law S.B. 315, which added more scrutiny to the fracking process and fracking wastewater disposal. Kasich also signed an executive order on July 12 that strengthened state regulators with the ability to impose new requirements on wastewater injection wells, which are used to dispose of wastewater produced during fracking, and halt activity at any injection wells deemed risky or dangerous.

The fracking debate has even inspired local action. On Aug. 1, Councilwoman Laure Quinlivan hosted a press conference to commemorate her latest legislative achievement — a ban on wastewater injection wells within city limits. At the press conference, Food and Water Watch organizer Alison Auciello echoed environmentalist intentions to ban fracking in Ohio.

However, the ban on injection wells could come under legal scrutiny.

It is unknown whether the City of Cincinnati would have the authority to overrule the state government when it comes to allowing wastewater injection wells.

Plus, banning wastewater injection wells in southwestern Ohio could turn out to be unnecessary. ODNR has received zero permit requests related to fracking for southwestern Ohio, and ODNR spokesperson Heidi Hetzel-Evans says it wouldn’t be feasible to build wastewater injection wells in southwestern Ohio due to the region’s geology. 

“It’s safe to say oil and gas drilling has no direct impact on southwestern Ohio,” Hetzel-Evans says.

This kind of back and forth has become the norm in the fracking debate. As both sides rush to defend their positions, both have been filled with strong words and hyperbole. Environmentalists insist that everything related to fracking has to be banned, and Republican supporters have willfully ignored environmental issues — possible aquifer contamination, air pollution, effects of unknown chemicals being pumped underground — that need serious consideration and possibly regulation.

But the $1 trillion estimate is the most ridiculous claim yet. It’s completely unverifiable, and it’s coming from the mouth of the highest executive official in Ohio. The implication is that fracking deserves support because it could make a lot of money for Ohio — $1 trillion worth. It’s a nice implication, but it came out of nowhere. Some would even say it was pulled out of a certain body part not known for much good.

How much is $1 trillion, anyway? To gauge the implications of Kasich’s claim, CityBeat launched its own investigation into what is actually worth around $1 trillion.

Australia

Australia is widely known for its kangaroos, koalas, platypus and deadly spiders, but the country has more than bizarre animals. It is rich in natural resources, including coal, iron, copper, gold, natural gas and uranium. The country also fared through the latest financial crisis better than most countries due to tougher regulations and more decisive economic action. The CIA World Factbook puts Australia at $926.2 billion — almost $1 trillion!

New York State

New York is mostly known for New York City and its liberal politics. It legalized same-sex marriage a little more than one year ago, and New York City Mayor Michael Bloomberg said it brought his city $259 million in economic development. But the state has many more sources of economic growth. Wall Street, which is in New York City, is the financial capital of the United States. Even though Wall Street was largely blamed for the financial collapse of 2008, it still plays a vital economic role in the state and nationwide. Altogether, the state is worth about $1.1 trillion, according to Federal Reserve data. Slightly more than Kasich’s number.

One and a half U.S. militaries

The U.S. military is a pretty big deal. It’s the strongest military in the world. It’s not cheap by any means, however. The latest numbers from the U.S. Department of Defense put the cost of all U.S. defense spending at $614 billion for the 2013 fiscal year. Multiply that by one and a half, and that’s nearly $1 trillion.

More than two Exxon Mobils

Based in Texas, Exxon Mobil is the biggest oil and gas company in the world. It claimed this year’s top spot in the Fortune 500 with $452.9 billion in revenue. The company mostly benefited from increased oil prices last year, but it has also taken advantage of fracking to carve out a spot in the natural gas market. Still, even two Exxon Mobils would not reach $1 trillion. Using last year’s revenue estimate, two of the company would only reach $905.8 billion.

Two and a half Ohios

It’s where CityBeat lives. It’s worth about $418.9 billion, according to Ohio’s Department of Development. If two and a half Ohios were put together, the result would be worth about $1.05 trillion. Fairly close to $1 trillion.

Three Venezuelas

Most people know of Venezuela for its anti-American leader, Hugo Chavez, but there’s a lot more to the country than that. Venezuela is also known for its substantial oil wealth and exports. The United States relies on the country heavily for oil, and Venezuela was the United States’ fifth biggest importer of oil in 2010, according to the U.S. Department of Energy. In total, Venezuela is worth about $378.9 billion, according to the CIA World Factbook. So three Venezuelas would equal $1.1 trillion. Close enough.

Five years of U.S. oil production

The United States produced about 5.7 million barrels of crude oil per day in 2011, according to the U.S. Energy Information Administration. Throughout the year, that’s about 2 billion barrels of crude oil. Today’s prices for a barrel of oil tend to hover around $100. That means the U.S. produces roughly $200 billion of crude oil every year. In other words, it would take five years of crude oil production in the United States to reach $1 trillion.

Sixteen clones of Bill Gates

Once the richest man in the world, now the richest man in the United States, Bill Gates is known for founding Microsoft. His company revolutionized the computer industry as it ruthlessly expanded in the 1980s and 1990s. Now, Microsoft Windows makes up 92 percent of the operating systems in the computer market, according to July data from web analytics firm Net Applications. That’s largely thanks to Bill Gates. Forbes put Gates at $61 billion as of March 2012. That means if Bill Gates was cloned 16 times, the clones would be worth $976 billion.

Sixty-six summer Olympics

Despite doubts presented by presidential candidate Mitt Romney, the London Olympics are going swimmingly. The competitions have been the talk of the world for the past two weeks, and there have been no major security breaches. The sports event has been a big hit for London. But how much does it cost? The latest British government estimates raised the cost of the Olympics from $4 billion to $15 billion. That means with $1 trillion, someone could pay for 66 summer Olympics. That’s enough summer Olympics for the next 264 years.

2,202 Cincinnati Reds teams

Cincinnati’s baseball team really needs no introduction. The team traces its origin to the first professional baseball team in the United States. The Reds have won the world series championship five times: 1919, 1940, 1975, 1976 and 1990. The team had the best record in Major League baseball when this issue of CityBeat went to press. The Reds are worth $454 million, according to Forbes, so 2,202 duplicates of the Reds would be worth $1 trillion.

32,720 election cycles of campaign contributions from oil and gas companies

Oil and gas companies are fairly big campaign contributors, but are they big enough to reach $1 trillion? Not even close, according to campaign data from OpenSecrets.org. So far, in the current election cycle, oil and gas companies have donated about $30.6 million. Most of that money — 88 percent — has gone to Republicans, who, unsurprisingly, tend to support fracking more than Democrats.

The biggest donors so far are Oxbow Corp., which has donated $1.75 million, and Koch Industries, which has donated nearly $1.4 million. Chesapeake Energy, the biggest fracking company in Ohio, has donated $825,851, with 7 percent of that going to Democrats, 66 percent to Republicans and the rest to “soft money,” which is contributed money that is not attributed to any particular party or candidate to avoid legal limitations.


Looking at that $30.6 million figure, it would take nearly 32,720 current election cycles to reach $1 trillion in campaign contributions.

Forty-five million Ford Mustangs

Ever want to own a Ford Mustang? The latest 2013 model costs about $22,200, according to Ford’s website. That means someone would have to buy 45 million units to spend about $1 trillion. That’s enough cars for the entire state of Ohio, which the U.S. Census Bureau puts at about 11.5 million people. After everyone in Ohio gets one, there would be nearly enough cars left over for all of Texas’ 25.6 million people and New York City, whose 8.2 million residents could also have a Mustang. At the very least, all adults would get a Ford Mustang in Ohio, Texas and New York City.

Two billion iPads

If cars aren’t enough, $1 trillion could also buy enough iPads, which are priced at about $500, for all of Ohio. Actually, $1 trillion could buy enough iPads for 2 billion people. That’s enough iPads for the populations of the United States, China, Brazil, and Japan combined, according to official estimates from each country and the World Bank.


*Yes,
unlike Kasich, CityBeat actually verified these numbers before putting them out for the public.

 
 
 
 

 

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